(Multiple choice)
1. Financial statement fraud is usually committed by:
a. Executives.
b. Managers.
c. Stockholders.
d. Outsiders.
e. Both a and b.

2. Which officer in a company is most likely to be the perpetrator of financial statement fraud?
a. Chief financial officer (CFO).
b. Controller.
c. Chief operating officer (COO).
d. Chief executive officer (CEO).

3. When looking for financial statement fraud, auditors should look for indicators of fraud by:
a. Examining financial statements.
b. Evaluating changes in financial statements.
c. Examining relationships the company has with other parties.
d. Examining operating characteristics of the company.
e. All of the above.
f. None of the above because auditors don’t have a responsibly to find financial statement fraud.

4. The three aspects of management that a fraud examiner needs to be aware of include all of the following except:
a. Their backgrounds.
b. Their motivations.
c. Their religious convictions.
d. Their influence in making decisions for the organization.

5. Which of the following is least likely to be considered a financial reporting fraud symptom, or red flag?
a. Grey directors.
b. Family relationships between directors or officers.
c. Large increases in accounts receivable with no increase in sales.
d. Size of the firm.

6. Many indicators of fraud are circumstantial; that is, they can be caused by non-fraud factors. This fact can make convicting someone of fraud difficult. Which of the following types of evidence would be most helpful in proving that someone committed fraud?
a. Missing documentation.
b. A general ledger that is out of balance.
c. Analytical relationships that don’t make sense.
d. A repeated pattern of similar fraudulent acts.

7. In the Phar-Mor fraud case, several different methods were used for manipulating the financial statements. These included all of the following except:
a. Funneling losses into unaudited subsidiaries.
b. Overstating inventory.
c. Recognizing revenue that should have been deferred.
d. Manipulating accounts.

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August 17, 2012

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