Archives: Quiz

1) The Certified Information Security Manager (CISM) is unique in the information security credential marketplace because it is designed specifically and exclusively for individuals who have experience managing an information security program. 2) The fraud examiner categorizes schemes in three […]

1) User access to systems may identify segregation of duties issues. Review of which file(s) can detect problems? H.System user access master file I.Accounts Receivable master file J.General ledge master file K.Accounts payable master file 2) Discuss the considerations that […]

1) Cyber-crime involves the use of cell phones. 2) What approaches are used by investigators to obtain documents? Answer: Generally, investigators can obtain documents using three approaches: Voluntary consent Subpoena Search warrant 3) Organizations refers to unions, the mafia, as […]

1) What is a fiduciary duty and give examples. 2) How can financial statement fraud be deterred? Answer: Following the principles of the fraud triangle, introduced in the first chapter of this book, a general approach to reducing financial statement […]

1) A computer audit test for detecting cash larceny where employees have high dollar differences between the cash count and sales register tape would include: I.Summarize by employee the difference between the cash receipt report and the sales register system […]

1) A murderer is condemned to death. He has to choose between three rooms. The first is full of raging fires, the second is full of assassins with loaded guns, and the third is full of lions that havent eaten […]

1) Real estate transaction records can be sources of evidence for income concealment. 2) High net worth individuals are likely to use private banks. Answer: T 3) Explain how the Patriot Act enhances RICO. Answer: The Patriot Act expands the […]

1) Using a copy of an electronic file is not allowed in court. 2) ________ value is used to describe the price of an asset, assuming that a willing buyer and willing seller can come to terms under normal market […]

1) A(n) ________ is considered by most professionals to be the cornerstone of an employee reporting program. M.hotline N.audit O.conflict of interest policy P.external review 2) The SarbanesOxley Act (SOX) of 2002 is aimed at accounting staffs, auditing firms, corporate […]

1) Collusion requires more than one person to override the system of internal controls. 2) Mischaracterized expense schemes involve payment for legitimate expenditures. Answer: T 3) The amount of damages proven under negligence may be relatively uncertain. Answer: F 4) […]

1) Computer crime and computer fraud are synonyms. 2) Common tipsters for fraud are employees, co-workers, managers, and outside colleagues who interact with the fraudster daily, weekly, or monthly. Answer: T 3) Much of the recent legislative and regulatory changes […]

1) Describe the fraud examiner/forensic accountants approach to investigations. 2) Since forensic accounting works with fact as documented by legal records the reports seldom add an adversarial nature to the engagements, and professionals can expect that their work will be […]

1) List three proactive computer audit steps for detecting skimming (from page 304 306). 2) What remedies are available through the civil and criminal justice systems? Answer: There are three major forms of negotiated remedies in civil procedures: out-of-court settlements, […]

1) The Department of Justice defines cybercrime as any violation of civil law that involves knowledge of computer technology for its perpetration, investigation, or prosecution. 2) Fraudulent endorsement schemes commonly involve the interception of a signed check before mailing. Answer: […]

1) Which of the following is not a typical corruption scheme: M.Economic extortion N.Expropriation O.Bribery P.Conflicts of interest 2) All instances of misconduct in the workplace amount to fraud. Answer: F 3) Explain the fraud triangle and M.I.C.E. and compare […]

1) Changing the payees name on a check is an example of alteration. 2) In general, increasing the perception of detection may be the best way to deter employee theft, while increasing the sanctions that are imposed on occupational fraudsters […]

1) Norming or calibrating is the process of observing behavior before critical questions are asked, as opposed to doing so during questioning. 2) IDEA can read, display, analyze, manipulate, sample, and extract data from files obtained from many sources in […]

1) Fraud may only be prosecuted criminally. 2) With fraudulent representations such as materially misstated financial statements and improper tax returns, the investigator starts with the suspected perpetrator. Answer: True 3) This Periodicity assumption uses the principle of dividing economic […]

1) Corruption schemes are broken down into four classifications: bribery, illegal gratuities, economic extortion and larceny. 2) The SarbanesOxley Act of 2002 was signed into law on July 30, 2002 to address corporate governance and accountability as well as public […]

1) Torts occur when a party has been injured, even though the parties to the suit do not have a contractual relationship. 2) Assessment questions should proceed logically from the most to the least sensitive. Answer: False 3) Subsequent to […]

1) The fraud examiner or forensic accountant often uses public records to verify the existence of the vendor business, the vendors ownership, and the vendors address and phone number. 2) In order to prevent cash larceny at the point of […]

1) Corporate governance is the set of processes, customs, and policies that affect the way an organization is directed. 2) When an employee skims money off-book sales of merchandise, the theft can be detected by comparing the register tape to […]

1) Perhaps the biggest key to preventing skimming of any kind is to maintain a viable oversight presence at any point where cash enters an organization. 2) Rationalizations provide a morally unjustifiable reason for the targets actions. Answer: False 3) […]

1) The acronym MICE signifies fraud motivations such as money, intellectualism, coercion, and ego. 2) What are some of the ways in which financial statement fraud is committed? Answer: 1>Playing the accounting system. In this approach, the fraudster uses the […]

1) Another way to conceal cash larceny is to use reversing transactions, such as False voids or refunds, which cause the register tape to reconcile to the amount of cash on hand after the theft. 2) Introductory questions serve four […]

1) Employees who perceive that they will be caught engaging in occupational fraud and abuse are less likely to commit it. 2) The essence of criminal and civil litigation is controlled confrontation: both sides get the opportunity to present the […]

1) A company should develop a system of internal controls that provides absolute assurance that assets are protected and financial statements are fairly presented. 2) Output controls address how to monitor waste and how to identify who is responsible for […]

1) Under current GAAP a stock dividend declaration and distribution will not reduce either total assets or total owners’ equity. 2) The activities comprising the operating cycle are generally consistent across firms. Answer: FALSE 3) The earnings conservatism ratio comparisons […]

1) Under IFRS, an indicator that could lead to a lease being classified as a finance lease is if the lessee cancels the lease, the lessor’s losses will be borne by the lessee. 2) Higher marginal income tax rates create […]

1) When a LIFO firm liquidates old LIFO layers, the net income number under LIFO can be seriously distorted because the older costs in the LIFO layers that are liquidated are matched against sales dollars that are stated at higher […]

1) GAAP states that if it is impractical to determine the cumulative effect of applying a change in accounting principle to prior periodssuch as when a firm adopts the LIFO inventory accounting methodthe new accounting principle is to be applied […]

1) Covenants restricting the use of funds for dividend payments, share repurchases, capital expenditures, and other business purposes are included so the creditor has greater assurance that cash will be available to make principal and interest payments when due. 2) […]

1) U.S. tax laws encourage companies to overfund their pension plans. 2) Authoritative guidance on bundled (multiple-element) software sales transactions states that if a software sales arrangement includes multiple, distinct elements, the revenue from the arrangement should be allocated to […]

1) The amount available to finance planned expansion of operating capacity, reduce debt, pay dividends, or repurchase stock is distributable (or free) cash flow. 2) Because financial disclosures are regulated, owners and managers have little economic incentive to supply the […]

1) When a company restates its financial statements due to some accounting irregularity, shareholder lawsuits are often filed against the company and its management. 2) If a lessee mistakenly treats a capital lease as an operating lease, both assets and […]

1) Securitizations have always been carefully designed to enable the transferor to consolidate the special purpose entity. 2) Predicting loan default and bankruptcy are relatively easy tasks if financial ratios are carefully analyzed. Answer: FALSE 3) GAAP requires the cost […]

1) Managers in lessee companies prefer that leases be treated as capital leases. 2) High quality financial statements help credit analysts see what is really going on at a company; low quality statements mask true performance and financial condition. Answer: […]

1) The SEC permits Internet resellers (i.e., those that act as agents or brokers in a transaction) to report revenue on either a “gross” or “net” basis. 2) GAAP states that if it is impractical to determine the cumulative effect […]

1) In applying the discounted free cash flow valuation model, the discount rate used is the average cost of capital. 2) Special purpose entities generally stay on the balance sheet under both IFRS and current U.S. GAAP. Answer: TRUE 3) […]

1) Once the deferred income tax allowance is established, it can be either increased or decreased in future years. 2) For tax purposes lessees prefer operating leases. Answer: FALSE 3) A firm generates a return that exceeds the cost of […]

1) When the risk of non-collection of installment payments is high or when there is no reasonable basis for estimating the proportion of installment accounts receivable likely to prove uncollectible, U.S. GAAP permits the use of the installment sales method. […]

1) The sale is itself the sole criterion for recognizing revenue. 2) Asset turnover is defined as sales divided by total assets. Answer: FALSE 3) The accounting standards codification was created by the IASB to harmonize U.S. and international GAAP. […]

1) A major factor underlying the rise of IFRS is that companies needing to seek global sources of capital are at a disadvantage when they only produce financial statements based on the commercial and tax law approach. 2) A lender […]

1) A convertible bond’s net-of-tax interest expense is added back to net income when determining diluted earnings per share only if the bond is known to be dilutive. 2) Subsequent events are required to be disclosed if they are material […]

1) Long-lived assets are operating assets that are expected to yield their economic benefits over a period longer than one year. 2) Companies are required to disclose the dollar amount of pension retirement benefits they expect to pay in each […]

1) Aging assets and inflation tend to complicate financial statement analysis by overstating return on assets. 2) A comprehensive risk analysis involves evaluating and summarizing the various individual risks associated with a loan. Answer: TRUE 3) In the United States, […]

1) While analysts may forecast only a single financial statement item, such forecasts may prove highly unreliable. 2) A significant difference between income from operations and net cash flows from operating activities is a signal that reported income might have […]

1) An increase in accounts payable of $6,000 for the year increases cash flow from operating activities by $6,000. 2) The sale of fixed assets represents an investing activity. Answer: TRUE 3) A corporation that incurs a net operating loss […]

1) Reported accrual accounting income for a period always provides an accurate picture of underlying economic performance. 2) Companies judged to be high credit risks may be subject to loan covenants. Answer: TRUE 3) For accounting purposes, “fair value” is […]

1) All companies should be expected to produce positive operating cash flows every year. 2) Debt covenants help guard against conflicts of interest between creditors and bank regulators. Answer: FALSE 3) Under IFRS the two additional lessor criteria provided under […]