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

Premature revenue recognition records revenue before all criteria under GAAP (e.g., delivery, risk transfer) are satisfied.

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

Round-tripping creates fictitious revenue by cycling cash through sham transactions that net no real economic benefit.

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

SOX Section 302 requires the CEO and CFO to personally certify that financial statements fairly present the company's condition.

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

Vertical analysis expresses each line item as a percentage of a base (e.g., total assets or net sales), enabling within-period structural comparisons.

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

Capitalizing expenses reduces the current-period expense charge, inflating net income and simultaneously overstating assets on the balance sheet.

(ACFE) Association of Certified Fraud Examiners Practice Test

(ACFE) Association of Certified Fraud Examiners Practice Test

ACFE Financial Statement Fraud 2