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

Channel stuffing involves pushing unsold product onto distributors, often with side agreements allowing returns, to inflate reported revenues artificially.

Question 2

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

Accepted Answer

Revenue and expense transactions recorded in the wrong accounting period

Answer

Cut-off testing verifies that transactions are recorded in the correct accounting period, a critical control against premature or delayed recognition.

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

Pressure (or incentive) is the motivating force — such as debt, bonus targets, or analyst expectations — that drives a person to commit fraud.

Question 4

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

Accepted Answer

AS 2401

Answer

PCAOB AS 2401 (Consideration of Fraud in a Financial Statement Audit) requires auditors to explicitly consider fraud risks during audit planning and execution.

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

Skipping a required impairment charge keeps goodwill inflated on the balance sheet (overstating assets) and avoids the expense that would reduce net income.

(ACFE) Association of Certified Fraud Examiners Practice Test

(ACFE) Association of Certified Fraud Examiners Practice Test

ACFE Financial Statement Fraud 4