ACFE Financial Statement Fraud 2

Question 1

Which financial statement fraud scheme involves recording sales before the earnings process is complete?

Accepted Answer

Premature revenue recognition

Answer

Channel stuffing

Answer

Fictitious revenues

Answer

Round-tripping

Question 2

A company records a sale and simultaneously agrees to repurchase the same goods at a higher price. This is best described as:

Accepted Answer

Round-tripping

Answer

Channel stuffing

Answer

Bill-and-hold fraud

Answer

Consignment fraud

Question 3

Under the Sarbanes-Oxley Act, which officer must certify the accuracy of a public company's financial statements?

Accepted Answer

CEO and CFO

Answer

Chief Compliance Officer and General Counsel

Answer

Controller and Treasurer

Answer

External auditor and Audit Committee Chair

Question 4

Which analytical procedure compares each financial statement line item as a percentage of a base figure within the same period?

Accepted Answer

Vertical (common-size) analysis

Answer

Horizontal analysis

Answer

Trend analysis

Answer

Regression analysis

Question 5

A company capitalizes ordinary repair costs as long-term assets to reduce current expenses. This scheme primarily overstates:

Accepted Answer

Net income and total assets

Answer

Revenue

Answer

Cash from financing activities

Answer

Accounts receivable

Question 6

Which red flag in accounts receivable aging most strongly suggests fictitious revenues?

Accepted Answer

A large balance from a single new customer with no payment activity

Answer

A decrease in days sales outstanding (DSO)

Answer

An increase in early-payment discounts taken

Answer

A decrease in the allowance for doubtful accounts

Question 7

The Beneish M-Score model is used to:

Accepted Answer

Identify companies with a high probability of earnings manipulation

Answer

Quantify the dollar amount stolen in asset misappropriation

Answer

Rank industries by likelihood of financial statement fraud

Answer

Calculate restitution in fraud litigation