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 the above are ways to underrecord liabi...
17 Aug 2021Of the following, the most difficult account for management to intentionally misstate is:a. Income Taxes Payable.b. Cash.c. Securities.d. Prepaid Expenses.
17 Aug 2021You observe that a companys 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 bee...
17 Aug 2021Which of the following is usually the hardest fraud to detect?a. Liability fraud.b. Revenue fraud.c. Asset fraud.d. Disclosure fraud.
17 Aug 2021In liability fraud, liabilities are most often:a. Understated.b. Overstated.c. Recorded as assets.d. Recorded as expenses.
17 Aug 2021A form 1099 with missing with holdings (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.
17 Aug 2021Which 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 companys books are fraudulent.d. All of the above make fraud m...
17 Aug 2021Each 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 va...
17 Aug 2021Each 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 sough...
17 Aug 2021When examining whether a company has underrecorded 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.
17 Aug 2021Inadequate 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 nor b.
17 Aug 2021Overstating 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.
17 Aug 2021When focusing on changes, you should consider changes from period to period in:a. Recorded balances.b. Relationships between balances.c. Balances of other nonsimilar companies.d. Both a and b.e. All of the above.
17 Aug 2021Proactively 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.
17 Aug 2021Analytical 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.
17 Aug 2021FAS 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
17 Aug 2021The 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 underrecording future obligations.d. Not recording or underrecording various types of debt.
17 Aug 2021Recognizing 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 corre...
17 Aug 2021When accounts payable-related liabilities are understated, the financial statements wont balance unless purchases and inventory are:a. Overstated.b. Understated.c. Correctly stated.d. It is impossible to tell.
17 Aug 2021Which 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.
17 Aug 2021Comparing cash and marketable securities balances with those of similar companies is usually very helpful when looking for analytical symptoms of fraud.
17 Aug 2021One of the best ways to detect inappropriate capitalization of costs is by making comparisons with other similar companies.
17 Aug 2021Comparing financial relationships such as interest expense and debt, or the amount of warranty expense as a percentage of sales, is not helpful in identifying fraud symptoms of understating liabilities.
17 Aug 2021Documentary symptoms provide the best opportunity to find contingent liabilities that should be recorded.
17 Aug 2021Financial statement frauds most often occur in large, well-established companies.
17 Aug 2021A company that claims to be something it is not in a 10-K report is committing a kind of financial statement fraud.
17 Aug 2021Financial statement fraud involving footnote disclosures can be either frauds of omission or frauds of commission.
17 Aug 2021Assets most often improperly capitalized are fixed assets such as property or equipment.
17 Aug 2021When searching for unrecorded liabilities, investigating vendors with zero balances would be just as important as investigating vendors with large balances.
17 Aug 2021Understatement of liability fraud is usually more difficult to find than overstatement of asset fraud.
17 Aug 2021Some misleading footnotes have no effect on financial statement balances.
17 Aug 2021Symptoms of unrecorded contingent liabilities can be found by performing analytical procedures on certain financial statement ratios.
17 Aug 2021Accrued liabilities are important accounts to look at when searching for fraud because it is easy to understate liabilities in these accounts.
17 Aug 2021Confirmations with vendors that the company owes money to are an effective way to discover unrecorded liabilities.
17 Aug 2021Proactive searching for analytical symptoms means that we are looking for accounts that appear too high or too low or that are unusual in some other way.
17 Aug 2021Fraud auditors should be equally concerned with liabilities being overstated as well as understated.
17 Aug 2021What are the three different categories into which disclosure frauds can be categorized?Here is a tip:Financial statements are prepared for the stakeholders of the company so as to evaluate the companys financial performance and position for a particular period.
17 Aug 2021If you were to compare two companies in the same industry and found that one company had $100 of fixed assets for every $1 of sales while the other had $200 of fixed assets for every $1 of sales, what would be a possible explanation for the difference?Here is a tip:The operations...
17 Aug 2021What are the four kinds of analysis that can be used in searching for analytical fraud symptoms?Here is a tip:Financial statements are prepared to evaluate the companys financial position and performance for a particular period.
17 Aug 2021If all financial statement amounts are presented appropriately, could financial statement fraud still be occurring?Here is a tip:Fraud is a deliberately dishonest action that is planned to provide an unlawful gain to the perpetrator, or to deny a victims right.
17 Aug 2021In what ways could financial statement fraud result from a merger?Here is a tip:Fraud is a dishonest action planned to provide an unlawful gain to the perpetrator.
17 Aug 2021Is cash an asset that is frequently overstated when committing financial statement fraud? Why or why not? Here is a tip:Fraud is a deliberately dishonest action planned to provide an unlawful gain to the perpetrator or to deny a victims right and can be of any type.
17 Aug 2021Explain why improper capitalization of amounts spent could result in financial statement fraud and overstatement of assets.Here is a tip:Fraud is a deliberate and dishonest action that is planned to provide an unlawful gain to the perpetrator and to deny a victims right.
17 Aug 2021What are some documentary symptoms of contingent liabilities that should be recorded?Here is a tip:Auditors are required to give a true and fair opinion on financial statements depending on the shred of evidence gathered during the audit.
17 Aug 2021If a contingent liability is only a possible liability, why might not disclosing contingent liabilities constitute financial statement fraud?Here is a tip:Liabilities are the companys obligations that result in an outflow of resources.
17 Aug 2021What is the difference between unearned revenue and earned revenue?Here is a tip:Revenue is the money a company receives from its daily operations, usually from the selling products or services to customers.
17 Aug 2021Why might liabilities be understated if proper adjusting entries are not made at the end of an accounting period?Here is a tip:Liabilities are the obligations of the company from past events or transactions that need to be paid in the near future.
17 Aug 2021Explain what is meant by "cutoff problems" as they relate to accounts payable.Here is a tip:Accounts payable is the amount payable by the company to the creditors for purchase of goods and services.
17 Aug 2021List the four methods used to perform analytical analyses to search for financial statement fraud symptoms. Give an example of each method as it applies to searching for symptoms related to underreporting of liabilities.
17 Aug 2021Why is understatement of liability fraud difficult to discover?Here is a tip:A company may not record accrued expenses in order to understate its liabilities.
17 Aug 2021