Acc505 module 6 quiz 5 2017 (Score 100%)

QuestionQuestion 1Under Sarbanes-Oxley, chief executive officers and chief financial officers are required to personally certify annual and quarterly SEC filings.Which of the following is an item that they must certify in their  reports?All of the above.They have disclosed to the audit committee any material control weakness.The financial statements were prepared in conformity with GAAP.The company's internal controls have prevented or detected all material instances of fraud during the last year.Question 2Walden Industries is being sued by a former employee for wrongful termination. It is probable that the company will lose the case and be ordered to pay the plaintiff a significant sum of money. If Walden fails to report this information somewhere in its financial statements, it is violating the GAAP concept of:cost-benefit.materiality.full disclosure.matching.Question 3Investigating registered public accounting firms and their employees, conducting disciplinary hearings, and imposing sanctions where justified are duties of which of the following bodies?General Accounting Office's Oversight BoardAICPA's Accounting Standards BoardSEC's Subcommittee on Corporate GovernancePublic Company Accounting Oversight BoardQuestion 4Senior management is most likely to understate business performance in the financial statements for which of the following reasons?To reduce the value of an owner-managed business for purposes of a divorce settlementTo increase the value of a corporate unit whose management is planning a buyoutTo comply with loan covenantsTo trigger performance-related compensation or earn-out paymentsQuestion 5Fraudulent manipulation of the going concern assumption usually results from an organization trying to conceal its terminal business situation.TrueFalseQuestion 6Which of the following is a duty of the Public Company Accounting Oversight Board?Registering accounting firms that audit publicly traded companiesEstablishing or adopting standards relating to audits of publicly traded companiesEnforcing compliance with professional standards and securities laws relating to public company auditsAll of the aboveQuestion 7Intentionally reporting product sales in the financial statements for the period prior to when they actually occurred is a violation of which generally accepted accounting principle?PeriodicityHistorical costMatchingRevenue recognitionQuestion 8When a fraudster feeds fictitious information into the accounting system in order to manipulate reported results, this is called:going outside the accounting system.beating the accounting system.playing the accounting system.boing around the accounting system.Question 9The Sarbanes-Oxley Act provides that members of the audit committee may receive compensation for consulting or advisory work only if approved by a majority of the board members.TrueFalseQuestion 10The term "financial statement" does not include a statement of cash receipts and disbursements, because this type of presentation violates the required use of accrual accounting under GAAP.TrueFalseQuestion 11According to COSO's study, Fraudulent Financial Reporting: 1998-2007, which of the following is the most likely to commit financial statement fraud?Organized criminalsLower-level employeesMid-level employeesThe chief executive officer and/or chief financial officerQuestion 12Which of the following is a reason that a chief executive officer might commit financial statement fraud?To conceal the company's true performanceTo receive or increase a performance bonusTo avoid termination due to poor performanceAll of the aboveQuestion 13Which of the following is not one of the provisions established under the Sarbanes-Oxley Act?Code of ethics for senior financial officersCriminal penalties for altering documentsManagement assessments of internal controlsThe creation of the Public Accounting Standards BoardQuestion 14A company's financial statements are the responsibility of:the accounting department.management.the shareholders.the independent auditors.SubsectionQuestion 15The preferred and easiest method of concealing liabilities and expenses is to simply fail to record them.TrueFalseQuestion 16Which of the following is a red flag associated with fictitious revenues?An unusual decline in the number of days' purchases in accounts payableRecurring losses while reporting increasing cash flows from operationsAn unusual decrease in gross marginSeveral unusual and highly complex sales transactions recorded close to the period endQuestion 17While conducting the annual audit of Bluebird Company's financial statements, Elsie Finnegan, CFE, CPA, came across some fishy findings. The company recorded several large and unusual sales at the end of the fiscal year to customers Elsie had never heard of. Further, all of these sales occurred within the company's specialty division, which had previously been in danger of closing due to recurring losses. Based on these findings, what type of financial statement fraud is likely occurring?Expense omissionAll of the aboveUnrecorded warrantiesFictitious revenuesQuestion 18Staff Accounting Bulletin Topic 13, "Revenue Recognition," indicates that revenue is considered realized or realizable and earned when four criteria are met. Which of the following is one of these criteria?Collectability is reasonably assured.Goods have been scheduled to be delivered or services have been scheduled to be rendered within the current fiscal period.The seller has located alternate buyers.All of the above.Question 19Capitalizing revenue-based expenses as depreciable assets will cause income to be ____________ in the current period and _______________ in future periods.overstated; overstatedunderstated; overstatedunderstated; understatedoverstated; understatedQuestion 20Which of the following is not an example of financial statement fraud?Deliberate omission of material disclosuresAll of the above are examples of financial statement fraudFalsification of material financial records, supporting documents, or business transactionsUnintentional misapplication of accounting principlesQuestion 21Recurring attempts by management to justify marginal or inappropriate accounting treatments on the basis of materiality is a red flag associated with which type of financial statement fraud?Improper disclosuresFictitious revenuesNone of the aboveConcealed liabilitiesQuestion 22The civil and criminal protections for whistleblowers under Sarbanes-Oxley apply only to employees of publicly traded companies.TrueFalseQuestion 23Sharpe Medical Supply, Inc. has suffered a recent slow-down in sales and is in danger of showing a loss for the 20X1 fiscal year. To boost income, the sales manager encourages two of the company's largest customers to overbuy several slow-moving products at deep discounts. He also offers them extended payment terms, some of which delay payment until the end of 20X2. This is an example of what type of scheme?Channel stuffingLong-term contractsDiscount extensionSales re-routingQuestion 24An organization that seeks to fraudulently minimize its net income due to tax considerations may do so by:recording fictitious revenues.omitting existing liabilities.underestimating warranty repairs expense.expensing capitalized expenditures.Question 25According to the 2012 Report to the Nations on Occupational Fraud and Abuse, the most common type of occupational fraud is financial statement fraud.TrueFalseQuestion 26Which of the following is a red flag associated with concealed liabilities and expenses?An unusual increase in the number of days' purchases in accounts payableAn unusual change in the relationship between fixed assets and depreciationGross margin significantly lower than industry averageSignificant reductions in accounts payable while competitors are stretching out payments to vendorsQuestion 27An inability to generate cash flows from operations while reporting earnings and earnings growth is a red flag for which of the following financial statement fraud schemes?Improper asset valuationFictitious revenuesConcealed liabilities and expensesSubsectionAll of the aboveQuestion 28In one of the cases in the textbook, Eddie Antar, the CEO of the Crazy Eddie electronic stores in the New Jersey area, took fraud to a higher level. The company started out as a small, family-owned business, but Eddie soon found that he could really clean up by taking his company public and making a fortune off the sale of stock. However, in order to sustain his financial success, he turned to cooking the books.Unfortunately for Eddie, his  scheme eventually came to an end. What financial statement fraud scheme did Eddie commit?Overstatement of inventoryImproper disclosuresFictitious revenuesAll of the aboveQuestion 29In one of the cases in the textbook, Eddie Antar, the CEO of the Crazy Eddie electronic stores in the New Jersey area, took fraud to a higher level. The company started out as a small, family-owned business, but Eddie soon found that he could really clean up by taking his company public and making a fortune off the sale of stock. However, in order to sustain his financial success, he turned to cooking the books.Unfortunately for Eddie, his  scheme eventually came to an end. How was the fraud caught?His ex-wife contacted the SEC.The audit committee received an anonymous tip which led them to the fraud.Eddie lost a proxy battle for ownership, and the company's new owners quickly discovered the fraud as they reviewed the books.The auditors found that the inventory count had been changed.Question 30In one of the cases in the textbook, Michael Weinstein was the head of Coated Sales, Inc., a company that coated fabrics for use in producing things like parachutes, helmet liners, and camouflage suits. By engaging in financial shenanigans, Coated Sales moved to the top of its industry, but ultimately the good times turned into bad times, and the company declared bankruptcy. Which of the following was a red flag that a fraud was being perpetrated?The bank account had been overdrawn on at least four occasions in one year.A single check was used to pay off several different customer accounts.The company kept changing auditors every other year.The company experienced extremely rapid growth even while its competitors' growth was flat.Question 31In the vertical analysis of an income statement, _____________ is assigned 100 percent, with all other items expressed as a percentage thereof.Net salesNet incomeGross salesGross marginQuestion 32Promoting strong values, based on integrity, throughout the organization can help reduce financial statement fraud by addressing which side of the fraud triangle?Pressure to commit fraudRationalization of fraudOpportunity to commit fraudNon-sharable financial needsQuestion 33In one of the cases in the textbook, Michael Weinstein was the head of Coated Sales, Inc., a company that coated fabrics for use in producing things like parachutes, helmet liners, and camouflage suits. By engaging in financial shenanigans, Coated Sales moved to the top of its industry, but ultimately the good times turned into bad times, and the company declared bankruptcy. What type of financial statement fraud was committed?Fictitious assetsConcealed expensesImproper disclosuresFictitious salesQuestion 34Which of the following is a common target for improper asset valuation schemes?Business combinationsInventory valuationAccounts receivableAll of the aboveQuestion 35The technique for analyzing the percentage change in individual financial statement items from one accounting period to the next is known as:vertical analysis.horizontal analysis.correlation analysis.ratio analysis.Question 36Bill Raymond is the CEO of the Drummond Group, a consulting group in the Carolinas. Sales have increased at least five percent every year for the past seven years. Unfortunately, the company has hit a slump this year, and revenue is far less than anticipated. However, in order to receive his performance bonus, Bill must show a sales increase of at least seven percent. When the financials are released, sales have increased by exactly seven percent. Which of the following ratio analyses would be most helpful in revealing that Bill included bogus sales in the company's financials?Quick ratioInventory turnoverDebt-to-equity ratioReceivable turnoverQuestion 37An unusual change in the relationship between fixed assets and depreciation is a red flag associated with which type of financial statement fraud scheme?Timing differencesAll of the aboveImproper asset valuationImproper disclosureQuestion 38Scott Ruskin is the CEO of Decatur Materials. The company has been struggling for the last few years and is in danger of defaulting on several of its bank loan covenants. Scott is facing significant pressure from the board of directors to turn the company around. Unless he meets all of the financial goals for the year, he will be out the door without a golden parachute. To improve the financial appearance of the company, Scott undertakes a scheme to boost the balance sheet by faking inventory. The analysis of what financial ratio would most likely bring this scheme to light?Profit marginInventory turnoverQuick ratioCollection ratioQuestion 39According to SAS 99 (AU240), the auditor should ask management about the risks of fraud and how they are addressed. Which of the following is not described as an issue that the auditor should ask management about?Whether and how management communicates the company's financial results to its employeesManagement's understanding of the risk of fraudWhether management has knowledge of fraud or suspected fraudPrograms that the entity has established to prevent, deter, or detect fraudQuestion 40According to SAS 99 (AU240), fraud involving senior management should be reported directly to the shareholders as soon as the fraud is documented.TrueFalse