MGMT 642 Chapter 12

  1. understated revenues and understated net income are among the most common typess of FS fraud
  2. 2 of the reasons revenue-related FS fraud is so prevalent are bc revenue recognition can be highly subjective and because revenue is so easily manipulated
  3. preforming a horizontal analysis of the stmt of cash flows is an excellent way to proactively search for revenue-related FS fraud
  4. teh most common accounts manipulated when perpetrating FS fraud are revenues and or accounts recievable
  5. an increase in gross margin and an increase in number of days' sales in inventory could be an indication of inflated inventory fraud
  6. a "sales discounts" amount taht appears to low could be a fraud symptom
  7. comparing fiancial results and trends of a company with those of similar firms is an ineffective way to look for fraud symptoms
  8. focusing on changes in fs from period to period can help identify analytical fraud symptoms
  9. controls over inventory shoudl be closely examined when searching for fraud symptoms
  10. the gross profit margin ratio is calculated by dividing gross profit by cost of goods sold
  11. working capital turnover ratio is calculated by dividing avg working capital by sales
  12. AR turnover is one of the most widely used ratios to analyze revenues and is a measure of the efficiency with which receivables are being collected
  13. one of the most practical ways to look for analytical symptoms of fraud are to focus on changes and comparisons within and from the FS
  14. teh most common accounts manipulated when perpetrating FS fraud are:
    c. revenues
  15. why might a company want to understate net income?
    d. to pay less taxes
  16. reported revenue and sales account balances that appear too high are examples of:
    a. analytical symptoms
  17. horizontal analysis is a method that:
    b. examines percent changes in account balances from period to period
  18. adding fictitious receivables will ususally result in an:
    d. increase in the # of days receivealbe
  19. comparing recorded amounts in the FS with the real world assets they are supposed to represent would be the most effective in detecting:
    a. cash and inventory fraud
  20. lifestyle symptoms are most effective with:
    c. employee frauds
  21. Which of the followingis not an inventory-related documentary symptom?
    d. all of the above are inventory-related documentary symptoms
  22. when looking foer inventory fraud, an important question to ask is:
    d. all are important questions to ask
  23. Which of the following ratios would not generally be used to look for inventory and COGS related frauds
    a. AP turnover
  24. in order to analyze Fs for fraud, an auditor or fraud examiner should consider all of the following except:
    d. teh audit should consider all of the above
  25. last-minute revenue adjustments, unsupported BS amts, and improperly recorded revenues are examples of:
    a. analytical symptoms
  26. accounts that can be manipulated in revenue fraud include all of the following except:
    C. inventory
  27. which financial ratio is not useful in detectingrevenue related fraud?
    d. all of the above are useful
  28. teh asset turnover ratio measures:
    c. sales that are generated with each dollar of the assets
  29. the most common way to overstate revenuesis to:
    c. create fictitious revenues
  30. Which of the following is a possible scheme for manipulating revenue when returned goods are accepted from customers?
    d. avoid recording the returned goods from customers
  31. all of the following ratios are useful in detecting large revenue frauds except:
    b. current ratio
  32. each of the following illicit revenue transactions is correctly linked with the FS accounts involved except:
    c. don't write off uncollectible receivables - Sales Returns, Sales Discounts
  33. identify which ratio is correctly linked to the information it could reveal about the company's potential for revenue fraud?
    b. sales return percentage - a sudden decrease in this ratio can mean that customer discounts are not being recorded in teh accounting records
  34. Which of the following is a common way to perform FS analysis while searching for revenue-related analytical symptoms?
    d. both a and b a re common ways to perform within statement analysis while searching for revenue-related analytical symptoms
  35. Primarily occuring at the end of teh year in an attempt to inflate sales, the practice of shipping more items to distributors than they can sell in a reasonable time period is known as:
    b. channel stuffing
Card Set
MGMT 642 Chapter 12
642 - 12