2
LSU ACCT 4235 Final Exam with correct || || || || || || ||
detailed answers ||
Which of the following is not a way to underrecord liabilities?
|| || || || || || || || || ||
a. Borrowing but not disclosing debt incurred on existing lines of credit.
|| || || || || || || || || || ||
b. Claiming that existing debt has been forgiven by creditors.
|| || || || || || || || ||
c. Not recording loans incurred.
|| || || ||
d. All of these are ways to underrecord liabilities. - ✔✔d. All of these are ways to
|| || || || || || || || || || || || || || || ||
underrecord liabilities.
|| ||
Horizontal analysis is a method that: || || || || ||
a. Examines financial statement numbers from period to period.
|| || || || || || || ||
b. Examines percent changes in account balances from period to period.
|| || || || || || || || || ||
c. Examines transactions from period to period.
|| || || || || ||
d. None of these. - ✔✔b. Examines percent changes in account balances from
|| || || || || || || || || || || || ||
period to period. || ||
In order to analyze financial statements for fraud, an auditor or fraud examiner
|| || || || || || || || || || || || ||
should consider all of the following except:
|| || || || || ||
a. The types of accounts that should be included in the financial statements.
|| || || || || || || || || || || ||
b. The types of fraud to which the company is susceptible.
|| || || || || || || || || ||
c. The nature of the company's business and industry.
|| || || || || || || ||
,2
d. The auditor should consider all of these. - ✔✔d. The auditor should consider
|| || || || || || || || || || || || || ||
all of these.
|| ||
When accounts payable-related liabilities are understated, the financial
|| || || || || || || ||
statements won't balance unless purchases and inventory are: || || || || || || ||
a. Understated.
||
b. Overstated.
||
c. It is impossible to tell.
|| || || || ||
d. Correctly stated. - ✔✔a. Understated.
|| || || || ||
Which of the following is a common way to perform financial statement
|| || || || || || || || || || || ||
analysis while searching for revenue-related analytical symptoms?
|| || || || || ||
a. Look for unusual changes in revenue-related account balances from period to
|| || || || || || || || || || ||
period (trends).
|| ||
b. Look for unusual changes in revenue-related relationships from period to
|| || || || || || || || || || ||
period.
c. Look for unusual changes in the cost of goods sold account from period to
|| || || || || || || || || || || || || || ||
period.
d. Both look for unusual changes in revenue-related account balances from
|| || || || || || || || || || ||
period to period (trends) and look for unusual changes in revenue-related
|| || || || || || || || || || ||
relationships from period to period are common ways to perform within- || || || || || || || || || ||
statement analysis while searching for revenue-related analytical symptoms.
|| || || || || || ||
e. All of these are common ways to perform financial statement analysis while
|| || || || || || || || || || || || ||
searching for revenue-related analytical symptoms. - ✔✔d. Both look for
|| || || || || || || || || ||
unusual changes in revenue-related account balances from period to period
|| || || || || || || || || ||
(trends) and look for unusual changes in revenue-related relationships from
|| || || || || || || || || ||
,2
period to period are common ways to perform within-statement analysis while
|| || || || || || || || || || ||
searching for revenue-related analytical symptoms. || || || ||
Why might a company want to understate net income?
|| || || || || || || ||
a. To increase profits.
|| || ||
b. To gain consumer confidence.
|| || || ||
c. To pay less taxes.
|| || || ||
d. To increase stock price. - ✔✔c. To pay less taxes.
|| || || || || || || || || ||
Which financial ratio is not useful in detecting revenue-related fraud?
|| || || || || || || || ||
a. Gross profit margin ratio.
|| || || ||
b. Accounts receivable turnover ratio.
|| || || ||
c. Asset turnover ratio.
|| || ||
d. All of these are useful revenue-related fraud detection ratios. - ✔✔d. All of
|| || || || || || || || || || || || || ||
these are useful revenue-related fraud detection ratios.
|| || || || || ||
When examining whether a company has underrecorded accounts payable,
|| || || || || || || || ||
each of the following ratios is helpful except:
|| || || || || || ||
a. Acid-test ratio.
|| ||
b. Current ratio.
|| ||
c. Accounts payable/Cost of goods sold.
|| || || || ||
d. Unearned revenue/Accounts payable.
|| || ||
e. Accounts payable/Purchases. - ✔✔d. Unearned revenue/Accounts payable.
|| || || || || || ||
, 2
Recording fictitious receivables will usually result in a(n):
|| || || || || || ||
a. Sales return percentage that remains constant.
|| || || || || ||
b. Increased sales discount percentage.
|| || || ||
c. Increase in accounts receivable turnover.
|| || || || ||
d. Increase in the number of days in receivables. - ✔✔d. Increase in the number
|| || || || || || || || || || || || || ||
of days in receivables.
|| || || ||
Most financial statement frauds occur in smaller organizations with simple
|| || || || || || || || || ||
management structures, rather than in large, historically profitable || || || || || || || ||
organizations. This is because: || || ||
a. It is easier to implement good internal controls in a small organization.
|| || || || || || || || || || || ||
b. Smaller organizations do not have investors.
|| || || || || ||
c. Management fraud is more difficult to commit when there is a more formal
|| || || || || || || || || || || || || ||
organizational structure of management. || || ||
d. People in large organizations are more honest. - ✔✔c. Management fraud is
|| || || || || || || || || || || || ||
more difficult to commit when there is a more formal organizational structure
|| || || || || || || || || || || ||
of management.
||
Generally accepted accounting practices require contingent liabilities to be
|| || || || || || || || ||
recorded as liabilities on the balance sheet if the likelihood of loss or payment
|| || || || || || || || || || || || || ||
is:
a. Reasonably possible.
|| ||
b. Remote.
||
c. Probable.
||
d. Not determinable. - ✔✔c. Probable.
|| || || || ||
LSU ACCT 4235 Final Exam with correct || || || || || || ||
detailed answers ||
Which of the following is not a way to underrecord liabilities?
|| || || || || || || || || ||
a. Borrowing but not disclosing debt incurred on existing lines of credit.
|| || || || || || || || || || ||
b. Claiming that existing debt has been forgiven by creditors.
|| || || || || || || || ||
c. Not recording loans incurred.
|| || || ||
d. All of these are ways to underrecord liabilities. - ✔✔d. All of these are ways to
|| || || || || || || || || || || || || || || ||
underrecord liabilities.
|| ||
Horizontal analysis is a method that: || || || || ||
a. Examines financial statement numbers from period to period.
|| || || || || || || ||
b. Examines percent changes in account balances from period to period.
|| || || || || || || || || ||
c. Examines transactions from period to period.
|| || || || || ||
d. None of these. - ✔✔b. Examines percent changes in account balances from
|| || || || || || || || || || || || ||
period to period. || ||
In order to analyze financial statements for fraud, an auditor or fraud examiner
|| || || || || || || || || || || || ||
should consider all of the following except:
|| || || || || ||
a. The types of accounts that should be included in the financial statements.
|| || || || || || || || || || || ||
b. The types of fraud to which the company is susceptible.
|| || || || || || || || || ||
c. The nature of the company's business and industry.
|| || || || || || || ||
,2
d. The auditor should consider all of these. - ✔✔d. The auditor should consider
|| || || || || || || || || || || || || ||
all of these.
|| ||
When accounts payable-related liabilities are understated, the financial
|| || || || || || || ||
statements won't balance unless purchases and inventory are: || || || || || || ||
a. Understated.
||
b. Overstated.
||
c. It is impossible to tell.
|| || || || ||
d. Correctly stated. - ✔✔a. Understated.
|| || || || ||
Which of the following is a common way to perform financial statement
|| || || || || || || || || || || ||
analysis while searching for revenue-related analytical symptoms?
|| || || || || ||
a. Look for unusual changes in revenue-related account balances from period to
|| || || || || || || || || || ||
period (trends).
|| ||
b. Look for unusual changes in revenue-related relationships from period to
|| || || || || || || || || || ||
period.
c. Look for unusual changes in the cost of goods sold account from period to
|| || || || || || || || || || || || || || ||
period.
d. Both look for unusual changes in revenue-related account balances from
|| || || || || || || || || || ||
period to period (trends) and look for unusual changes in revenue-related
|| || || || || || || || || || ||
relationships from period to period are common ways to perform within- || || || || || || || || || ||
statement analysis while searching for revenue-related analytical symptoms.
|| || || || || || ||
e. All of these are common ways to perform financial statement analysis while
|| || || || || || || || || || || || ||
searching for revenue-related analytical symptoms. - ✔✔d. Both look for
|| || || || || || || || || ||
unusual changes in revenue-related account balances from period to period
|| || || || || || || || || ||
(trends) and look for unusual changes in revenue-related relationships from
|| || || || || || || || || ||
,2
period to period are common ways to perform within-statement analysis while
|| || || || || || || || || || ||
searching for revenue-related analytical symptoms. || || || ||
Why might a company want to understate net income?
|| || || || || || || ||
a. To increase profits.
|| || ||
b. To gain consumer confidence.
|| || || ||
c. To pay less taxes.
|| || || ||
d. To increase stock price. - ✔✔c. To pay less taxes.
|| || || || || || || || || ||
Which financial ratio is not useful in detecting revenue-related fraud?
|| || || || || || || || ||
a. Gross profit margin ratio.
|| || || ||
b. Accounts receivable turnover ratio.
|| || || ||
c. Asset turnover ratio.
|| || ||
d. All of these are useful revenue-related fraud detection ratios. - ✔✔d. All of
|| || || || || || || || || || || || || ||
these are useful revenue-related fraud detection ratios.
|| || || || || ||
When examining whether a company has underrecorded accounts payable,
|| || || || || || || || ||
each of the following ratios is helpful except:
|| || || || || || ||
a. Acid-test ratio.
|| ||
b. Current ratio.
|| ||
c. Accounts payable/Cost of goods sold.
|| || || || ||
d. Unearned revenue/Accounts payable.
|| || ||
e. Accounts payable/Purchases. - ✔✔d. Unearned revenue/Accounts payable.
|| || || || || || ||
, 2
Recording fictitious receivables will usually result in a(n):
|| || || || || || ||
a. Sales return percentage that remains constant.
|| || || || || ||
b. Increased sales discount percentage.
|| || || ||
c. Increase in accounts receivable turnover.
|| || || || ||
d. Increase in the number of days in receivables. - ✔✔d. Increase in the number
|| || || || || || || || || || || || || ||
of days in receivables.
|| || || ||
Most financial statement frauds occur in smaller organizations with simple
|| || || || || || || || || ||
management structures, rather than in large, historically profitable || || || || || || || ||
organizations. This is because: || || ||
a. It is easier to implement good internal controls in a small organization.
|| || || || || || || || || || || ||
b. Smaller organizations do not have investors.
|| || || || || ||
c. Management fraud is more difficult to commit when there is a more formal
|| || || || || || || || || || || || || ||
organizational structure of management. || || ||
d. People in large organizations are more honest. - ✔✔c. Management fraud is
|| || || || || || || || || || || || ||
more difficult to commit when there is a more formal organizational structure
|| || || || || || || || || || || ||
of management.
||
Generally accepted accounting practices require contingent liabilities to be
|| || || || || || || || ||
recorded as liabilities on the balance sheet if the likelihood of loss or payment
|| || || || || || || || || || || || || ||
is:
a. Reasonably possible.
|| ||
b. Remote.
||
c. Probable.
||
d. Not determinable. - ✔✔c. Probable.
|| || || || ||
