fraud 132 chapter13

Card Set Information

Author:
es2437
ID:
270344
Filename:
fraud 132 chapter13
Updated:
2014-04-12 19:20:22
Tags:
fraud 132 chapter 13
Folders:
fraud132
Description:
chapter 13
Show Answers:

Home > Flashcards > Print Preview

The flashcards below were created by user es2437 on FreezingBlue Flashcards. What would you like to do?


  1. Which of the following is a primary type of transaction that can create liabilities for a company?
    a. Purchasing inventory.
    b. Borrowing money.
    c. Selling purchased goods.
    d. Leasing assets.
    e. All of the above.
    e. All of the above.
  2. When accounts payable-related liabilities are understated, purchases and inventory are often, or the financial statements don’t balance.
    A. Overstated.
    B. Understated.
    C. Correctly stated.
    D. It is impossible to tell.
    B. Understated.
    (this multiple choice question has been scrambled)
  3. Recognizing something as a revenue instead of as a liability has a positive effect on the reported financial statements because:
    a. It understates liabilities.
    b. It overstates revenues.
    c. It overstates net income.
    d. It overstates assets.
    e. All of the above.
    f. a, b, and c are correct.
    f. a, b, and c are correct.
  4. The most common fraud involving car companies and the warranties they offer would most likely be:
    A. Understating accrued liabilities.
    B. Recognizing unearned revenue.
    C. Not recording or under recording future
    obligations.
    d. Not recording or under recording various
    types of debt.
    C. Not recording or under recording future obligations.
    (this multiple choice question has been scrambled)
  5. FAS 5 requires contingent liabilities to be recorded as liabilities on the balance sheet if the likelihood of loss or payment is:
    A. Remote.
    B. Reasonably possible.
    C. Probable.
    D. Not determinable.
    C. Probable.
    (this multiple choice question has been scrambled)
  6. Analytical symptoms of accounts payable fraud most often relate to reported “accounts payable” balances that appear:
    A. Unchanged.
    B. Too perfect.
    C. Too high.
    D. Too low.
    D. Too low.
    (this multiple choice question has been scrambled)
  7. Proactively searching for analytical symptoms related to financial statement fraud means that we are looking for accounts that appear:
    a. Too low.
    b. Too high.
    c. Unusual.
    d. All of the above.
    d. All of the above
  8. When focusing on changes, you should consider changes from period to period in:
    A. Relationships between balances.
    B. Both a and b.
    C. Balances of other non-similar companies.
    D. Recorded balances.
    e. All of the above.
    B. Both a and b.
    (this multiple choice question has been scrambled)
  9. Overstating cash is usually difficult because:
    a. Cash balances can be easily confirmed with
    banks and other financial institutions.
    b. Cash is hard to steal.
    c. Cash is normally not a fraudulent account.
    d. Cash is usually a small asset.
    a. Cash balances can be easily confirmed with banks and other financial institutions.
  10. Inadequate disclosure fraud usually involves:
    A. Neither a nor b.
    B. Disclosures that should have been made in the footnotes but were not.
    C. Statements in the footnotes that are wrong but do not impact the financial statement.
    D. Both a and b.
    D. Both a and b.
    (this multiple choice question has been scrambled)
  11. When examining whether a company has under-recorded accounts payable, each of the following ratios is helpful except:
    A. Accounts payable/Purchases.
    B. Acid-test ratio.
    C. Current ratio.
    D. Unearned revenue/Accounts payable.
    E. Accounts payable/Cost of goods sold.
    D. Unearned revenue/Accounts payable.
    (this multiple choice question has been scrambled)
  12. Each of the following is a symptom relating to understatement of liability frauds except:
    a. Original purchase-related records where
    copies could exist.
    b. Denied access to records, facilities, certain
    employees, customers, vendors, or others
    from whom audit evidence might be sought.
    c. Last-minute adjustments by the entity that
    significantly affect financial results.
    d. Missing documents.
    e. All of the above are documentary symptoms of understatement of liability fraud.
    a. Original purchase-related records where copies could exist.
  13. Each of the following assets is correctly linked with how it can be overstated except:
    a. Inventory can be overstated by improperly
    capitalizing these assets.
    b. Marketable securities can be overstated because they are not widely traded, and it is difficult to assign an accurate value to the securities.
    c. Fixed assets can be overstated by leaving
    expired assets on the books.
    d. Assets can be inflated in mergers, acquisitions, and restructurings by having the wrong entity act as the acquirer.
    b. Marketable securities can be overstated because they are not widely traded, and it is difficult to assign an accurate value to the securities.
  14. Which of the following factors does not make
    fraud more difficult to detect?
    a. Collusion with outsiders.
    b. Forgery, which GAAS auditors are not
    routinely trained to detect.
    c. Off-book frauds in which no records on the
    company’s books are fraudulent.
    d. All of the above make fraud more difficult to detect.
    d. All of the above make fraud more difficult to detect.
  15. A form 1099 with missing withholdings (where they should be reported) may be a fraud symptom for which liability account?
    A. Accounts Payable.
    B. Unearned Revenues.
    C. Accrued Liabilities.
    D. Contingent Liabilities.
    C. Accrued Liabilities.
    (this multiple choice question has been scrambled)
  16. In liability fraud, liabilities are most often:
    A. Recorded as expenses.
    B. Recorded as assets.
    C. Understated.
    D. Overstated.
    C. Understated.
    (this multiple choice question has been scrambled)
  17. Which of the following is usually the hardest fraud to detect?
    A. Disclosure fraud.
    B. Asset fraud.
    C. Revenue fraud.
    D. Liability fraud.
    A. Disclosure fraud.
    (this multiple choice question has been scrambled)
  18. You observe that a company’s current ratio is dramatically
    increasing. This may indicate fraud in that:
    a. Probable contingent liabilities that will settle
    in the next year for an amount that can be
    estimated are not recorded.
    b. Accounts payable are understated.
    c. Expenses have been inappropriately
    capitalized as fixed assets.
    d. Fixed assets are overstated.
    e. Both b and c
    e. Both b and c
  19. Of the following, the most difficult account for
    management to intentionally misstate is:
    A. Income Taxes Payable.
    B. Securities.
    C. Prepaid Expenses.
    D. Cash.
    D. Cash.
    (this multiple choice question has been scrambled)
  20. Which of the following is not a way to under-record liabilities?
    A. Not recording loans incurred.
    B. Claiming that existing debt has been forgiven by creditors.
    C. Borrowing but not disclosing debt incurred on existing lines of credit.
    d. All of the above are ways to under-record
    liabilities.
    B. Claiming that existing debt has been forgiven by creditors.
    (this multiple choice question has been scrambled)
  21. When looking for accounting or documentary
    symptoms of fraud when a merger occurs, one of the first steps should be to:
    A. Make sure that the purchasing company got a fair deal.
    B. Make sure that the accounting methods used were appropriate and consistent with
    C. Make sure that both the buyer and the seller were content with the deal.
    D. Make sure that the selling company  properly disclosed its financial troubles.
    accounting standards.
    B. Make sure that the accounting methods used were appropriate and consistent withaccounting standards.
    (this multiple choice question has been scrambled)
  22. Which of the following is a good place to look for inadequate disclosures?
    a. Board of directors’ minutes.
    b. Correspondence and invoices from attorneys.
    c. Confirmations with banks and others.
    d. Loan agreements.
    e. All of the above are good places to look for
    inadequate disclosure.
    e. All of the above are good places to look forinadequate disclosure.
  23. Understatement of liability frauds:
    A.can be accomplished by understating purchase returns.
    B.are among the easiest types of fraud to detect due to the availability of documentary evidence.
    C.can be accomplished by recording accruals in a later period.
    D.can be accomplished by recording payments made in earlier periods as being paid in later periods.
    C.can be accomplished by recording accruals in a later period.
    (this multiple choice question has been scrambled)
  24. Which of the following is not among the ways discussed in the text to understate accounts payable?
    A.Not record purchases.
    B.Overstate purchase returns.
    C.Understate purchase discounts.
    D.Make it appear as if liabilities have been paid off when they have not.
    C.Understate purchase discounts.
    (this multiple choice question has been scrambled)
  25. All of the following are ways to understate liabilities except:
    A.understate accounts payable.
    B.overstate unearned revenue.
    C.omission of contingent liabilities.
    D.failure to record warranty obligations.
    B.overstate unearned revenue.
    (this multiple choice question has been scrambled)
  26. Computing each liability as a percentage of total assets is known as:
    A.common-size financial statements.
    B.the acid-test ratio.
    C.All of the choices are true.
    D.horizontal analysis.
    A.common-size financial statements.
    (this multiple choice question has been scrambled)
  27. Which of the following is not discussed in the text as one of the ways to actively search for "accounting and documentary" symptoms of under-reporting of liabilities fraud?
    A.More inventory counted than identified through purchasing and inventory records.
    B.Discrepancies in cut-off tests.
    C.Amounts listed on vendor statements not recorded as purchases.
    D.All of the choices are discussed
    D.All of the choices are discussed
    (this multiple choice question has been scrambled)
  28. Which of the following ratios was not discussed in the text as one useful in detecting understatement of liability fraud?a.Quick assets/current liabilities
    b.Accounts payable/purchases
    c.Accounts payable/net salesd.Current assets/current liabilities
    c.Accounts payable/net salesd.Current assets/current liabilities
  29. Overstatement of asset fraud can be perpetrated through:
    A.asset impairments.
    B.depreciation methods.
    C.All of the choices are true.
    D.capitalization of expenditures.
    C.All of the choices are true.
    (this multiple choice question has been scrambled)
  30. Under-reporting depreciation expense can be accomplished by:
    A.establishing useful lives for assets that exceed their true expected lives.
    B.establishing salvage values for assets that fall below the asset's true estimated salvage value.
    C.All of the choices are methods of under-reporting depreciation expense.
    D.allocating too much cost in as basket purchase of land and building to the building account.
    A.establishing useful lives for assets that exceed their true expected lives.
    (this multiple choice question has been scrambled)
  31. Disclosure fraud can include statements that should have been, but were not, made by management.
    True   
    False
    True
  32. Included among the "other" types of financial statement fraud is the improper accounting for roundtrip transactions.
    True   
    False
    True

What would you like to do?

Home > Flashcards > Print Preview