Which of the following is a good place to look for inadequate disclosures?

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

Answer: E

When looking for accounting or documentary symptoms of fraud when merger occurs, one of the first steps should be to:

When looking for accounting or documentary symptoms of fraud when 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 selling company properly disclosed its financial troubles
C. Make sure that both the buyer and the seller were content with the deal
D. Make sure that the accounting methods used were appropriate and consistent with accounting standards.

Answer: D

Which of the following is not a way to under record liabilities?

Which of the following is not a way to under record liabilities? 

A. Borrowing but not disclosing debt incurred on existing lines of credit
B. Claiming that existing debt has been forgiven by creditors
C. Not recording loans incurred
D. All of the above are ways to under record liabilities

Answer: D

Of the following, the most difficult account for management to intentionally misstate is:

Of the following, the most difficult account for management to intentionally misstate is: 

A. Income Taxes Payable
B. Cash
C. Securities
D. Prepaid Expenses

Answer: B

You observe that a company's current ratio is dramatically increasing. This may indicate fraud in that:

You observe that a company's current ratio is dramatically increasing. This may indicate fraud in that: 

A. Contingent liabilities are not recorded
B. Accounts payable is understated
C. Expenses have been inappropriately capitalized as assets
D. Fixed assets are overstated
E. Two of the above are true

Answer: B

Which of the following is usually the hardest fraud to detect?

Which of the following is usually the hardest fraud to detect?

A. Liability fraud
B. Revenue fraud
C. Asset fraud
D. Disclosure fraud

Answer: D

In liability fraud, liabilities are most often:

In liability fraud, liabilities are most often: 

A. Understated
B. Overstated
C. Recorded as assets
D. Recorded as expenses

Answer: A

A form 1099 with missing withholdings (where they should be reported) may be a fraud symptom for which liability account?

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. Contingent Liabilities
D. Accrued Liabilities

Answer: D

Which of the following factors does not make fraud more difficult to detect?

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

Answer: D

Each of the following assets is correctly linked with how it can be overstated except:

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 restructuring by having the wrong entity act as the acquirer.

Answer: A

Each of the following is a symptom relating to understatement of liability frauds except:

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.

Answer: A

When examining whether a company has under recorded accounts payable, each of the following ratios is helpful except:

When examining whether a company has under recorded accounts payable, each of the following ratios is helpful except: 

A. Acid-test ratio
B. Accounts Payable/Purchases
C. Accounts Payable/Cost of Goods Sold
D. Unearned revenue/Accounts Payable
E. Current Ratio

Answer: D

Inadequate disclosure fraud usually involves:

Inadequate disclosure fraud usually involves: 

A. Statements in the footnotes that are wrong but do not impact the financial statement.
B. Disclosures that should have been made in the footnotes but were not.
C. Both A and B
D. Neither A or B

Answer: C

Overstating cash is usually difficult because:

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.

Answer: A

When focusing on changes, you should consider changes from period to period in:

When focusing on changes, you should consider changes from period to period in: 

A. Recorded balances
B. Relationships between balances
C. Balances of other non similar companies
D. Both A and B
E. All of the above

Answer: D

Proactively searching for analytical symptoms related to financial statement fraud means that we are looking for accounts that appear:

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

Answer: D

Analytical symptoms of accounts payable fraud most often relate to reported "accounts payable" balances that appear:

Analytical symptoms of accounts payable fraud most often relate to reported "accounts payable" balances that appear: 

A. Too low
B. Too high
C. Too perfect
D. Unchanged

Answer: A

FAS 5 requires contingent liabilities to be recorded as liabilities on the balance sheet if the likelihood of loss or payment is:

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

Answer: C

The most common fraud involving car companies and the warranties they offer would most likely be:

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

Answer: C

Recognizing something as a revenue instead of as a liability has a positive effect on the reported financial statements because:

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

Answer: F