Question 1

Assume that the net sales for a company is $5,000,cost of goods sold is $3,000,and average inventory is $1,500.Calculate the number of days' sales in inventory.

Accepted Answer

A)  145
B)  274
C)  110
D)  183E) A) and D)
F) A) and C)

Question 2

Which of the following is NOT true regarding "topside" journal entries used to commit financial statement fraud?

Accepted Answer

A)  Upper management usually records the journal entry.
B)  Entries are recorded on subsidiary ledgers.
C)  The journal entry may be recorded after normal business hours.
D)  Entries often bypass the normal process for posting journal entries.E) None of the above
F) C) and D)

Question 3

Which of the following ratios is relatively more helpful in highlighting revenue-related frauds?

Accepted Answer

A)  Working capital turnover ratio
B)  Earnings per share
C)  Asset turnover ratio
D)  Accounts receivable turnoverE) B) and C)
F) C) and D)

Question 4

Which of the following is most likely an indicator of potential revenue fraud?

Accepted Answer

A)  A sudden increase in the sales discount percentage
B)  A high sales return percentage
C)  A rapidly increasing asset turnover ratio
D)  A rapidly decreasing working capital turnover ratioE) A) and D)
F) A) and C)

Question 5

Which of the following is a lifestyle symptom associated with revenue-related fraud?

Accepted Answer

A)  Too little cash is collected relative to reported revenues.
B)  Weaknesses in the cutoff processes or other key accounting processes.
C)  Untrue responses by management to queries about revenue-related accounts.
D)  Executives' personal net worth tied up in company stock.E) B) and D)
F) C) and D)

Question 6

Smart fraudsters will avoid financial statement fraud involving the overstatement of ____ because of the compounding effect from period to period.

Accepted Answer

A)  revenue
B)  accounts receivable
C)  inventory
D)  fixed assetsE) A) and B)
F) C) and D)

Question 7

Which of the following is a common inventory-related fraud scheme?

Accepted Answer

A)  Channel stuffing
B)  Cutoff problems
C)  Related-party transactions
D)  Side agreementsE) A) and C)
F) B) and C)

Question 8

What is the difficulty in using horizontal,vertical,or ratio analysis?

Accepted Answer

A)  The complicated calculations required to arrive at change statements.
B)  Identifying the changes and speed of changes in the ratios,when the change is unexpected or unexplained.
C)  Knowing when a change in account balance or relationship is significant enough to signal possible fraud.
D)  Assessing the magnitude or significance of changes in account balances looking only at raw financial statement numbers.E) A) and C)
F) A) and D)

Question 9

________ is a practice in which cash receipts are misapplied to hide fictitious receivables.

Accepted Answer

A)  Bill-and-hold
B)  Channel stuffing
C)  Partial shipment
D)  KitingE) None of the above
F) B) and D)

Question 10

One of the first tasks to understand the various revenue transactions in the company to uncover the revenue frauds is to:

Accepted Answer

A)  determine how each transaction could be misstated.
B)  evaluate the efficiency of the management.
C)  analyze and diagram the various transactions between an organization and its customers.
D)  identify scheme-specific symptoms and proactively search for more fraud.E) B) and D)
F) B) and C)

Question 11

____ is a practice that suppliers use to encourage customers to buy extra inventory so as to increase current-year sales.

Accepted Answer

A)  Kiting
B)  Channel stuffing
C)  Redating transactions
D)  Partial shipmentsE) None of the above
F) A) and C)

Question 12

Sales return percentage ratio is calculated by:

Accepted Answer

A)  dividing sales returns by total sales.
B)  dividing total sales by sales returns.
C)  dividing sales returns by net sales.
D)  dividing net sales by sales returns.E) None of the above
F) C) and D)

Question 13

______ involves selling unused assets for a promise to buy them or similar assets back at roughly the same price.

Accepted Answer

A)  Bill-and-hold sales
B)  Kiting
C)  Channel stuffing
D)  Round-trippingE) A) and B)
F) B) and C)

Question 14

Which of the following is a fraud scheme affecting the inventory?

Accepted Answer

A)  Refreshing transactions
B)  Side agreements
C)  Double counting
D)  LappingE) All of the above
F) A) and C)

Question 15

Which of the following can be used by fraud examiners to sift through millions of journal entries to find the potentially fraudulent few?

Accepted Answer

A)  Microsoft Access
B)  SPSS
C)  ODBC
D)  ACLE) A) and B)
F) A) and C)

Question 16

The least effective method for comparing financial statement information between companies is:

Accepted Answer

A)  to perform ratio analysis.
B)  to perform horizontal analysis.
C)  to study the statement of cash flows.
D)  to focus on changes in financial statement numbers.E) None of the above
F) All of the above

Question 17

Overstating ending inventory has the following effect on cost of goods sold and net income respectively.

Accepted Answer

A)  COGS - overstated and NI - overstated
B)  COGS - understated and NI - overstated
C)  COGS - overstated and NI - understated
D)  COGS - No effect and NI - understatedE) A) and B)
F) A) and D)

Question 18

Under SAS 99,financial statement auditors are required to make inquires of all but which of the following individuals or groups about possible fraudulent activity or red flags.

Accepted Answer

A)  Management
B)  Audit committee members
C)  Internal audit personnel
D)  ShareholdersE) None of the above
F) A) and B)

Question 19

Which of the following is an analytical symptom associated with revenue-related financial statement frauds?

Accepted Answer

A)  Untrue responses by management to queries about revenue-related accounts.
B)  Missing documents in the revenue cycle.
C)  Unusual entries made at the end of the accounting period that increase revenues.
D)  Significant bonuses tied to meeting earnings forecasts.E) B) and C)
F) All of the above

Question 20

According to a study sponsored by The Committee of Sponsoring Organizations (COSO) ,the most common way to manipulate revenue accounts is by:

Accepted Answer

A)  reclassifying expenses as revenues.
B)  recording fictitious revenues.
C)  inappropriately reducing sales returns and allowances.
D)  prematurely recording revenue.E) None of the above
F) B) and D)

Exam 12: Revenue- and Inventory-Related Financial Statement Frauds

Which of the following is NOT true regarding "topside" journal entries used to commit financial statement fraud?

Correct AnswerverifiedShow Answer

One of the first tasks to understand the various revenue transactions in the company to uncover the revenue frauds is to:

Correct AnswerverifiedShow Answer

________ is a practice in which cash receipts are misapplied to hide fictitious receivables.

Correct AnswerverifiedShow Answer

Which of the following is a fraud scheme affecting the inventory?

Correct AnswerverifiedShow Answer

The least effective method for comparing financial statement information between companies is:

Correct AnswerverifiedShow Answer

Which of the following is an analytical symptom associated with revenue-related financial statement frauds?

Correct AnswerverifiedShow Answer

What is the difficulty in using horizontal,vertical,or ratio analysis?

Correct AnswerverifiedShow Answer

Which of the following is a common inventory-related fraud scheme?

Correct AnswerverifiedShow Answer

Sales return percentage ratio is calculated by:

Correct AnswerverifiedShow Answer

Which of the following ratios is relatively more helpful in highlighting revenue-related frauds?

Correct AnswerverifiedShow Answer

Which of the following is most likely an indicator of potential revenue fraud?

Correct AnswerverifiedShow Answer

______ involves selling unused assets for a promise to buy them or similar assets back at roughly the same price.

Correct AnswerverifiedShow Answer

Overstating ending inventory has the following effect on cost of goods sold and net income respectively.

Correct AnswerverifiedShow Answer

Which of the following is a lifestyle symptom associated with revenue-related fraud?

Correct AnswerverifiedShow Answer

Under SAS 99,financial statement auditors are required to make inquires of all but which of the following individuals or groups about possible fraudulent activity or red flags.

Correct AnswerverifiedShow Answer

According to a study sponsored by The Committee of Sponsoring Organizations (COSO) ,the most common way to manipulate revenue accounts is by:

Correct AnswerverifiedShow Answer

Smart fraudsters will avoid financial statement fraud involving the overstatement of ____ because of the compounding effect from period to period.

Correct AnswerverifiedShow Answer

Which of the following can be used by fraud examiners to sift through millions of journal entries to find the potentially fraudulent few?

Correct AnswerverifiedShow Answer

Assume that the net sales for a company is $5,000,cost of goods sold is $3,000,and average inventory is $1,500.Calculate the number of days' sales in inventory.

Correct AnswerverifiedShow Answer

____ is a practice that suppliers use to encourage customers to buy extra inventory so as to increase current-year sales.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified