C254 WGU Practice Review |260 questions with
verified answers
______________ in the acid test ratio (QA ÷ CL) and Current Ratio (CA ÷ CL) with
____________ in the ratios Accounts Payable/Cost of Goods Sold (AP ÷ COGS) and
Accounts Payable/Inventory are most indicative of fraud.
Decreases; Decreases
Increases; Increases
Increases; decreases
Decreases; Increases Ans✓✓✓ Increases; decreases
_________________ means "reason to believe that fraud may be occurring.
When __________________ exists and conditions warrant, an investigation
should take place.
Illegal Activity
Fraud
Dishonesty
Predication Ans✓✓✓ Predication
"Reported cost of goods sold balances that appear too low or are not increasing
fast enough" is what type of symptom?
,Accounting and documentary
Behavioral
Analytical
Control Ans✓✓✓ Analytical
"Unusual or suspicious-looking purchase orders, invoices, shipping docs, and/or
receiving docs" is what type of symptom?
Behavioral
Accounting and documentary
Tips and complaints
Analytical Ans✓✓✓ Accounting and documentary
A Company will not usually be found guilty of fraud for misleading statements
about the Company if the statements were made by a news outlet but are based
on information obtained from the Company. Ans✓✓✓ False
False. The Medical Fraud examples mentioned are cases where this form of
disclosure fraud existed.
A Company will not usually be found guilty of fraud for misleading statements
about the Company if the statements were made by a news outlet but are based
on information obtained from the Company. Ans✓✓✓ False. The Medical Fraud
examples mentioned are cases where this form of disclosure fraud existed.
,A good ending question to an interview would be an open-ended, non-
threatening and general question about potential issues of which they might be
aware. Ans✓✓✓ True
A Ponzi scheme is best described as
Bernie Madoff described his actions as that of a Ponzi investment because Charles
Ponzi is believed to be the greatest investor of all times.
Charles Ponzi was a fictitious character created for the movie Matchstick Men
that depicted crafty investment schemes.
A Ponzi scheme is a fraudulent investment operation where the operator, an
individual or organization, pays returns to its old investors from capital provided
by new investors, rather than from profit earned by the organization.
Any fraud or corruption act because Charles Ponzi was the first fraudster ever
documented by the Securities and Exchange Commission. Ans✓✓✓ A Ponzi
scheme is a fraudulent investment operation where the operator, an individual or
organization, pays returns to its old investors from capital provided by new
investors, rather than from profit earned by the organization.
A Variable Interest Entity (VIE) can be
-Equity investments
-Leases
-Forward contracts
, -All of the above Ans✓✓✓ All of the above
According to FASB ASC 450: Contingencies, when do contingent liabilities need to
be recorded (versus simply disclosed or not even mentioned) on the financial
statements?
Firms must always record or disclose any contingent liability
When the likelihood of loss or repayment is remote
When the likelihood of loss or repayment is probable
When the likelihood of loss or repayment reasonably probable Ans✓✓✓ When
the likelihood of loss or repayment is probable
According to Pincus, Asene, and Wright, checklists during audits constrain
auditors from reasoning strategically. Ans✓✓✓ True
According to SAS 99, not relying on a company's internal controls when evaluating
a high fraud-risk area increases auditor's possibility of missing fraud. Ans✓✓✓
False
By not relying on internal controls (pretending they don't exist), we dig further
than we normally would and thus increase the possibility of detecting fraud
According to SAS 99, why is brainstorming important to auditors?
To comprehend the registration process of public accounting firms
To close the expectation gap of financial statements reporting
To avoid overreacting to the red flags that occur in the audit
To document findings among auditors to increase the likelihood of detecting
fraud Ans✓✓✓ To avoid overreacting to the red flags that occur in the audit
verified answers
______________ in the acid test ratio (QA ÷ CL) and Current Ratio (CA ÷ CL) with
____________ in the ratios Accounts Payable/Cost of Goods Sold (AP ÷ COGS) and
Accounts Payable/Inventory are most indicative of fraud.
Decreases; Decreases
Increases; Increases
Increases; decreases
Decreases; Increases Ans✓✓✓ Increases; decreases
_________________ means "reason to believe that fraud may be occurring.
When __________________ exists and conditions warrant, an investigation
should take place.
Illegal Activity
Fraud
Dishonesty
Predication Ans✓✓✓ Predication
"Reported cost of goods sold balances that appear too low or are not increasing
fast enough" is what type of symptom?
,Accounting and documentary
Behavioral
Analytical
Control Ans✓✓✓ Analytical
"Unusual or suspicious-looking purchase orders, invoices, shipping docs, and/or
receiving docs" is what type of symptom?
Behavioral
Accounting and documentary
Tips and complaints
Analytical Ans✓✓✓ Accounting and documentary
A Company will not usually be found guilty of fraud for misleading statements
about the Company if the statements were made by a news outlet but are based
on information obtained from the Company. Ans✓✓✓ False
False. The Medical Fraud examples mentioned are cases where this form of
disclosure fraud existed.
A Company will not usually be found guilty of fraud for misleading statements
about the Company if the statements were made by a news outlet but are based
on information obtained from the Company. Ans✓✓✓ False. The Medical Fraud
examples mentioned are cases where this form of disclosure fraud existed.
,A good ending question to an interview would be an open-ended, non-
threatening and general question about potential issues of which they might be
aware. Ans✓✓✓ True
A Ponzi scheme is best described as
Bernie Madoff described his actions as that of a Ponzi investment because Charles
Ponzi is believed to be the greatest investor of all times.
Charles Ponzi was a fictitious character created for the movie Matchstick Men
that depicted crafty investment schemes.
A Ponzi scheme is a fraudulent investment operation where the operator, an
individual or organization, pays returns to its old investors from capital provided
by new investors, rather than from profit earned by the organization.
Any fraud or corruption act because Charles Ponzi was the first fraudster ever
documented by the Securities and Exchange Commission. Ans✓✓✓ A Ponzi
scheme is a fraudulent investment operation where the operator, an individual or
organization, pays returns to its old investors from capital provided by new
investors, rather than from profit earned by the organization.
A Variable Interest Entity (VIE) can be
-Equity investments
-Leases
-Forward contracts
, -All of the above Ans✓✓✓ All of the above
According to FASB ASC 450: Contingencies, when do contingent liabilities need to
be recorded (versus simply disclosed or not even mentioned) on the financial
statements?
Firms must always record or disclose any contingent liability
When the likelihood of loss or repayment is remote
When the likelihood of loss or repayment is probable
When the likelihood of loss or repayment reasonably probable Ans✓✓✓ When
the likelihood of loss or repayment is probable
According to Pincus, Asene, and Wright, checklists during audits constrain
auditors from reasoning strategically. Ans✓✓✓ True
According to SAS 99, not relying on a company's internal controls when evaluating
a high fraud-risk area increases auditor's possibility of missing fraud. Ans✓✓✓
False
By not relying on internal controls (pretending they don't exist), we dig further
than we normally would and thus increase the possibility of detecting fraud
According to SAS 99, why is brainstorming important to auditors?
To comprehend the registration process of public accounting firms
To close the expectation gap of financial statements reporting
To avoid overreacting to the red flags that occur in the audit
To document findings among auditors to increase the likelihood of detecting
fraud Ans✓✓✓ To avoid overreacting to the red flags that occur in the audit
