WGU C254 Exam Questions With 100% Correct Answers To Score A

America's capital markets are the envy of the world because of their efficiency, liquidity, and resiliency. What role do financial statements play in American capital markets? - They present a fair picture of the financial position and results of the organization Why are American financial statements so widely trusted? - They are prepared with integrity and there is a system that checks all published statements. The SEC views auditors of public companies as "unreliable and frequently incompetent." - False The SEC refers to auditors as the "public's watchdog" in the financial reporting process. Financial statements don't need to be as accurate as possible. There is so much that goes into building them that there are bound to be mistakes. - False Many decisions are based on the information provided in financial statements. When there are substantial errors, companies reissue their statements to provide information as accurate and fair as possible. In 2002, a landmark piece of legislation was signed into law to protect against and deter fraud, which also created a private sector organization called the PCAOB (Public Committee Accounting Oversight Board) to help. What was it? - Sarbanes-Oxley Act (SOX) What is the most significant "red-flag" or tell-tale sign of fraud? - The symptoms, or red-flags, cannot be ranked in order of their significance or extent. Motivations for fraud change from case to case, though there tends to be a common theme. Which of the following is that "common theme?" a. Attempt to improve financial information to support high stock price b. To support a bond or stock offering c. To increase stock price d. All of the above - all of the aboveFinancial statement fraud affects everyone, not just those directly or indirectly involved with the fraudulent company. True or False - True By its nature, fraud is a hidden and secret act. Therefore, it is difficult to detect and even harder to prove. True or False - True Only large, multi-million dollar companies perpetrate fraud; large risk equals large reward. - False Any size company can commit fraud, from Fortune 100 to Fortune 500. Size is irrelevant when looking for fraud. In most cases of fraud, who was implicated in those cases as, at the very least, being complicit? - CEO and CFO (89%) What is the most common technique used to manipulate financial statements? - Misstatement of revenues While not the most common tactic(s) of perpetrating fraud, which of the following are still considered "very common?" a. improper capitalization of assets b. Use of off balance sheet SPE's to hide debt and expenses c. Overstatement of existing assets d. All of the above - All of the above