LSU ACCT 4235 FINAL EXAM
QUESTIONS AND ANSWERS
(GRADED A)
Which of the following is the major reason why there is so much divorce fraud?
a. Divorce proceedings usually take a long time.
b. Children usually get most assets in divorce cases.
c. States make divorces very difficult.
d. Assets are being taken away from one divorce partner and given to another. -
Answer- d. Assets are being taken away from one divorce partner and given to another.
Kickback schemes always involve the purchasing function of the victim company.
a. True
b. False - Answer- b. False
What is one way to determine if a Web site is secure or not?
a. Click on a link to see if it works.
b. Look for the official logo of the company you want to deal with.
c. Call the FTC and ask about the ISP address of the website.
d. Look for an "s" after the "http" in the URL of the website. - Answer- d. Look for an "s"
after the "http" in the URL of the website.
The person appointed by a bankruptcy judge in a Chapter 11 proceeding who
investigates allegations of fraud or misconduct by the debtor or its principals is a(n):
a. Creditor.
b. Adjuster.
c. Auditor.
d. Examiner. - Answer- d. Examiner.
Kickbacks are undisclosed payments made by employees of purchasing companies to
vendors.
a. True
b. False - Answer- b. False
Statistics show that fraud losses are directly proportional to age and inversely
proportional to education.
a. True
,b. False - Answer- a. True
Bid rigging involves establishing a predetermined amount of money that bidders will
have to exceed in order to win a bid.
a. True
b. False - Answer- b. False
Which of the following is an indicator of possible hiding of assets in a divorce?
a. Assets transferred to an off-site location.
b. Changing the title to assets.
c. Payments made to fictitious individuals.
d. All of these are indicators of possible hiding of assets. - Answer- d. All of these are
indicators of possible hiding of assets.
Which of the following is not an element of a company's control environment?
a. Audit committee participation.
b. Hiring policies.
c. Independent checks.
d. Management's philosophy. - Answer- c. Independent checks.
The retention of a fraud investigator in a bankruptcy proceeding must be approved by
the bankruptcy judge unless:
a. The creditors' committee pays the investigator.
b. An individual creditor or shareholder pays the investigator.
c. The trustee pays the investigator.
d. The debtor's estate pays the investigator. - Answer- b. An individual creditor or
shareholder pays the investigator.
Lawyers, creditors, and trustees can often be involved in bankruptcy fraud.
Which section of the bankruptcy code targets conflicts of interest by those appointed or
hired to equitably dissolve assets in bankruptcy cases?
a. Concealment of Assets, False Oaths and Claims, and Bribery (18 USC 152)
b. Embezzlement against the Debtor's Estate (18 USC 153)
c. Bankruptcy Fraud (the "catch-all" section)
d. Adverse Interest and Conduct of Officers (18 USC 154) - Answer- d. Adverse Interest
and Conduct of Officers (18 USC 154)
Jill has recently begun working at a local florist. In addition to creating floral
arrangements, Jill spends a good deal of her time talking to customers and ringing up
sales. Over time, she identifies a weakness in the procedures for ringing up voids. No
approval is necessary to void a sale, and the void slip collects very little information
about the sale. After Jill has completed a cash sale and the customer has left, she voids
the sale and pockets the cash that was just received. The floral shop doesn't miss the
lost inventory because it has a high inventory turnover rate and high losses due to
flowers losing their blooms.
, Jill is committing theft of cash through skimming, a fraud scheme in which cash is stolen
from an organization before it is recorded on the organization's books and records.
a. True
b. False - Answer- False
Jill is committing theft of cash through fraudulent disbursements. Specifically, Jill is
using a register disbursement scheme involving false voids of customer sales. A record
is made at the time of sale, and another record is created for the false void.
Suppose you are working with the CI division of the IRS. You have recently been
assigned to a case that involves a $3 million tax evasion scandal. The IRS discovered
the case when it was performing a routine audit. Because the IRS believed that the
case involved fraud, the IRS agent referred the case to the CI division, which has now
assigned the case to you. After investigating the case, you determine that it involves
significant fraud. Before prosecuting the case further, you want to review the specific
laws under which fraud perpetrators are charged.
You determine that this tax fraud would be prosecuted under Title 26 USC § 7206(1).
To which of the following action or behavior does this law relate?
a. Willful failure to collect or pay owed tax
b. Attempts to interfere with administration of Internal Revenue laws
c. Conspiracy to commit offense or to defraud the United States
d. Fraud and false statements - Answer- d. Fraud and false statements
You have been hired as a fraud auditor to examine the assets of a company that
recently filed for Chapter 11 bankruptcy. The company manufactures and sells circuit
boards for children's computerized toys. You have access to its financial statements and
warehouses. The company is a closely held corporation. The company is suspected of
fraudulently concealing assets.
Which of the following is not a red flag you would look for to indicate fraudulent asset
concealment by a company involved in a bankruptcy proceeding?
a. Decreases in operating losses that are not explained by economic factors
b. Travel to offshore tax havens or locations that allow secret bank accounts
c. Unusual reduction in assets
d. Frequent and unusual transfers between bank accounts - Answer- a. Decreases in
operating losses that are not explained by economic factors
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. - Answer- 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.
QUESTIONS AND ANSWERS
(GRADED A)
Which of the following is the major reason why there is so much divorce fraud?
a. Divorce proceedings usually take a long time.
b. Children usually get most assets in divorce cases.
c. States make divorces very difficult.
d. Assets are being taken away from one divorce partner and given to another. -
Answer- d. Assets are being taken away from one divorce partner and given to another.
Kickback schemes always involve the purchasing function of the victim company.
a. True
b. False - Answer- b. False
What is one way to determine if a Web site is secure or not?
a. Click on a link to see if it works.
b. Look for the official logo of the company you want to deal with.
c. Call the FTC and ask about the ISP address of the website.
d. Look for an "s" after the "http" in the URL of the website. - Answer- d. Look for an "s"
after the "http" in the URL of the website.
The person appointed by a bankruptcy judge in a Chapter 11 proceeding who
investigates allegations of fraud or misconduct by the debtor or its principals is a(n):
a. Creditor.
b. Adjuster.
c. Auditor.
d. Examiner. - Answer- d. Examiner.
Kickbacks are undisclosed payments made by employees of purchasing companies to
vendors.
a. True
b. False - Answer- b. False
Statistics show that fraud losses are directly proportional to age and inversely
proportional to education.
a. True
,b. False - Answer- a. True
Bid rigging involves establishing a predetermined amount of money that bidders will
have to exceed in order to win a bid.
a. True
b. False - Answer- b. False
Which of the following is an indicator of possible hiding of assets in a divorce?
a. Assets transferred to an off-site location.
b. Changing the title to assets.
c. Payments made to fictitious individuals.
d. All of these are indicators of possible hiding of assets. - Answer- d. All of these are
indicators of possible hiding of assets.
Which of the following is not an element of a company's control environment?
a. Audit committee participation.
b. Hiring policies.
c. Independent checks.
d. Management's philosophy. - Answer- c. Independent checks.
The retention of a fraud investigator in a bankruptcy proceeding must be approved by
the bankruptcy judge unless:
a. The creditors' committee pays the investigator.
b. An individual creditor or shareholder pays the investigator.
c. The trustee pays the investigator.
d. The debtor's estate pays the investigator. - Answer- b. An individual creditor or
shareholder pays the investigator.
Lawyers, creditors, and trustees can often be involved in bankruptcy fraud.
Which section of the bankruptcy code targets conflicts of interest by those appointed or
hired to equitably dissolve assets in bankruptcy cases?
a. Concealment of Assets, False Oaths and Claims, and Bribery (18 USC 152)
b. Embezzlement against the Debtor's Estate (18 USC 153)
c. Bankruptcy Fraud (the "catch-all" section)
d. Adverse Interest and Conduct of Officers (18 USC 154) - Answer- d. Adverse Interest
and Conduct of Officers (18 USC 154)
Jill has recently begun working at a local florist. In addition to creating floral
arrangements, Jill spends a good deal of her time talking to customers and ringing up
sales. Over time, she identifies a weakness in the procedures for ringing up voids. No
approval is necessary to void a sale, and the void slip collects very little information
about the sale. After Jill has completed a cash sale and the customer has left, she voids
the sale and pockets the cash that was just received. The floral shop doesn't miss the
lost inventory because it has a high inventory turnover rate and high losses due to
flowers losing their blooms.
, Jill is committing theft of cash through skimming, a fraud scheme in which cash is stolen
from an organization before it is recorded on the organization's books and records.
a. True
b. False - Answer- False
Jill is committing theft of cash through fraudulent disbursements. Specifically, Jill is
using a register disbursement scheme involving false voids of customer sales. A record
is made at the time of sale, and another record is created for the false void.
Suppose you are working with the CI division of the IRS. You have recently been
assigned to a case that involves a $3 million tax evasion scandal. The IRS discovered
the case when it was performing a routine audit. Because the IRS believed that the
case involved fraud, the IRS agent referred the case to the CI division, which has now
assigned the case to you. After investigating the case, you determine that it involves
significant fraud. Before prosecuting the case further, you want to review the specific
laws under which fraud perpetrators are charged.
You determine that this tax fraud would be prosecuted under Title 26 USC § 7206(1).
To which of the following action or behavior does this law relate?
a. Willful failure to collect or pay owed tax
b. Attempts to interfere with administration of Internal Revenue laws
c. Conspiracy to commit offense or to defraud the United States
d. Fraud and false statements - Answer- d. Fraud and false statements
You have been hired as a fraud auditor to examine the assets of a company that
recently filed for Chapter 11 bankruptcy. The company manufactures and sells circuit
boards for children's computerized toys. You have access to its financial statements and
warehouses. The company is a closely held corporation. The company is suspected of
fraudulently concealing assets.
Which of the following is not a red flag you would look for to indicate fraudulent asset
concealment by a company involved in a bankruptcy proceeding?
a. Decreases in operating losses that are not explained by economic factors
b. Travel to offshore tax havens or locations that allow secret bank accounts
c. Unusual reduction in assets
d. Frequent and unusual transfers between bank accounts - Answer- a. Decreases in
operating losses that are not explained by economic factors
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. - Answer- 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.
