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Chapter 11 - Chapter 11 Multiple-Choice Questions 1 easy b...

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Chapter 11 Multiple-Choice Questions 1. Which of the following best defines fraud in a financial statement auditing context? easy a. Fraud is an unintentional misstatement of the financial statements. b b. Fraud is an intentional misstatement of the financial statements. c. Fraud is either an intentional or unintentional misstatement of the financial statements, depending on materiality. d. Fraud is either an intentional or unintentional misstatement of the financial statements, depending on consistency. 2. easy One of the earliest frauds occurred at McKesson-Robbins. This company committed fraud by doing which of the following? b a. Reporting fictitious contributed capital. b. Reporting fictitious sales and nonexistent inventory. c. Reporting fictitious fixed assets and underreporting expenses. d. Reporting expenses as capitalized items. 3. Which of the following is a category of fraud? easy a Fraudulent financial reporting Misappropriation of assets 4. With respect to fraudulent financial reporting, most frauds involve: easy d Inventory or liquid asset theft Intentional misstatements of amounts 5. ________ is fraud that involves theft of an entity’s assets. easy c 6. ________ involves deliberate actions taken by management to meet earnings objectives. easy a. Expenditure management b b. Earnings management c. Top-line management d. Management-by-objective 7. easy ________ is a form of earnings management in which revenues and expenses are shifted between periods to reduce fluctuations in earnings. c Arens/Elder/Beasley
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8. Which of the following is one of the conditions for fraud described in SAS No. 99? easy a Attitudes/rationalization Risk Factors Opportunities 9. Fraudulent financial reporting may be accomplished through the manipulation of: easy d 10. Who is most likely to perpetrate fraudulent financial reporting? easy a. Members of the board of directors c b. Production employees c. Management of the company d. The internal auditors
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