Fraud Ch 12

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  1. What is the second most common financial statement fraud?
    Inventory related fraud schemes
  2. Which one of the following is not a commonly used inventory related fraud scheme
    side agreements
  3. When inventory is understated, how is net income affected?
    Net income is understated
  4. What effect does the carry forward nature of the over/understatement of inventory and COGS have on the fraud perpetrator?
    The fraud perpetrator must overstate ending inventory even more to further conceal the fraud
  5. What people in an organization provide investigators and auditors with the best information about inventory?
    The people who actually handle the inventory on a day to day basis
  6. What are the most common account(s) manipulated when perpetrating financial statement fraud
    Revenues and Receivables
  7. What is the most common type of revenue related financial statement fraud?
    recording fictitious revenues
  8. Which is not a common revenue related fraud scheme
    arms length transactions
  9. This fraud symptom is unexpected or unexplained economic events, accounting transactions or financial and nonfinancial relationships
    analytical symptoms
  10. This fraud symptom can involve missing documents, pohotocopies, ledgers that don't balance, or unusual journal entires
    accounting or doumentary symptoms
  11. The most common account(s) manipulated when perpetrating financial statement fraud are
  12. Why might a company want to understate net income
    to pay less taxes
  13. Reported revenue and sales account balances that appear too high are examples of
    analytical symptoms
  14. examines percent changes in account balances from peirod to period
    Horizontal Analysis
  15. Recording fictitious receivables will usually result in a
    increase in the number of days in receivables
  16. Comparing recorded amounts in the financial statements with the real world assets they are supposed to represent would be most effective in detecting
    cash and inventory fraud
  17. Lifestyle symptomps are most effective with
    employee frauds
  18. Which of the following is not an inventory related documentary symptom
    duplicate purchase orders
    missing inventory during inventory counts
    unsupported inventory sales transactions
    all of the above are
  19. When looking for inventory fraud, an important question to ask is
    what is the nature of inventory
    what is the age of inventory
    what is the salability of inventory
    all of the following are importanty
  20. Which of the following ratios would not generally be used to look for inventory and COGS related frauds
    accounts payable turnover
  21. In order to analyze financial statements for fraud an auditor or fraud examiner should consider all of the following execpt
    the types of accounts that should be included
    the types of fraud to which the company is susceptible
    the nature of the company's business and industry
    all of the above
  22. Last minute revenue adjustments, unsuported balance sheet amounts, and improperly recorded revenues are
    analytical symptoms
  23. Accounts that can be manipulated inrevenue fraud include all of the following except
  24. Which financial ratio is not useful in detecting revenue related fraud
    gross profit margin
    account receivable turnover ratio
    asset turnover ratio
    all of the above are useful
  25. The asset turnover ratio measures
    sales that are generated with each dollar of sales
  26. The most common way to overstate revenues is to
    abuse the cutoff line for recording revenues
  27. Which of the following is a possible scheme for manipulating revenue when returned goods are accepted from customers
    acoid recording of returned goods from customers
  28. All of the following ratios are useful in detecting large revenue frauds except
    current ratio
  29. Each of the following illicit revenue transactions is correctly linked with the financial statement accounts involved exccept
    don't write off uncollectible receivables - sales returns, sales discounts
  30. Indentify which ratio is correctly linked to the infromation it could reveal about the company's potential for revenue fraud
    gross profit margin - this ratio will increase if managemnt overstates inventory
  31. Which of the following is a common way to perform fianncial statement analysis whicle searing for revenue related analystical symptoms
    look for unusual changes in reveue related account balances from period to period
    look for unusual changes in revenue related relationships from period to period
    both of these
  32. Primarily occurring at the end of the year in an attempt to inflate sales the practice of shipping more items to distributors than they can sell in a reasonable time period is known as
    channel stuffing
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Fraud Ch 12

Fraud Ch 12
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