Finance MCQs

1. To prevent fraudulent shipments of merchandise, organizations should:a. Match every receiving slip to an approved purchase order.b. Match every outgoing shipment to a sales order.c. Make sure that all increases to perpetual inventory records are supported by proper source documents.d. All of the above

2. Unexplained increases in inventory shrinkage can be a red flag that signals which type of fraud scheme?a. Fictitious refundsb. Inventory larcenyc. Sales skimmingd. All of the above

3. Which of the following computer audit tests can be used to detect purchasing and receiving schemes?a. Identifying dormant customer accounts for the past six months that show a sale in the last two months of the yearb. Calculating the ratio of the largest sale to the next largest sale by customerc. Extracting all inventory coded as obsolete and possessing reorder points within the inventory systemd. All of the above

4. Andy Kaplan is a foreman for JCP Enterprises, a regional construction company. He recently ordered some plumbing supplies from the company warehouse for an office building project he is overseeing. When the supplies arrived at the job site, however, he loaded them in his truck and took them home to use in remodeling his master bathroom. What kind of inventory theft scheme did Andy commit? a. False shipmentsb. Unconcealed larcenyc. Asset requisitiond. Misappropriation of intangible assets

B1. ___________________ is the offering, giving, receiving, or soliciting of something of value as a reward for a favorable decision. a. Business diversionb. Economic extortionc. Illegal gratuityd. Commercial bribery

2. The offering, giving, receiving, or soliciting of something of value for the purpose of influencing a business decision without the knowledge or consent of the principal is known as:a. Official briberyb. Commercial briberyc. Conflict of interestd. Illegal gratuity

3. To facilitate a bribery scheme, a fraudster might divert company funds to a non-company account from which the illegal payments can be made. This account is called a:a. Slush fundb. Petty cash fundc. Bid poold. None of the above

4. Johanna Pye is a hair stylist at Mamon Salon. The salon’s policy states that stylists receive 40 percent of the revenue they generate as their compensation. Johanna grew tired of sharing her income with the salon and decided she wanted to make more money. She continued seeing her existing clients at the salon, but when new clients called for an appointment, Johanna lied and told them the salon was completely booked for the next few months. She then offered to come to their homes and cut their hair for 10 percent less than what the clients would be charged at the salon. She did not report the house call appointments to the salon, and was therefore able to keep all the income she generated from these side clients. This is an example of what type of scheme? a. Shell company b. Resource diversionc. Business diversiond. Double dealing

5. Julius Smith is a purchasing agent for a Louisiana state agency. He has a project budgeted for $24,000 that he would like to hire RGS Consultants to handle. Unfortunately for Julius and RGS Consultants, the state has a requirement that all projects over $10,000 must be sent out for competitive bids. In order to avoid the bidding process, Julius breaks the project into three component projects worth $8,000 each. RGS Consultants is subsequently awarded the contracts for all three projects. What type of bid-rigging scheme is this?a. Bid poolingb. Underbiddingc. Bid splittingd. Bid diversion

C1. Which of the following is a reason that a chief executive officer might commit financial statement fraud? a. To receive or increase a performance bonusb. To avoid termination due to poor performance c. To conceal the company’s true performanced. All of the above

2. A company’s financial statements are the responsibility of:a. The independent auditorsb. The shareholdersc. The accounting departmentd. Management

D1. Which of the following is not an example of financial statement fraud?a. Falsification of material financial records, supporting documents, or business transactionsb. Unintentional misapplication of accounting principlesc. Deliberate omission of material disclosuresd. All of the above are examples of financial statement fraud

2. At the suggestion of the external auditors, the audit committee of Alpha Technologies called in Bryce Miller, CFE, to investigate some suspected improprieties. During his investigation, Bryce learns that the company has been involved in several highly-complex transactions with related parties that do not appear to have any logical business purpose. Further, Alpha’s organizational structure is overly complex and involves some unusual legal entities with overlapping lines of authority. Bryce also discovers four large bank accounts in the Cayman Islands that have no clear business justification. When questioned about these situations, the company’s CEO treats them as unimportant and refuses to provide any further explanation. What type of financial statement fraud scheme do Bryce’s findings most likely indicate?a. Fictitious revenuesb. Improper asset valuationc. Improper disclosuresd. Concealed expenses

3. An unusual change in the relationship between fixed assets and depreciation is a red flag associated with which type of financial statement fraud scheme?a. Timing differencesb. Improper asset valuationc. Improper disclosured. All of the above

4. The textbook lists several ways to reduce the pressures to commit financial statement fraud, including: a. Avoiding setting unachievable financial goalsb. Maintaining accurate and complete internal accounting recordsc. Having confidential reporting mechanisms to communicate inappropriate behaviord. Maintaining accurate personnel records including background checks on new employees

5. Scott Ruskin is the CEO of Decatur Materials. The company has been struggling for the last few years and is in danger of defaulting on several of its bank loan covenants. Scott is facing significant pressure from the board of directors to turn the company around. Unless he meets all of the financial goals for the year, he will be out the door without a golden parachute. To improve the financial appearance of the company, Scott undertakes a scheme to boost the balance sheet by faking inventory. The analysis of what financial ratio would most likely bring this scheme to light?a. Quick ratiob. Collection ratioc. Inventory turnoverd. Profit margin