ACFE Financial Statement Fraud 3

Question 1

Which liability omission scheme most directly understates a company's reported obligations?

Accepted Answer

Failing to accrue warranty liabilities

Answer

Overstating depreciation

Answer

Accelerating revenue recognition

Answer

Understating inventory write-downs

Question 2

In a bill-and-hold arrangement used fraudulently, the seller records revenue even though:

Accepted Answer

The goods have not been shipped and the buyer has no risk of ownership

Answer

The buyer has not yet placed an order

Answer

The invoice has not been issued

Answer

The price has not been agreed upon

Question 3

Which document is most useful for detecting fictitious vendor disbursements in a financial statement fraud scheme?

Accepted Answer

Vendor master file

Answer

Bank reconciliation

Answer

Petty cash log

Answer

Fixed asset register

Question 4

A company discloses a contingent liability only in footnotes without accruing it, despite evidence the loss is probable and estimable. This violates:

Accepted Answer

ASC 450 contingency standards

Answer

ASC 606 revenue recognition guidance

Answer

ASC 842 lease accounting rules

Answer

ASC 350 goodwill impairment rules

Question 5

Which ratio trend is most consistent with understated inventory write-downs used to inflate earnings?

Accepted Answer

Declining inventory turnover paired with rising gross margin

Answer

Rising inventory turnover paired with declining gross margin

Answer

Stable inventory turnover paired with stable net income

Answer

Declining gross margin paired with rising current ratio

Question 6

Which technique do fraudsters use to conceal improper related-party transactions in financial statements?

Accepted Answer

Omitting disclosure and structuring them to appear arm's-length

Answer

Recording them at above-market prices and disclosing them fully

Answer

Reporting them in management discussion and analysis only

Answer

Including them in the auditor's report

Question 7

During a financial statement fraud investigation, which source best corroborates reported revenue figures?

Accepted Answer

Third-party bank statements and customer confirmations

Answer

Internal sales reports prepared by management

Answer

Board-approved budgets

Answer

Prior-year audited financial statements