Question

QUESTION 1

Financial statement fraud prompted such federal legislation as the Dodd-Frank Act and the Sarbanes-Oxley Act.

		True
		False

QUESTION 2

Maintaining accurate and complete accounting records, having effective separation of duties, providing comprehensive physical security and control of assets and other resources, and providing strong supervision of employees are all ways to help reduce the opportunity to commit financial statement fraud.

		True
		False

QUESTION 3

Establishing effective corporate governance with a proper "tone at the top", avoiding unrealistic financial goals, and ensuring that compensation plans are fair are all examples of ways to reduce pressures to commit financial fraud.

		True
		False

QUESTION 4

Ratio analysis is an analytical tool that could possibly help raise red flags that might require additional investigation into a possible fraud.

		True
		False

QUESTION 5

Incentives to commit fraud, opportunity to commit fraud, and attitudes to justify fraudulent behavior are part of the fraud triangle but are also referred to in this chapter as "fraud risk factors."

		True
		False

QUESTION 6

A subsequent event is an event that occurs after the close of the accounting period but should be disclosed with the financial statements if it is significant.

		True
		False

QUESTION 7

When "revenue expenses" are capitalized, net income will be overstated.  This is a common way to manipulate earnings fraudulently.

		True
		False

QUESTION 8

A sale is made to a customer on terms 2/10 net 30 and the customer has very poor credit. There is no evidence that the customer can make good on the payment however, delivery is made and there is a contract. This is a very large sale and should be booked.

		True
		False

QUESTION 9

The receivable turnover ratio tells you the number of days it takes to collect an accounts receivable.

		True
		False

QUESTION 10

The expression of the relationship or percentage of component part to a specific base - such as cash as a percentage of total assets or accounts payable as a percentage of total liabilities is horizontal analysis.

		True
		False

Answer 1

Ans 1 (True) Financial statement fraud is a deliberate action for the purpose of misguides the investors by preparing misleading and misrepresentation of financial data.

The Sarbanes –Oxley Act was passed to protect investors from potential fraudulent accounting of companies and Dodd –Frank Act was passed to provide significance financial reforms to reduce risk in various areas of economy.

So it is true that financial statement fraud promoted such federal legislation as the Dodd –Frank act and Sarbanes –Oxley Act.

Ans 2(True) these all are helped to reduce the opportunity to commit financial statement fraud.

a) Maintaining accurate and complete records.

b) Separation of duties of employees.

c) Providing accurate control of assets and other resources.etc.

Ans 3(True) these all are helped to reduce pressure to commit financial fraud.

Effective corporate governance provides that goals of the company are well designed and company internal control and procedure are well defined. It also helped avoiding unrealistic financial goals. Establishing effective corporate governance with a proper tone at the top helps to influence the employee’s behavior and success of corporate governance.

Ans 4 (True) Ratio Analysis helps to analyses financial analysis and in case unexplainable variation arises in percentage can serve as a red flag for further analysis.so it is true that Ratio analysis is an analytical tool that can possibly help to raise flags that might require additional investigation.