1. Which 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.

2. When accounts payable-related liabilities are understated, purchases and inventory are often, or the financial statements don't balance.
a. Overstated.
b. Understated.
c. Correctly stated.
d. It is impossible to tell.

3. Recognizing 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 correct.

4. The 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 under recording future obligations.
d. Not recording or under recording various types of debt.

5. FAS 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.

6. Analytical 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.

7. Proactively 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.

8. When focusing on changes, you should consider changes from period to period in:
a. Recorded balances.
b. Relationships between balances.
c. Balances of other non-similar companies.
d. Both a and b.
e. All of the above.