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LSU ACCT 4235 Final exam with
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Which of the following is not a way to underrecord 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 these are ways to underrecord liabilities. - CORRECT ANSWERS ✔✔d. All of these are ways to underrecord liabilities. Horizontal analysis is a method that: a. Examines financial statement numbers from period to period. b. Examines percent changes in account balances from period to period. c. Examines transactions from period to period. d. None of these. - CORRECT ANSWERS ✔✔b. Examines percent changes in account balances from period to period. In order to analyze financial statements for fraud, an auditor or fraud examiner should consider all of the following except: a. The types of accounts that should be included in the financial statements. b. The types of fraud to which the company is susceptible. c. The nature of the company's business and industry.
d. The auditor should consider all of these. - CORRECT ANSWERS ✔✔d. The auditor should consider all of these. When accounts payable-related liabilities are understated, the financial statements won't balance unless purchases and inventory are: a. Understated. b. Overstated. c. It is impossible to tell. d. Correctly stated. - CORRECT ANSWERS ✔✔a. Understated. Which of the following is a common way to perform financial statement analysis while searching for revenue-related analytical symptoms? a. Look for unusual changes in revenue-related account balances from period to period (trends). b. Look for unusual changes in revenue-related relationships from period to period. c. Look for unusual changes in the cost of goods sold account from period to period. d. Both look for unusual changes in revenue-related account balances from period to period (trends) and look for unusual changes in revenue-related relationships from period to period are common ways to perform within- statement analysis while searching for revenue-related analytical symptoms. e. All of these are common ways to perform financial statement analysis while searching for revenue-related analytical symptoms. - CORRECT ANSWERS ✔✔d. Both look for unusual changes in revenue-related account balances from period to period (trends) and look for unusual changes in revenue-related relationships from period to period are common ways to
e. Accounts payable/Purchases. - CORRECT ANSWERS ✔✔d. Unearned revenue/Accounts payable. Recording fictitious receivables will usually result in a(n): a. Sales return percentage that remains constant. b. Increased sales discount percentage. c. Increase in accounts receivable turnover. d. Increase in the number of days in receivables. - CORRECT ANSWERS ✔✔d. Increase in the number of days in receivables. Most financial statement frauds occur in smaller organizations with simple management structures, rather than in large, historically profitable organizations. This is because: a. It is easier to implement good internal controls in a small organization. b. Smaller organizations do not have investors. c. Management fraud is more difficult to commit when there is a more formal organizational structure of management. d. People in large organizations are more honest. - CORRECT ANSWERS ✔✔c. Management fraud is more difficult to commit when there is a more formal organizational structure of management. Generally accepted accounting practices require contingent liabilities to be recorded as liabilities on the balance sheet if the likelihood of loss or payment is: a. Reasonably possible. b. Remote.
c. Probable. d. Not determinable. - CORRECT ANSWERS ✔✔c. Probable. A form 1099 with missing withholdings (where they should be reported) may be a fraud symptom for which liability account? a. Contingent liabilities. b. Unearned revenues. c. Accrued liabilities. d. Accounts payable. - CORRECT ANSWERS ✔✔c. Accrued liabilities. Which officer in a company is most likely to be the perpetrator of financial statement fraud? a. Controller. b. Chief financial officer (CFO). c. Chief executive officer (CEO). d. Chief operating officer (COO). - CORRECT ANSWERS ✔✔c. Chief executive officer (CEO). In the context of strategic reasoning, if an auditor only follows the established audit plan and does not consider other factors relating to the auditee, then this is an example of which of the following? a. Zero-order reasoning. b. High-order reasoning. c. First-order reasoning.
d. Their backgrounds. - CORRECT ANSWERS ✔✔b. Their religious convictions. 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 these. - CORRECT ANSWERS ✔✔e. All of these. Each of the following assets is correctly linked with how it can be overstated except: a. Marketable securities can be overstated because they are not widely traded, and it is difficult to assign an accurate value to the securities. b. Fixed assets can be overstated by leaving expired assets on the books. c. Assets can be inflated in mergers, acquisitions, and restructurings by having the wrong entity act as the acquirer. d. Inventory can be overstated by improperly capitalizing these assets. - CORRECT ANSWERS ✔✔a. Marketable securities can be overstated because they are not widely traded, and it is difficult to assign an accurate value to the securities. Financial statement fraud is usually committed by: a. Executives. b. Managers.
c. Stockholders. d. Outsiders. e. Both Executives and Managers. - CORRECT ANSWERS ✔✔e. Both Executives and Managers. Financial statement fraud is very different from embezzlement and misappropriation, especially with respect to who usually commits the fraud. Perpetrators of financial statement fraud are usually members of top management. a. True b. False - CORRECT ANSWERS ✔✔a. True As the recently hired controller for Hatfield Corporation, you have observed that the company's audit committee is composed mainly of inside directors. In addition, it appears that the committee rarely holds a meeting. Based on your observations regarding the audit committee, which fraud risk exposure group is represented in this case? a. Organization and industry b. Relationships with others c. Financial results and operating characteristics d. Management and directors - CORRECT ANSWERS ✔✔a. Organization and industry In its 2001 annual report, investors of Adelphia Communications were startled to find a footnote to its financial statements that reported the company had guaranteed as much as $2.7 billion in loans to a private
b. Customer impersonation. c. Stealing petty cash. d. Setting up dummy companies - CORRECT ANSWERS ✔✔b. Customer impersonation. Secure web connections are based on: a. HTTPS. b. DNS. c. FTPS. d. FTP. - CORRECT ANSWERS ✔✔a. HTTPS. Failure to account for missing inventory that was supposed to have been returned is a problem found in voided sales frauds. a. True b. False - CORRECT ANSWERS ✔✔a. True Which of the following is not a fraud risk unique to e-business transactions? a. Removal of personal contact. b. Innovative technologies where security lags process development. c. Complex information systems. d. Selling new products. - CORRECT ANSWERS ✔✔d. Selling new products. Multilevel marketing companies:
a. Are illegal. b. Require little time and effort to be successful. c. Increase their distribution process by recruiting additional company sales representatives. d. Can legally pay commission to representatives for simply signing up new recruits. - CORRECT ANSWERS ✔✔c. Increase their distribution process by recruiting additional company sales representatives. The Gramm-Leach-Bliley Act gives you the right to: a. Claim your credit report although an identity fraudster has damaged it severely. b. Receive a yearly stipend to cover the losses incurred as a victim of identity fraud. c. Sue the perpetrator for more money than he or she defrauded from you. d. Opt out of having your personal information sold to organizations. e. Periodically change your Social Security number to avoid identity theft. - CORRECT ANSWERS ✔✔d. Opt out of having your personal information sold to organizations. The major reason that elderly people are so susceptible to telemarketing fraud is that they: a. Are often financially in need. b. Have an excess amount of cash to invest. c. Are often lonely and enjoy talking to friendly callers. d. Are none of these. - CORRECT ANSWERS ✔✔c. Are often lonely and enjoy talking to friendly callers.
Kickback schemes always involve the purchasing function of the victim company. a. True b. False - CORRECT ANSWERS ✔✔b. False What is one way to determine if a Web site is secure or not? a. Click on a link to see if it works. b. Look for the official logo of the company you want to deal with. c. Call the FTC and ask about the ISP address of the website. d. Look for an "s" after the "http" in the URL of the website. - CORRECT ANSWERS ✔✔d. Look for an "s" after the "http" in the URL of the website. The person appointed by a bankruptcy judge in a Chapter 11 proceeding who investigates allegations of fraud or misconduct by the debtor or its principals is a(n): a. Creditor. b. Adjuster. c. Auditor. d. Examiner. - CORRECT ANSWERS ✔✔d. Examiner. Kickbacks are undisclosed payments made by employees of purchasing companies to vendors. a. True b. False - CORRECT ANSWERS ✔✔b. False
Statistics show that fraud losses are directly proportional to age and inversely proportional to education. a. True b. False - CORRECT ANSWERS ✔✔a. True Bid rigging involves establishing a predetermined amount of money that bidders will have to exceed in order to win a bid. a. True b. False - CORRECT ANSWERS ✔✔b. False Which of the following is an indicator of possible hiding of assets in a divorce? a. Assets transferred to an off-site location. b. Changing the title to assets. c. Payments made to fictitious individuals. d. All of these are indicators of possible hiding of assets. - CORRECT ANSWERS ✔✔d. All of these are indicators of possible hiding of assets. Which of the following is not an element of a company's control environment? a. Audit committee participation. b. Hiring policies. c. Independent checks.
cash that was just received. The floral shop doesn't miss the lost inventory because it has a high inventory turnover rate and high losses due to flowers losing their blooms. Jill is committing theft of cash through skimming, a fraud scheme in which cash is stolen from an organization before it is recorded on the organization's books and records. a. True b. False - CORRECT ANSWERS ✔✔False Jill is committing theft of cash through fraudulent disbursements. Specifically, Jill is using a register disbursement scheme involving false voids of customer sales. A record is made at the time of sale, and another record is created for the false void. Suppose you are working with the CI division of the IRS. You have recently been assigned to a case that involves a $3 million tax evasion scandal. The IRS discovered the case when it was performing a routine audit. Because the IRS believed that the case involved fraud, the IRS agent referred the case to the CI division, which has now assigned the case to you. After investigating the case, you determine that it involves significant fraud. Before prosecuting the case further, you want to review the specific laws under which fraud perpetrators are charged. You determine that this tax fraud would be prosecuted under Title 26 USC § 7206(1). To which of the following action or behavior does this law relate? a. Willful failure to collect or pay owed tax b. Attempts to interfere with administration of Internal Revenue laws c. Conspiracy to commit offense or to defraud the United States
d. Fraud and false statements - CORRECT ANSWERS ✔✔d. Fraud and false statements You have been hired as a fraud auditor to examine the assets of a company that recently filed for Chapter 11 bankruptcy. The company manufactures and sells circuit boards for children's computerized toys. You have access to its financial statements and warehouses. The company is a closely held corporation. The company is suspected of fraudulently concealing assets. Which of the following is not a red flag you would look for to indicate fraudulent asset concealment by a company involved in a bankruptcy proceeding? a. Decreases in operating losses that are not explained by economic factors b. Travel to offshore tax havens or locations that allow secret bank accounts c. Unusual reduction in assets d. Frequent and unusual transfers between bank accounts - CORRECT ANSWERS ✔✔a. Decreases in operating losses that are not explained by economic factors Regina recently landed her dream job at a local clothes outlet. Within a few weeks of working in her new employment, however, Regina began to engage in fraud. Regina committed the fraud by doing the following: When people returned merchandise for a cash refund, Regina would ring up an amount that was greater than the value of the item that was being returned. Regina would then pocket the extra cash and give the customer the amount due. Regina found this method of fraud very effective because people were, in reality, returning something, and inventory and register totals wouldn't be out of balance at the end of the day. Which type of occupational fraud is Regina committing?
Which of these would provide opportunities for internal perpetrators of e- commerce fraud? a. Improperly secured software or not updating systems with critical updates from vendors b. The implementation of new, electronic systems c. SQL injections and/or cross-site scripting that crashes customer portals or publishes secret customer information to hackers d. Spoofing IP addresses to impersonate vendors in electronic funds transfers. - CORRECT ANSWERS ✔✔d. Spoofing IP addresses to impersonate vendors in electronic funds transfers. Which of the following is not information or advice you would give to the Silver Years Senior Squad to help them avoid becoming a victim of a telemarketing fraudster? a. The most effective way to combat telemarketing fraud is through reporting all telemarketing calls you suspect are fraudulent to the Federal Trade Commission. b. The elderly are more susceptible to telemarketing fraud than almost any other type of fraud. c. Fraudsters need your voluntary participation, so just say "no" or hang up the telephone when you suspect a fraudulent telemarketing call. d. Realize that fraudsters are masters of manipulation and focus on manipulating human traits such as greed, fear, excitement, and gullibility. - CORRECT ANSWERS ✔✔a. The most effective way to combat telemarketing fraud is through reporting all telemarketing calls you suspect are fraudulent to the Federal Trade Commission.
Check tampering is unique among the disbursement frauds because it is the one group of schemes in which the perpetrator actually prepares the check or takes physical control of the check and converts it for his or her own benefit. a. True b. False - CORRECT ANSWERS ✔✔a. True The best way to obtain documentary evidence is: a. by chance, accident, or tip discovery. b. through computer-based queries of full-population accounting and other databases. c. through interviews and interrogations. d. through discovery sampling. - CORRECT ANSWERS ✔✔b. through computer-based queries of full-population accounting and other databases. Which of the following is not one of the common stages of a criminal case? a. Discovery. b. Filing a criminal charge. c. Filing a complaint. d. Trial and appeal. - CORRECT ANSWERS ✔✔c. Filing a complaint. What is the term for the risk that the sample was not representative of the population? a. Systematic risk b. Nonsampling risk
