Ensuring the Integrity of Financial
Quiz____?
Riverton Company rents a building that it uses in its operations. The accountant for
Riverton Company mistakenly input a $1,000 rental payment on the building as just $100 in
the accounting records. What is the impact of this recording error on the financial
statements? -
Answer✓✓
Expenses are too low, so reported net income is too high.
Revenues ar
Quiz____?
Which ONE of the following audit processes attempts to identify areas that may deserve
attention by using techniques such as comparative ratio analysis? -
Answer✓✓
Analytical procedures
Quiz____?
The accountant for Kearns Company mistakenly posted an expense amount as an asset in
the general ledger. What is the financial statement impact of this error? -
Answer✓✓
Assets are too high, and retained earnings are too high
1
, Quiz____?
The shareholders of Escalante Company are suing the external auditors of the company.
The shareholders are upset because the management of Escalante Company produced
overly positive financial statements and used these financial statements to lure new
investors. Escalante Company is now bankrupt, the managers are facing prison time, and the
external auditors are in monetary damages settlement talks with the shareholders of
Escalante Company.
What role could the Public Company Accounting Oversight Board (PCAOB) have played in
avoiding this catastrophe? -
Answer✓✓
Conduct an inspection of the external audit firm
Quiz____?
Why is the separation-of-duties control so important with cash? -
Answer✓✓
Without separation of duties, an employee who takes cash can cover up the shortage by
adjusting the accounting records.
Quiz____?
With respect to the earnings management continuum, what is the FIRST item in the
continuum and what is the LAST item in the continuum? -
Answer✓✓
FIRST: strategic matching; LAST, fictitious transactions
Quiz____?
Roger Lemmon is the chief financial officer (CFO) for a large aviation parts supply company.
In recent months, Roger has been alarmed at the increase in inventory losses. He is not sure
whether parts orders are not being properly recorded or whether employees or outside
2
Quiz____?
Riverton Company rents a building that it uses in its operations. The accountant for
Riverton Company mistakenly input a $1,000 rental payment on the building as just $100 in
the accounting records. What is the impact of this recording error on the financial
statements? -
Answer✓✓
Expenses are too low, so reported net income is too high.
Revenues ar
Quiz____?
Which ONE of the following audit processes attempts to identify areas that may deserve
attention by using techniques such as comparative ratio analysis? -
Answer✓✓
Analytical procedures
Quiz____?
The accountant for Kearns Company mistakenly posted an expense amount as an asset in
the general ledger. What is the financial statement impact of this error? -
Answer✓✓
Assets are too high, and retained earnings are too high
1
, Quiz____?
The shareholders of Escalante Company are suing the external auditors of the company.
The shareholders are upset because the management of Escalante Company produced
overly positive financial statements and used these financial statements to lure new
investors. Escalante Company is now bankrupt, the managers are facing prison time, and the
external auditors are in monetary damages settlement talks with the shareholders of
Escalante Company.
What role could the Public Company Accounting Oversight Board (PCAOB) have played in
avoiding this catastrophe? -
Answer✓✓
Conduct an inspection of the external audit firm
Quiz____?
Why is the separation-of-duties control so important with cash? -
Answer✓✓
Without separation of duties, an employee who takes cash can cover up the shortage by
adjusting the accounting records.
Quiz____?
With respect to the earnings management continuum, what is the FIRST item in the
continuum and what is the LAST item in the continuum? -
Answer✓✓
FIRST: strategic matching; LAST, fictitious transactions
Quiz____?
Roger Lemmon is the chief financial officer (CFO) for a large aviation parts supply company.
In recent months, Roger has been alarmed at the increase in inventory losses. He is not sure
whether parts orders are not being properly recorded or whether employees or outside
2
