ACFE Financial Statement Fraud 4

Question 1

Which of the following best describes 'channel stuffing'?

Accepted Answer

Shipping excess product to distributors to inflate period-end revenue

Answer

Manipulating depreciation schedules to reduce expenses

Answer

Creating fictitious customers in the accounts receivable ledger

Answer

Delaying vendor payments to improve working capital ratios

Question 2

An auditor performs 'cut-off testing' primarily to detect:

Accepted Answer

Revenue and expense transactions recorded in the wrong accounting period

Answer

Overstated fixed asset valuations

Answer

Understated accounts payable balances

Answer

Misclassified equity versus debt instruments

Question 3

Which financial statement fraud motivation is described by the 'pressure' element in the fraud triangle?

Accepted Answer

Personal financial stress or pressure to meet earnings targets

Answer

Weak internal controls that allow manipulation to go undetected

Answer

Rationalizing that the fraud is temporary or justified

Answer

Access to the accounting system through privileged credentials

Question 4

Which PCAOB standard requires external auditors to assess the risk of material misstatement due to fraud?

Accepted Answer

AS 2401

Answer

AS 2101

Answer

AS 2605

Answer

AS 3101

Question 5

A company overstates goodwill by failing to record required impairment. The primary impact is:

Accepted Answer

Overstated total assets and overstated net income

Answer

Understated total equity and overstated liabilities

Answer

Understated revenue and understated net income

Answer

Overstated cash flow from operations

Question 6

Which ratio is most directly inflated by a scheme that understates cost of goods sold through inventory manipulation?

Accepted Answer

Gross profit margin

Answer

Debt-to-equity ratio

Answer

Current ratio

Answer

Interest coverage ratio

Question 7

A whistleblower tip to the SEC alleging financial statement fraud would most likely be routed to which program?

Accepted Answer

SEC Office of the Whistleblower under Dodd-Frank

Answer

FINRA BrokerCheck

Answer

PCAOB Ethics Hotline

Answer

FASB Standards Advisory Council