Question 1
Fraud in financial statements generally takes the form of overstated assets or revenue and
understated liabilities and expenses. (T/F)
CORRECT ANSWER
True
Question 2
Which of the following would be considered a timing difference financial statement fraud
scheme?
A: Recognizing a percentage of revenue on a construction project corresponding to the
percentage of the project that is complete
B: Recognizing revenue in Year 1 when the service is performed, even though the customer
doesn't have to pay until year 2
C: Waiting to record revenue on a contract until a construction hob is complete
D: Recording revenue in Year 1 when the payment is received even though the service won't
be performed until Year 2
CORRECT ANSWER
D: Recording revenue in Year 1 when the payment is received, even though the service
won't be performed until Year 2
Question 3
1
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, What financial statement fraud scheme involves recording revenues and expenses in
improper periods?
CORRECT ANSWER
Timing differences
Question 4
Events occurring after the close of the period that could have a significant effect on the
entity's financial position must be disclosed in the entity's financial statements. (T/F)
CORRECT ANSWER
True
Question 5
ABC Company purchases a material amount of products from another entity whose
operating policies can be controlled by ABC Company's management, but it does not
disclose this situation on its financial statements. In which type of improper disclosure
scheme has ABC Company engaged?
CORRECT ANSWER
Related-party transaction
Question 6
Failure to record corresponding revenues and expenses in the same accounting period will
result in an understatement of net income in the period when the revenue is recorded and
an overstatement of net income in the period in which the corresponding expenses are
recorded. (T/F)
CORRECT ANSWER
False
2
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Fraud in financial statements generally takes the form of overstated assets or revenue and
understated liabilities and expenses. (T/F)
CORRECT ANSWER
True
Question 2
Which of the following would be considered a timing difference financial statement fraud
scheme?
A: Recognizing a percentage of revenue on a construction project corresponding to the
percentage of the project that is complete
B: Recognizing revenue in Year 1 when the service is performed, even though the customer
doesn't have to pay until year 2
C: Waiting to record revenue on a contract until a construction hob is complete
D: Recording revenue in Year 1 when the payment is received even though the service won't
be performed until Year 2
CORRECT ANSWER
D: Recording revenue in Year 1 when the payment is received, even though the service
won't be performed until Year 2
Question 3
1
@https://www.stuvia.com/user/thestudyvault
, What financial statement fraud scheme involves recording revenues and expenses in
improper periods?
CORRECT ANSWER
Timing differences
Question 4
Events occurring after the close of the period that could have a significant effect on the
entity's financial position must be disclosed in the entity's financial statements. (T/F)
CORRECT ANSWER
True
Question 5
ABC Company purchases a material amount of products from another entity whose
operating policies can be controlled by ABC Company's management, but it does not
disclose this situation on its financial statements. In which type of improper disclosure
scheme has ABC Company engaged?
CORRECT ANSWER
Related-party transaction
Question 6
Failure to record corresponding revenues and expenses in the same accounting period will
result in an understatement of net income in the period when the revenue is recorded and
an overstatement of net income in the period in which the corresponding expenses are
recorded. (T/F)
CORRECT ANSWER
False
2
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