ACC 312G Exam 3

What were some of the effects of unsupported journal entries and transfers? Artificially reduced expenditures in the football activity account Transferred expenses from football to girls basketball More expenses were transferred from the administration to football than vice versa Transferred $10,000 in fundraising money from football to soccer

Artificially reduced expenditures in the football activity account

What is the most important management assertion for larceny using false voids and refunds? Occurrence Authorization Uniqueness Completeness

Authorization

Why do authorized maker frauds have a higher likelihood of occurring than forgery frauds? Authorized makers have more ethics than forgers to perpetrate the fraud Authorized makers have better opportunity than forgers to perpetrate the fraud Authorized makers have more rationalization than forgers to perpetrate the fraud Authorized makers have more need than forgers to perpetrate the fraud

Authorized makers have better opportunity than forgers to perpetrate the fraud

Which of the following steps is not part of the confirmation process for cash balances? Authorized signor mails the confirmation The mailed envelope included a stamped envelope addressed directly to the auditor Auditor uses the "Standard Form to Confirm Account Balance Information with Financial Institutions" The authorized signor signs the form in the presence of the auditor

Authorized signor mails the confirmation

Which of the following is not a benefit of a proof of cash? Provides a separate reconciliation of cash receipts and cash disbursements Uncovers incorrectly recorded interbank transfers Helps detect unrecorded cash receipts and cash disbursements Auditor can trace cash receipts and cash disbursements directly to respective journals

Uncovers incorrectly recorded interbank transfers

Timpview High School questionable or unusual expenditures included all of the following EXCEPT: Personal vehicle repairs paid by Timpview High School totaling $759.84 Flooring for football complex for $4,000 was billed to a third party Undocumented payment of $10,000 to principal Check payable to bank for $300

Undocumented payment of $10,000 to principal

The individual who embezzled funds from the East Lansing, Michigan chapter of the United Way did all of the following EXCEPT: Forged signatures of check cosigners Wrote checks to herself Donated large amounts of money to the organization Kept the organization's books Destroyed cancelled checks mailed back by bank

Donated large amounts of money to the organization

Which of the following is a detection control? Reconciling bank statement Recording disbursement Authorizing disbursement Signing check

Reconciling bank statement

Which of the following would not be a segregation of issues problem for someone who accepts cash receipts? Adjust the customer account for returns and voids Record the receipt of cash Adjust the general ledger Reconcile the bank statement

Record the receipt of cash

The internal audit activity is effectively managed when it does all of the following EXCEPT: The internal audit activity conforms with the Standards and the Code of Ethics The individuals who are part of the internal audit activity demonstrate conformance with the Code of Ethics and the Standards The internal audit activity conforms with the Definition of Internal Auditing and the Standards The results of the internal audit activity's work achieve the purpose and responsibility included in the internal audit charter

The internal audit activity conforms with the Standards and the Code of Ethics

The federal judge ruled in favor of El-Hadad in all of the following areas EXCEPT: El-Hadad had been defamed by former employer The federal court did not have jurisdiction in the case El-Hadad had been victimized by false charges intended to discredit him Defamation by former employer ended El-Hadad's career

The federal court did not have jurisdiction in the case

The judge in the case noted all of the following EXCEPT: Troberg could have taken advantage of the EPPA ongoing investigation exemption with little risk of legal reprisal Troberg could have dismissed Kirby immedialey following the May 1995 theft with little risk of repurcussion The judge only awarded damages for lost wages and employment benefits Kirby may have committed theft from the cash register

The judge only awarded damages for lost wages and employment benefits

Reporting to senior management and the board must include all of the following EXCEPT: Governance issues Significant control issues Time spent on audits Fraud risks Other matters needed or requested by senior management and the board Significant risk exposures

Time spent on audits

In order to achieve the approved plan, the chief audit executive must ensure that internal audit resources are all of the following EXCEPT: Appropriate Effectively employed Timely Sufficient

Timely

All of the following are true regarding trade discounts EXCEPT: Trade loading improved long term revenues and profitability Trade discounts were offered at the end of account period to entice customers to buy items they would otherwise defer Trade discounts were used when a company appeared to fall short of revenue or expense targets Excessive trade loading made it difficult for Campbell to meet revenue and earnings profits

Trade loading improved long term revenues and profitability

For which of the following allegations did the judge rule in favor of Troberg Stores? None of the above Troberg Stores caused Kirby to take the polygraph examination Troberg disciplined Kirby on the basis of the polygraph results Troberg constructively discharged Kirby on the basis of the polygraph results Troberg improperly used the polygraph results

Troberg Stores caused Kirby to take the polygraph examination

Appropriate refers to the mix of knowledge, skills, and other competencies needed to perform the plan. True False

True

Resources are effectively deployed when they are used in a way that optimizes the achievement of the approved plan. True False

True

The chief audit executive must communicate the internal audit activity's plans and resource requirements, including significant interim changes, to senior management and the board for review and approval. True False

True

The chief audit executive must effectively manage the internal audit activity to ensure it adds value to the organization. True False

True

The chief audit executive must establish a follow-up process to monitor and ensure that management actions have been effectively implemented or that senior management has accepted the risk of not taking action. True False

True

The chief audit executive must establish and maintain a system to monitor the disposition of results communicated to management. True False

True

The chief audit executive must establish policies and procedures to guide the internal audit activity. True False

True

The chief audit executive should share information and coordinate activities with other internal and external providers of assurance and consulting services to ensure proper coverage and minimize duplication of efforts. True False

True

The frequency and content of reporting are determined in discussion with senior management and the board. True False

True

The frequency and content of reporting depend on the importance of the information to be communicated. True False

True

The frequency and content of reporting depend on the urgency of the related actions to be taken by senior management or the board. True False

True

The internal audit activity adds value to the organization (and its stakeholders) when it provides objective and relevant assurance, and contributes to the effectiveness and efficiency of governance, risk management, and control processes True False

True

The internal audit activity must monitor the disposition of results of consulting engagements to the extent agreed upon with the client. True False

True

When an external service provider serves as the internal audit activity, the provider must make the organization aware that the organization has the responsibility for maintaining an effective internal audit activity. True False

True

Embassy employees embezzled funds from all of the following transactions EXCEPT: Tuition reimbursements Tuition refunds Healthcare payments for families

Tuition reimbursements

Investigating out-of-sequence or duplicate checks helps detect which type of fraud? Forged endorsements Unauthorized checks Altered checks Authorized maker checks

Unauthorized checks

Kerviel used all of the following methods to circumvent controls and conceal unauthorized trades EXCEPT: Used his friendly nature to influence back office personnel Preparing false documents to corroborate trades Created phony emails from superiors authorizing illicit transactions Manufacturing impressive impromptu explanations for apparent irregularities Voiding warning messaged triggered by unauthorized trades

Used his friendly nature to influence back office personnel

What is the primary purpose of the cutoff bank statement? Used to detect unrecorded receipts and disbursements Used in the proof of cash to reconcile cash receipts and cash disbursements Confirms ending cash balance Used to audit deposits in transit and outstanding checks

Used to audit deposits in transit and outstanding checks

Which of the following statements is false? Controls are adequate for most charities Fewer than 15% of United Way of America local chapters have written accounting and control policies Many charities have inadequate or non-existant internal controls Charities reduced administrative costs including accounting and control costs

Controls are adequate for most charities

Which of the following was NOT a deception on the part of the bank's employees? Concealment of the cash shortage by Cordova and subordinates Explanation for why a large amount of cash was segregated in the locked cabinet Description of the three key security system The amount of cash in the locked cabinet on January 14, 1988 was $2.7 million

?

The form and content of policies and procedures are dependent upon all of the following EXCEPT: Budget of the internal audit activity Size of the internal audit activity Complexity of the work Structure of the internal audit activity

Budget of the internal audit activity

Which of the following is false? CapitalBank was declared insolvent and place under control of FDIC Cardova was not prohibited from serving as an officer or director of a public company Cardova missappropriated at least $400,000 Cardova pleaded guilty to bank fraud and conspiracy to commit bank fraud

Cardova was not prohibited from serving as an officer or director of a public company

For financial reporting purposes, which if the most serious concern for the auditor regarding the interbank transfer schedule? Cash deposit per bank recorded in December and corresponding cash disbursement per bank recorded the following January Cash deposit per books recorded in December and corresponding cash disbursement per books recorded the following January Cash disbursement per books recorded in December and corresponding cash deposit per books recorded the following January Cash disbursement per bank recorded in December and corresponding cash deposit per bank recorded the following January

Cash deposit per books recorded in December and corresponding cash disbursement per books recorded the following January

Which of the following is not a forgery scheme? Check signed by unauthorized person Authentic check altered by unauthorized person Endorsement made by unauthorized person Check made out to an authorized signer and signed by the authorized signer

Check made out to an authorized signer and signed by the authorized signer

Which is not a red flag for authorized maker fraud schemes? Checks are altered after signing Checks are made payable to relatives of cash disbursement custodian Checks are made payable to cash Checks are made payable to cash disbursement custodian

Checks are altered after signing

Which of the following types of fraud would most likely be perpetrated by someone outside the organization? Checks created and forged resulting in duplicate or out-of-sequence checks Blank checks are not safeguarded with passwords Blank checks are not locked in cabinets Voided checks are altered and forged

Checks created and forged resulting in duplicate or out-of-sequence checks

What was the major reporting problem with the "guaranteed sales?" Guaranteed sales involved shipping orders to the warehouse Company did not record appropriate sales return reserves Customers did not have an unconditional right of return of the product The practice is fraudulent

Company did not record appropriate sales return reserves

Which of the following types of audit procedures is NOT designed to assess bank deposit skimming or larceny? Observe cash deposit process to assess whether or not the process is in compliance with the segregation of duties chart Review proof of cash for cash receipts and cash disbursements that are not recorded in the organization records Investigate deposits in transit that do not clear the bank on the following bank business day Compare ending bank reconciliation to balance per books

Compare ending bank reconciliation to balance per books

One of the most important assertions for cash receipts is Completeness Occurrence Uniqueness Classification

Completeness

Which is the most important management assertion for cash receipts? Occurrence Authorization Completeness Classification

Completeness

French banks are best known for the development of which of the following? Derivatives Stocks Joint auditing Bouton Report

Derivatives

Who was not immediately terminated from employment because of the embezzlements? Cultural attache El-Hadad Embassy's chief accountant Deputy cultural attache

El-Hadad

All of the following are methods for stealing recorded deposits EXCEPT: Employee steals cash from the deposit and hides the theft by adjusting the records or reconciliation Employee deposits unexpected receipts then withdraws and steals the amount deposited Employee steals the deposit then hides the theft by replacing it with the following day's deposit Employee steals cash from the deposit and uses deposits in transit to hide the theft

Employee deposits unexpected receipts then withdraws and steals the amount deposited

What are the primary management assertions for cash balances? Completeness and Valuation Existence and Valuation Existence and Presentation and Disclosure Completeness and Rights and Obligations

Existence and Valuation

The chief audit executive may communicate the impact of resource limitations to senior management and the board. True False

False

When the chief audit executive concludes that management has accepted a level of risk that may be unacceptable to the organization, the chief audit executive must discuss the matter with the board. True False

False

El-Hadad was accusued of all of the following EXCEPT: Falsifying his own performance evaluations Payment of healthcare premiums for his family Expense reimbursements to which he was not entitled Compensation for overtime he had not worked

Falsifying his own performance evaluations

Which of the following is false regarding the sampling of expenditure transactions for football and drivers education? Tested 53 percent of expenditure dollars Tested 11 percent of transactions Football and drivers education had different fiscal custodians Tested 85 items

Football and drivers education had different fiscal custodians

All of the following are examples of authorization audit procedures EXCEPT: For cash disbursements over $5,000, inspect cancelled checks for two authorized signatures Analyze checks for payments to same vendor within one week where combined amounts exceed check authorization limit Inspect cancelled checks for authorized signatures For a sample of cash disbursements, inspect supporting invoices for "paid" stamp

For a sample of cash disbursements, inspect supporting invoices for "paid" stamp

Sales for a shipment on 12/31/12 were booked as revenue on 12/31/12. Which of the following situations would cause sales at 12/31/12 to be overstated? Goods shipped FOB destination on 12/31/12 arrived at customer place of business on 12/31/12 Goods shipped FOB shipping point on 12/31/12 arrived at customer place of business on 1/3/13 Goods shipped FOB destination on 12/31/12 arrived at customer place of business on 1/3/13 Goods shipped FOB shipping point on 12/31/12 arrived at customer place of business on 12/31/12

Goods shipped FOB destination on 12/31/12 arrived at customer place of business on 1/3/13

According to the case, all of the following disproportionately impact employment opportunities in France EXCEPT: Hard work Socio-economic status Hierarchical society Educational background

Hard work

The main reason for tracing a sample of the day's sales total checks, credit card transactions, and cash transactions to the bank deposit is to assess which risk event? Hides cash receipts theft by altering or destroying cash register tapes Hides the theft by altering the cash count Hides the theft by replacing stolen cash with false checks Employee steals cash from registers not assigned to him so the theft cannot be traced to him

Hides the theft by replacing stolen cash with false checks

What was NOT a major criticism in the case regarding International Financial Reporting Standards (IFRS)? Use of the "true and fair override" resulted in backdated losses that were inappropriate IFRS and U.S. GAAP are equivalent for financial accounting and reporting IFRS allows creative accountants to use accounting tricks and is a step backward for comparability IFRS encourages self-interested accounting and financial reporting

IFRS and U.S. GAAP are equivalent for financial accounting and reporting

Which of the following procedures best prevents interception of checks? Locking checks in cabinet until delivery Immediate delivery of check to payee after signing Mailing checks the following business day Waiting for vendor to contact company before sending check

Immediate delivery of check to payee after signing

All of the following are key audit procedures for authorized maker schemes EXCEPT: Review segregation of duties chart for individuals performing incompatible duties Analyze cash disbursements for checks made payable to cash or in the name of the organization Inspect cancelled checks for authorized endorsements Analyze cash disbursements for checks made payable to cash disbursement custodian

Inspect cancelled checks for authorized endorsements

The most important audit test for detecting alteration forgeries is Analyze bank statements for out of sequence or duplicate checks Observe vendor complaint process Inspect cancelled checks for matching payee and amount Evaluate the adequacy of security of blank checks

Inspect cancelled checks for matching payee and amount

The chief audit executive must report periodically to senior management and the board on all of the following relative to its plan EXCEPT: Internal audit activity's responsibility Internal audit activity's performance Internal audit activity's authority Internal audit activity's purpose Internal audit activity's budget

Internal audit activity's budget

Which of the following risks allows the perpetrator to hide the theft in the accounting records? Lack of segregation of duties among those completing checks, recording checks, signing checks, and reconciling bank statements Checks issued payable to cash Checks made payable to authorized signer Lack of matching documentation

Lack of segregation of duties among those completing checks, recording checks, signing checks, and reconciling bank statements

All of the following were violations of generally accepted accounting principles EXCEPT: Large trade discounts recorded as reductions of gross revenue Shipping to the yard Guaranteed sales Large trade discounts recorded as selling, general and administrative expenses

Large trade discounts recorded as reductions of gross revenue

According to the case, all of the following practices were unusual or not normal EXCEPT: Substantial portion of bank's cash was inaccessible for an extended period of time Substantial portion of bank's assets were not invested and earning interest for an extended period of time Maintaining a vault general ledger proof sheet that reconciled with cash on hand Segregating a large amount of cash in the locked cabinet

Maintaining a vault general ledger proof sheet that reconciled with cash on hand

The identification of risk accepted by management may be observed through all of the following methods EXCEPT: Assurance engagements Consulting engagements Actions taken by management as a result of prior engagements Management assertions

Management assertions

Which of the following is not a compatible function and therefore should be segregated from the other three? Approves cash disbursement policies Approves authorized signers on bank account Approves authorized limits for checks Matches documentation and approves disbursements

Matches documentation and approves disbursements

What is the most important detection control for accounts receivable skimming? Monthly statements mailed to customers showing payments and payment complaints investigated by independent employee Cash and accounts receivable personnel do not have access to general ledger system Cash and accounts receivable personnel do not authorize write off of receivables Two people open and record all payments received through the mail

Monthly statements mailed to customers showing payments and payment complaints investigated by independent employee

The Employee Polygraph Protection Act (EPPA) makes it unlawful, unless otherwise excepted by the act, for any employer engaged in commerce to do all of the following EXCEPT: Directly or indirectly to require, request, suggest, or cause any employee or prospective employee to take or submit to any lie detector test To use, accept, refer to, or inquire concerning the results of any lie detector test of any employee or prospective employee None of the answers are exceptions to the EPPA To dischare, disicipline, discriminate against in any manner, or deny employment or promotion to, or threaten to take any action against any employee or prospective employee who refuse, declines, or fails to take or submit to any lie detector test To dischare, disicipline, discriminate against in any manner, or deny employment or promotion to, or threaten to take any action against any employee or prospective employee on the basis of the results of any lie detector test

None of the answers are exceptions to the EPPA

All of the following are methods for hiding larceny of accounts receivable thefts EXCEPT: Making unauthorized adjustment to general ledger Making unauthorized adjustment to customer account Destroying records Not posting receipt to customer account

Not posting receipt to customer account

All of the following are methods for hiding theft for a larceny of sales scheme EXCEPT: Altering or destroying cash register tapes Altering the cash count Replacing stolen cash with false checks Not recording the sale

Not recording the sale

What is the most important type of audit procedure to detect skimming? Inspection Inquiry Confirmation Observation

Observation

The most important audit procedure to evaluate the prevention of intercepted checks-alteration and endorsement forgeries is Analyze bank statements for out of sequence or duplicate checks Read vendor payment complaint policies/processes and observe vendor payment complaint process to assess appropriate segregation of duties For a sample of cash disbursements, compare cancelled check to cash disbursements journal for matching payee and amount. Also, inspect for authorized signature and endorsement Observe check creation and delivery process

Observe check creation and delivery process

The staff auditors failed to do all of the following EXCEPT: Obtained documentation for the liability from CNB personnel Confirmed liability with customer Acquired corroboraing evidence for customer's planned use of funds Confirmed that customer cashed a large certificate of deposit

Obtained documentation for the liability from CNB personnel

When the internal auditors could not count the cash that was supposedly locked in the cabinet during their surprise count, what should they have done? Placed audit seals on the doors of the cabinet Accepted management's representation that the cash was in the locked cabinet without doing additional procedures Performed a surprise cash count at another location Counted the cash when the person with the key returned

Placed audit seals on the doors of the cabinet

A lack of segregation of duties allowed the Financial Secretary at Timpview High School to do all of the following incompatible duties EXCEPT: Prepared payroll checks Prepared and signed checks Entered transactions, made adjustments and writeoffs, and had sole custody of the general ledger system Prepared bank reconciliation

Prepared payroll checks

State agencies overseeing charitable organizations are generally all of the following EXCEPT: Inactive Ineffective Understaffed Productive

Productive

Why were joint audits primarily developed? Improve disclosures Protect domestic auditing firms Improve audit quality Increase audit fees

Protect domestic auditing firms

All of the following were noted as inadequate internal controls by the internal auditors EXCEPT: Approvals for many purchases or reimbursements are obtained after the purchases have already occurred, effectively making any effort to monitor or approve purchases meaningless There is a charge account at a local gas station for driver's education fuel charges. There are no logs, receipt copies, or any sort of reconciliation methods currently in use to track what charges are being made to the account, or to provide any method by which the Drivers Education Coordinator could review and approve monthly invoices. A risk exists that unauthorized users could make charges to the THS account that would remain undetected Reimbursements and disbursements initiated by the Principal are approved by a supervisor The Timpview High School (THS) Financial Secretary reported that THS does not have petty cash funds. Instead, checks are written to the bank and cashed for petty cash type transactions, travel advances, and change fund establishment.

Reimbursements and disbursements initiated by the Principal are approved by a supervisor

The most important audit procedure to evaluate the prevention of authorized maker schemes is For a sample of cash disbursements, inspect cancelled checks for authorized signatures Analyze cash disbursements for checks made payable to cash or in the name of the organization Review segregation of duties chart for individuals performing incompatible duties. While reviewing approvals, compare to segregation of duties chart. Analyze cash disbursements for checks made payable to cash disbursement custodian, his/her relatives, significant others, or other related parties or for their personal benefit

Review segregation of duties chart for individuals performing incompatible duties. While reviewing approvals, compare to segregation of duties chart.

Which of the following internal controls would have best reduced the likelihood of Troberg's cash thefts? Proper reconciliation of cash receipts Segregation of duties Invigilation Proper recording of sales

Segregation of duties

Campbell made all of the following strategic changes during the early to mid-1980s EXCEPT: Financed an aggressive expansion program Significantly increased profits Released more than 300 new products Sold debt securities for the first time

Significantly increased profits

If an auditor notices a decrease in gross margin over time, it could indicate Skimming of sales Larceny of deposits Larceny of sales Decrease in cost of goods sold

Skimming of sales

The transaction is not recorded in the records for which type of fraud? Skimming of sales Larceny of sales Larceny of cash deposits Larceny of accounts receivable

Skimming of sales

Which of the following is true? Both skimming and larceny transactions are recorded Skimming transactions are not recorded but larceny transactions are recorded Larceny transactions are not recorded, but skimming transactions are recorded Neither skimming nor larceny transactions are recorded

Skimming transactions are not recorded but larceny transactions are recorded

How did the UAE attorneys attempt to have the lawsuit dismissed? Sovereign immunity because it was a foreign embassy El-Hadad did not pay U.S. income taxes Commercial activity exception El-Hadad was employed by a foreign government

Sovereign immunity because it was a foreign embassy

Which is not a major problem faced by United Way? Highly publicized and embarrassing embezzlements Intense and growing competition for donations Tax status

Tax status

Which of the following statements is false? 95% of losses suffered by charities result from cash thefts The perpetrator for charity thefts generally serves in a financial function A research study estimates that one in eight dollars contributed to charitable organizations is stolen each year The charitable sector has strong regulatory oversight Annual theft losses for charitable organizations is approximately $40 billion annually

The charitable sector has strong regulatory oversight

EPPA Sections 2006 and 2009 do not prohibit an employer from requesting an employee to submit to a polygraph test if it follows all of the following steps EXCEPT: The employer executes a statement provided to the examinee that meets multiple criteria stated in the EPPA The employee had access to the property that is the subject of the investigation The employee volunteers to participate in a polygraph test The employer had a reasonable suspicion that the employee was involved in the incident or activity under investigation

The employee volunteers to participate in a polygraph test

Which is the best control to detect endorsement forgeries? All checks are completely filled in with permanent ink and copied before signing and prompt delivery Cancelled checks are examined for matching payee, amount, signature, and endorsement Vendor payment complaints investigated by someone independent of purchasing, accounts payable, or cash functions Organization investigates out-of-sequence or duplicate checks on bank statement

Vendor payment complaints investigated by someone independent of purchasing, accounts payable, or cash functions

What is the most important detection control for sales skimming? Security cameras and frequent visible and covert monitoring of sales transactions Require employees to give receipts for all sales to customers Visibly post notice to customers for free or discounted goods or services if they do not receive a sales receipt Cash register tape copied electronically by system

Visibly post notice to customers for free or discounted goods or services if they do not receive a sales receipt