C254 Fraud & Forensic QUESTIONS AND ANSWERS COMPLETE

Which of the following are the four areas of the fraud exposure rectangle - Management and Directors Relationship with others Organization & Industry Financial Results & Operational Characteristics To detect fraud, symptoms must be not Observed and Recognized - True When is a contingent liability supposed to be recognized on the books (a contingent liability is the potential for a payout based on a court case or some other future event)? - Probable Many accounts payable frauds occur with timing/cut-off issues around the end-of-period events. - True The Enron fraud was (in a very simplistic description) involved in what type of fraud? - Understatement of Liability fraud How does discovery sampling relate to fraud risk exposure? - Only 100% examination guarantees no fraud; discovery sampling allows auditor to control the fraud exposure by extrapolating the sample onto the population To detect inventory/cost of goods sold frauds, auditors tend to focus on which two symptoms THE MOST? - Analytical and Accounting/Documentary symptoms Why is inventory/cost of goods sold frauds more difficult for perpetrators than revenue-related frauds? - There is no compounding affect in subsequent periods with revenue frauds f Ending inventory is overstated, then COGS (cost of goods sold) is ______________ and net income is ____________________ - Understated, OverstatedWhich of the following is RARELY used as a method to perpetrate an inventory/cost of goods sold fraud? - Understate Beginning Inventory What is the most practical way to look for analytical symptoms of revenue-related fraud? - Looking at changes and comparison within and from the financial statements Who usually benefits from revenue-related fraud, in the short-term? - Stockholders Which of the following is NOT an account that can be manipulated to perpetrate a revenue-related fraud? - Accounts Payable