Solved by verified expert :Question 1Which of the following is not an objective of financial reporting?Financial
reporting should provide information that is useful to present and
potential investors and creditors and other users in making rational
investment, credit, and similar decisions.Financial reporting
should provide information to help present and potential investors and
creditors and other users in assessing the amounts, timing, and
uncertainty of prospective cash receipts from dividends or interest and
the proceeds from the sale, redemption, or maturity of securities or
loans.Financial reporting should provide information about the
economic resources of an enterprise, the claims against those resources,
and the effects of transactions, events, and circumstances that change
the resources and claims against those resources.Financial accounting is designed to measure directly the value of a business enterprise.1.5 points Question 2The primary current source of generally accepted accounting principles for non government operations is theNew York Stock ExchangeFinancial Accounting Standards BoardSecurities and Exchange CommissionAmerican Institute of Certified Public Accountants1.5 points Question 3Which of the following indicates how revenue is usually recognized?Point of saleEnd of productionReceipt of cashDuring production1.5 points Question 4Statement
of Financial Accounting Concepts No. 1, “ Objectives of Financial
Reporting by Business Enterprises,” includes all of the following
objectives, except one. Which objective does it not include?Financial accounting is designed to measure directly the value of a business enterprise.Investors,
creditors, and others may use reported earnings and information about
the elements of financial statements in various ways to assess the
prospects for cash flows.The primary focus of financial reporting is information about earnings and its components.The primary focus of financial reporting is information about earnings and its components.1.5 points Question 5If assets are $ 40,000 and stockholders’ equity is $ 10,000, how much are liabilities?$50,000$10,000$30,000$20,0001.5 points Question 6From
the point of view of analysis, which classification of an audit opinion
indicates that the financial statements carry the highest degree of
reliability?disclaimer of opinionUnqualified opinionqualified opinionadverse opinion1.5 points Question 7Which of these is not a suggested problem caused by lack of harmonization of international accounting standards?Difficulties in reconciling local standards for access to other capital marketsDifficulties in reconciling local standards for access to other capital marketsA
need for employment of key personnel in multinational companies to
bridge the “ gap” in accounting requirements between countriesPositive effect on the international trade of accounting practice and services1.5 points Question 8Which party has the primary responsibility for the financial statements?BookkeeperAuditorManagementCost accountant1.5 points Question 9Current assets typically include all but which of the following assets?Cash restricted for the retirement of bondsUnrestricted cashMarketable securitiesInventories1.5 points Question 10Which of the following accounts would not be classified as an intangible?GoodwillPatentAccounts ReceivableTrademarks1.5 points Question 11Growth Company had total assets of $ 100,000 and total liabilities of $ 60,000. What is the balance of the stockholders’ equity?$ 0$ 40,000$ 60,000$ 100,0001.5 points Question 12The Current Assets section of the balance sheet should includeInventoryTaxes PayableLandPatents1.5 points Question 13Which of the following is not a typical current liability?Accounts payableBonds PayableInterest payableWages payable1.5 points Question 14Which of the following would be classified as an extraordinary item?Loss from floodSelling expenseInterest expenseGain on sale of marketable securities1.5 points Question 15If
the investor company owns 30% of the stock of the investee company and
the investee company reports profits of $ 150,000, then the investor
company reports equity income of$25,000$35,000$45,000$ 50,000.1.5 points Question 16The following relate to the income statement of Growth Company for the year ended 2008. What is the beginning inventory? Purchases $ 180,000Purchase
returns 5,000 Purchase returns is inventory the company bought (part of
purchases, and then returned to their supplier). Sales 240,000 Cost of goods sold 210,000 Ending inventory 30,000$6,000$65,000$50,000$75,0001.5 points Question 17Using these results for a given ratio, compute the median, 14%, 13.5%, 13%, 11.8%, 10.5%, 9.5%, 9.3%, 9%, 7%.10.5%7% 14%13.5%1.5 points Question 18Industry ratios should not be considered as absolute norms for a given industry because of all but which of the following?The firms have different accounting methods.Many companies have varied product lines.The financial services may be private independent firms.The fiscal year- ends of the companies may differ.1.5 points Question 19Use the information below to compute the acid test ratio. (The same company and numbers are used for questions 19 -22)SHARKEY CORPORATIONSelected Financial Data As of December 31, ……………….. ……………………………………2007….2006 Cash $ 8,000 $ 60,000 Marketable securities 32,000 8,000 Accounts receivable 40,000 110,000 Inventory 80,000 140,000 Net property, plant, and equipment 240,000 280,000 Accounts payable 60,000 100,000 Short- term notes payable 30,000 50,000 Credit sales 600,000 900,000 Cost of goods sold 1,260,000 1,403,0000.630.700.890.991.5 points Question 20Use the information below to compute the receivables turnover. (The same company and numbers are used for questions 19 -22)SHARKEY CORPORATIONSelected Financial Data As of December 31, …. …………………………………………….2007………. 2006Cash $ 8,000 $ 60,000 Marketable securities 32,000 8,000 Accounts receivable 40,000 110,000 Inventory 80,000 140,000 Net property, plant, and equipment 240,000 280,000 Accounts payable 60,000 100,000 Short- term notes payable 30,000 50,000 Credit (AR)sales 600,000 900,000 Cost of goods sold 1,260,000 1,403,0008 times6 times12 times14 times1.5 points Question 21Use the information below to compute the inventory turnover. (The same company and numbers are used for questions 19 -22)SHARKEY CORPORATIONSelected Financial Data As of December 31, …. …………………………………………….2007………. 2006Cash $ 8,000 $ 60,000 Marketable securities 32,000 8,000 Accounts receivable 40,000 110,000 Inventory 80,000 140,000 Net property, plant, and equipment 240,000 280,000 Accounts payable 60,000 100,000 Short- term notes payable 30,000 50,000Credit sales 600,000 900,000 Cost of goods sold 1,260,000 1,403,00011.45 times10.5 times9.85 times8.45 times1.5 points Question 22Use the information below to compute the current ratio. (The same company and numbers are used for questions 19 -22)SHARKEY CORPORATIONSelected Financial Data As of December 31, 2007 2006Cash $ 8,000 $ 60,000 Marketable securities 32,000 8,000 Accounts receivable 40,000 110,000 Inventory 80,000 140,000 Net property, plant, and equipment 240,000 280,000 Accounts payable 60,000 100,000 Short- term notes payable 30,000 50,000 Credit sales 600,000 900,000 Cost of goods sold 1,260,000 1,403,0001.402.601.901.781.5 points Question 23Investment instruments used to invest temporarily idle cash balances should have which of the following characteristics?High expected return, readily marketable, and no maturity dateLow default risk, low marketability, and a short term to maturityLow default risk, readily marketable, and a long term to maturityLow default risk, readily marketable, and a short term to maturity1.5 points Question 24The primary objective in the management of accounts receivable isTo realize no bad debts because of the opportunity cost involved.To
achieve a combination of sales volume, bad- debt experience, and
receivables turnover that maximizes the profits of the corporation.To provide the treasurer of the corporation with sufficient cash to pay the company’s bills on time.To coordinate the activities of manufacturing, marketing, and financing so that the corporation can maximize its profits.1.5 points Question 25Under the Employee Retirement Income Security Act, a company can be liable for its pension plan up to30% of its net worth30% of pension liabilities30% of liabilities40% of its net worth1.5 points Question 26Which of the following statements is correct?A ratio that indicates a firm’s long- term debt- paying ability from the balance sheet view is the times interest earned.Some
of the items on the income statement that are excluded in order to
compute times interest earned are interest expense, income taxes, and
interest income.Usually, the highest times interest coverage in
the most recent five- year period is used as the primary indication of
the interest coverage.Capitalized interest should be included with interest expense when computing times interest earned.1.5 points Question 27Total asset turnover measuresNet income dollars generated by each dollar of sales.The ability of the firm to generate sales through the use of the assets.The firm’s ability to make productive use of its property, plant, and equipment through generation of profits.Return to the common shareholders.1.5 points Question 28Net profit margin × total asset turnover measuresDuPont return on assets.Return on investment.Return on common equityReturn on stockholders’ equity.1.5 points Question 29Previously
there were 100,000 shares. In 2008, Zello Company declared a 10% stock
dividend. In 2007, earnings per share was $ 1.00. When the 2007 earnings
per share is disclosed in the 2008 annual report, it will be disclosed
at$1.10$1.00$0.91$0.811.5 points Question 30The earnings per share ratio is computed forConvertible bondsRedeemable preferredCommon StockNonredeemable preferred1.5 points Question 31Which
of the following current asset or current liability accounts is not
included in the computation of cash flows from operating activities?Change in ARChange in inventoryChange in APChange in notes payable to banks1.5 points Question 32How would revenue from services be classifiedInvesting inflowInvesting outflowOperating inflowFinancing outflow1.5 points Question 33Working capital is defined as Total assets plus current liabilitiesCurrent assets less current liabilitiesCash equivalent accounts less current liabilitiesCurrent assets less cash equivalent accounts1.5 points Question 34In regards to cash flow what type of account is inventory?InvestingFinancing OperatingNoncash1.5 points Question 35The ratio of total cash, trade receivables, and marketable securities to current liabilities isThe acid-test ratioThe current ratioSignificant if the result is 2 to 1 or belowMeaningless1.5 points Question 36The times interest earned ratio is a primary measure ofLiquidityLong term debt paying abilityActivityProfitabilityAdditional Requirements Level of Detail: Show all work Other Requirements: Question 1Check tampering is unique from other fraudulent disbursement schemes because in a check tampering scheme:The perpetrator physically prepares the fraudulent check.The perpetrator must have access to a signature stamp in order to conceal the crime.The perpetrator submits a phony document in order to generate the fraudulent payment.The perpetrator must endorse the check in order to cash it.2.5 points Question 2The most effective method if preventing an individual from adding fictitious employees to a company’s payroll records is:Segregation of duties. Bank reconciliation. Use of dual control. Authorized check signer.2.5 points Question 3The two most common ways that commissions may be fraudulently increased are:Skimming and theft of non cash assets. Larceny and bribing. False sales and increasing the rate of the commission.Misuse of non cash assets and shorting company purchases.2.5 points Question 4Which of the following is NOT something the fraud examiner would do to see if a salesman is inflating their commission?Compare the salesman’s commissions to those of other salesmen.Compare the rate of commission to personnel or company policy. Examine checks for forged endorsements.Verify sales with customers.2.5 points Question 5Which of the following is not a strong control for protecting blank checks?Blank checks should be kept under lock and key.The key to the blank checks should be closely guarded.Access to computer generated check software should be controlled by password.Blank check should be under the control of the cashier.2.5 points Question 6Which
of the following is the main reason why the fraudster may be detected
in a scheme where an outgoing check made out to a third party is stolen
by the fraudster?The inventory will be overstated.The bank account will not be able to be properly reconciled.The third party will question why they haven’t received the check.The forged endorsement may be detected by the bank.2.5 points Question 7Which of the following is not a way to prevent employees from charging their personal expenses to the company?Insure that checks are signed by an authorized signer.Require detailed expense reports for all reimbursable expenses.All reimbursed expenses should be reviewed by an employees immediate supervisor.Incorporate a policy that clearly explains what types of expenses are reimbursable.2.5 points Question 8Which of the following is a method to detect expense reimbursement fraud?Establishment of travel and entertainment budgets and examination of variances.Completing a monthly bank reconciliation.Use of an authorized check signer.Insuring that all blank checks are adequately secured.2.5 points Question 9Which of the following is not a control that is used to prevent/detect expenses being paid more than once?Require only original receipts; no photocopies.Completing a monthly bank reconciliation.All reimbursed expenses should be reviewed by an employee’s immediate supervisor.Use of a computer check that will identify like invoice numbers and amounts.2.5 points Question 10A register disbursement false refund scheme normally causes inventory shrinkage because:The item stolen must be destroyed.The fraudster will continue the theft until caught.The item is returned to the inventory on the books only.The item is physically returned to the inventory.2.5 points Question 11Which of the following is false?Employees
sometimes create fictitious sales to justify the shipment of
merchandise, steal the merchandise and then write off the sale.Employees may designate inventory as damaged and then steal it when it is written off.Employees may record sales to dormant customer accounts, steal the merchandise and then write off the sale.A
comparison of the sales register to the shipment register will not
identify inventory that was fraudulently shipped without a corresponding
sale.2.5 points Question 12If an employee generates a
much higher percentage of uncollected sales than his coworkers, what
type of scheme might he be committing?Accounts receivable skimmingCommission schemeMultiple reimbursement schemeShell company scheme2.5 points Question 13To successfully carry out and conceal a check tampering scheme, the fraudster must have:Access to checks.Access to the bank statements.The ability to forge signatures or alter other information on the check.All of the above.2.5 points Question 14To
safeguard against ghost employee schemes, the person in charge of
entering new employees in the payroll system should also distribute the
paychecks so that he can look for payments to unauthorized employees.TrueFalse2.5 points Question 15If a fraudster fails to remove a terminated employee from the payroll and collects theformer employee’s fraudulent paychecks, he/she is committing a:Payroll larceny scheme.Falsified hours and salary scheme.Forged endorsement scheme.Ghost employee scheme.2.5 points Question 16Which of the following controls will help prevent falsified hours and salary schemes?The duties of payroll preparation, authorization, and distribution are segregated.Sick leave and vacation time are monitored for excesses by the payroll department.Supervisors return authorized timecards to the employees for review before they are sent to the payroll department.All of the above .2.5 points Question 17Which of the following procedures can be used to prevent mischaracterized expense reimbursement schemes?A policy should be established and communicated to employees regarding what types of expenses will and will not be reimbursed.Employees should be required to sign their expense reports before being reimbursed.The internal audit department should review all expense reports under a certain dollar amount.None of the above.2.5 points Question 18Which of the following procedures can be used to detect mischaracterized expense reimbursement schemes?Compare the dates of claimed reimbursable business expenses to the employees work schedules. On company credit card statements, extract charges with SIC codes that are normally associated with personal purchases.Compare current expense reimbursement levels to prior years and budgeted amounts.All of the above.2.5 points Question 19Which of the following is not considered a red flag of a fictitious expense reimbursement scheme?An employee repeatedly uses the company credit card for travel expenses.An employee’s reimbursement requests are always for round-dollar amounts.An employee submits reimbursement requests that consistently fall just below the reimbursement limit.An employee frequently requests reimbursement for high-dollar items that he claims were paid for in cash.2.5 points Question 20To
safeguard against expense reimbursement schemes, organizations should
require that employee expense reports be reviewed and approved by a
supervisor outside the requestor’s department.TrueFalse2.5 points Question 21Register disbursement schemes are different from skimming and larceny at the register in that they:Are on-book schemes, where as skimming and larceny are off-book schemes.Require the use of an accomplice.Leave a record of the removal of money on the register tape.All of the above.2.5 points Question 22Which of the following is a type of register disbursement scheme?Fictitious refunds.Overstated refunds.False voids.All of the above.2.5 points Question 23When
an employee perpetrates a credit card refund scheme, the perpetual
inventory will show a greater amount than the physical inventory.TrueFalse2.5 points Question 24An excessive number of reversing sales transactions at the register is an indicator of which of the following schemes?Skimming. Register disbursement.Pass-through scheme.Multiple reimbursements.2.5 points Question 25Register
disbursement schemes are difficult to conceal because they cause the
cash drawer to be out of balance with the cash register tape.TrueFalse2.5 points Question 26Which of the following can be used to conceal a false refund scheme?Destroying register tapes.Issuing refunds below the review limit.Forcing inventory totals.All of the above.2.5 points Question 27To
safeguard against false voids schemes, companies should require a copy
of the customer’s receipt from the initial purchase as documentation for
voided sales.TrueFalse2.5 points Question 28To prevent fraudulent shipments of merchandise organizations should match every outgoing shipment to a sales order.TrueFalse2.5 points Question 29Which of the following methods can be used to conceal inventory shrinkage on a company’s books?Creating fictitious sales and receivables.Writing off inventory as obsolete.Physical padding.All of the above.2.5 points Question 30An
unexplained increase in uncollectible accounts receivable may be a
warning sign of a non-cash asset misappropriation scheme involving false
shipments of inventory.TrueFalse2.5 points Question 31Running
a computer program that identifies shipping documents with no
associated sales order can detect which of the following non-asset cash
misappropriation schemes?False shipments.Purchasing and receiving schemes.Unconcealed inventory larceny.Asset requisition schemes.2.5 points Question 32Which of the following is not a method used to conceal false shipments of inventory?Creating false sales orders.Placing a false outstanding check on the bank reconciliation.Writing off the inventory as scrap.Physical padding (such as adding empty boxes to the inventory and counting them as full).2.5 points Question 33From
the article Control of Cash Register Thievery which of the following is
not a red flag for a cash register disbursement scheme?Low inventory shrinkage.Altered cash register tapes.Multiple refunds just under the review limit.Increased refund transactions by the same employee.2.5 points Question 34From the article So That’s Why It’s Called a Pyramid Scheme which of the following is false?Assign experienced auditors for inventory observations.Understand the relationship between the client and its principal suppliers.It is more difficult to conspire with a family member than with an outsider.Consider the increased risk with closely held businesses.2.5 points Question 35From the article And Nothing But the Truth which of the following is true?Most fraudulent disclosures involve purposeful omissions.Management fraud is rarely detected through tips and complaints.Material accounting changes need not be disclosed.Management fraud for small amounts is not considered significant.2.5 points Question 36From
the article Ghost Goods: How to Spot Phantom Inventory to spot the
possibility of phantom inventory, when analyzing a company’s financial
statements, the auditor should look for all of the following trends
except: Falling cost of sales as a percentage of sales.Decreasing inventory turnover.Cost of goods sold on the books agreeing to the tax return.Inventory increasing faster than sales.2.5 points Question 37From the article Let Them Know Someone’s Watching which of the following is true?From the boardroom to the mailroom all fraudsters think alike.The auditor should not inquire as to the existence of fraud within the organization.The auditor should never conduct a surprise audit.Fraud prevention and deterrence are interchangeable terms.2.5 points Question 38From the article To Catch a Liar which of the following is false?There are no distinctions between interviewing and interrogating an employee while investigating a fraud.Analyzing speech patterns and reading body language can help identify a liar.Prepare the interview and be friendly.Very few organizations are equipped to handle executive-level fraud.2.5 points Question 39Non-Cash misappropriations of assets may be prevented or detected by:Segregation of duties.Matching invoices to receiving reports before payments are issued.Matching packing slips to approved sales orders.Matching every outgoing shipment to the sales order before the merchandise is shipped.Examining significant increases in bad debt expense.All of the above.2.5 points Question 40Which of the following is false?Weak internal controls breed fraud.Red flags will always indicate fraud.Fraud investigators and auditors should practice professional skepticism. At first, the perpetrator will lie to you.Regular, everyday people commit fraud.2.5 points Question 41Anne
deposits $2,000 that she had received as a gift into account with her
husband. The account already had a balance of 4,000. If the spouses
chose to withdraw $2,000 from the account, under the
marital-property-out-first method how will this amount be identified in
terms of separate property vs. transmuted property.The entire 2,000 will have been deemed to have been withdrawn from the joint account.The entire $2,000 will be deemed to have been withdrawn from Anne’s separate property as the last in – first out.$1,000
will be deemed to have been withdrawn from the joint account and $1,000
will be deemed to have been withdrawn from Anne’s separate property.$1,000
will be deemed to have been withdrawn from the joint account and $1,000
will be deemed to have been withdrawn from Anne’s separate property.2.5 points Question 42Which of the following is false?The major weakness in a cash larceny scheme is the resulting imbalance in the organization’s accounting records.Because in skimming nothing is recorded, it is difficult to detect.Accounts receivable skimming may be concealed by recording a fraudulent credit memo.Skimming may be concealed by recording a fraudulent credit memo.Most shell company schemes involve the purchase of goods rather than services.
