ACCT 50 CHAPTER 9 TO 12 ...100% QUESTIONS AND ANSWERS
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Course
ACCT 450
Institution
ACCT 450
1. Borrowing a company asset for personal use without permission, even if it is returned unharmed, is a form of non-cash asset misappropriation.
a. True
b. False
2. Which of the following is not a red flag in a fraudulent shipment scheme?
a. An increase in bad debt expense
b. An unexplained ...
1. Borrowing a company asset for personal use without permission, even if it is returned unharmed, is a
form of non-cash asset misappropriation.
a. True
b. False
2. Which of the following is not a red flag in a fraudulent shipment scheme?
a. An increase in bad debt expense
b. An unexplained decrease in the scrap account
c. Unusually high levels of reorders for inventory items
d. Shipments with missing sales documents
3. Manually altering entries in an organization’s books in order to conceal fraud is called:
a. Padding the books
b. Forced reconciliation
c. Shrinkage
d. Fictitious reconstruction
4. To prevent fraudulent shipments of merchandise, organizations should:
a. Match every receiving slip to an approved purchase order.
b. Match every outgoing shipment to a sales order.
c. Make sure that all increases to perpetual inventory records are supported by proper source documents.
d. All of the above
5. Which of the following methods can be used to conceal inventory shrinkage on a company’s books?
a. Creating fictitious sales and receivables
b. Writing off inventory as obsolete
c. Physical padding
d. All of the above
6. An employee causes his organization to purchase merchandise that it does not need. This is an example
of what type of scheme?
a. Purchasing and receiving scheme
b. False billing scheme
c. Unconcealed larceny scheme
d. Asset requisition scheme
7. An unexplained increase in uncollectible accounts receivable may be a warning sign of a non-cash
asset misappropriation scheme involving false shipments of inventory.
a. True
b. False
8. Of the following, which is the best method for detecting the theft of inventory?
a. Have the warehouse manager personally oversee bi-monthly inventory counts.
b. Have someone from purchasing conduct inventory counts every quarter.
c. Have a designated person in customer service follow-up with customers who have complained
about short shipments.
d. Match vendor addresses against employee addresses.
9. To deter inventory theft schemes, organizations should install security cameras in the warehouses
without the employees’ knowledge.
a. True
b. False
10. Which of the following procedures would be least helpful in preventing larceny of non-cash assets?
a. Segregating the duties of sales and accounts payable
b. Installing surveillance cameras in the warehouse and on sales floors
c. Creating access logs to track employees that enter restricted areas
d. Employing security guards at the entrance of the warehouse
,ACCT 450 CHAPTER 9 T0 12
11. The unaccounted-for reduction in the company’s inventory that results from theft is called:
a. Physical defalcation
b. Spoilage
c. Shrinkage
d. Misappropriation of intangible assets
12. Unexplained increases in inventory shrinkage can be a red flag that signals which type of fraud scheme?
a. Fictitious refunds
b. Inventory larceny
c. Sales skimming
d. All of the above
13. Which of the following computer audit tests can be used to detect purchasing and receiving schemes?
a. Identifying dormant customer accounts for the past six months that show a sale in the last two
months of the year
b. Calculating the ratio of the largest sale to the next largest sale by customer
c. Extracting all inventory coded as obsolete and possessing reorder points within the inventory system
d. All of the above
14. Which of the following computer audit tests can be used to detect an inventory misappropriation scheme?
a. Identifying inventory receipts in the receiving system that do not agree to the receipts per the
accounts payable system
b. Identifying inventory shipments delivered to an address that is not designated as a business address
c. Identifying inventory with a negative quantity balance
d. All of the above
15. Running a computer program that identifies shipping documents with no associated sales order can
detect which of the following non-asset cash misappropriation schemes?
a. False shipments
b. Purchasing and receiving schemes
c. Unconcealed inventory larceny
d. Asset requisition schemes
16. Which of the following is not a method used to conceal false shipments of inventory?
a. Creating false sales orders
b. Falsely increasing the perpetual inventory
c. Writing off the inventory as scrap
d. Physical padding
17. According to the 2012 Report to the Nations on Occupational Fraud and Abuse, non-cash schemes
occur more frequently than cash schemes.
a. True
b. False
18. According to the 2012 Report to the Nations on Occupational Fraud and Abuse, cash schemes have a
higher median loss than non-cash schemes.
a. True
b. False
19. According to the 2012 Report to the Nations on Occupational Fraud and Abuse, the theft of which type
of non-cash asset was the least common but caused the highest median loss?
a. Equipment
b. Proprietary information
c. Securities
d. Inventory
20. Andy Kaplan is a foreman for JCP Enterprises, a regional construction company. He recently ordered some
plumbing supplies from the company warehouse for an office building project he is overseeing. When the
supplies arrived at the job site, however, he loaded them in his truck and took them home to use in
remodeling his master bathroom. What kind of inventory theft scheme did Andy commit?
, ACCT 450 CHAPTER 9 T0 12
a. False shipments
b. Unconcealed larceny
c. Asset requisition
d. Misappropriation of intangible assets
21. Nicolette Garrison works part-time at an independent record store. Whenever her friend, Jacob Barker,
comes into the store during one of her shifts, he picks up a CD and brings it to the register where
Nicolette is stationed. After ringing a “no sale” transaction on the cash register, Nicolette pretends to swipe
Jacob’s credit card for payment. She puts the CD in a bag and gives it to Jacob, who walks out without
actually paying for the merchandise. What kind of scheme is being committed?
a. Fake sale
b. False refund
c. Sales skimming
d. Cash larceny
22. Ben Rogers works as a cashier for Tillis Sporting Goods. One afternoon, he asked his sister Dawn to come
into the store. When she arrived, Ben put three watches, two fishing reels, and four pairs of sunglasses in
a sack and gave it to her. Dawn walked out of the store, sold two of the watches, and returned to the store
later to return the other items for a refund. What type of asset misappropriation has been committed?
a. Sales skimming
b. Pay-and-return scheme
c. False refund scheme
d. Inventory larceny scheme
23. Ace Electronics is a company that sells computers, televisions, home entertainment centers, DVD players,
and other electronic equipment. A downturn in the market has caused severe financial problems in the
company. In order to fool the auditors as they begin their inventory count, several of Ace’s managers have
begun stacking empty boxes in the warehouse to create the illusion of extra inventory. This scheme is
known as:
a. Forced reconciliation
b. Physical padding
c. Inventory shuffling
d. Misappropriation of intangible assets
24. To supplement her income, Jeanne Lester decided to start her own bookkeeping business while still
working as an office assistant at Howe & Lyon, a small CPA firm. Not having much start-up capital for her
new business, she used her phone at work to contact clients and her work computer to print invoices and
client letters. However, she ordered and paid for her own office supplies and used her own postage stamps
to mail the invoices and letters. From the information given, has Jeanne misappropriated any of the firm’s
assets?
a. Yes
b. No
25. In one of the cases in the textbook, Larry Gunter was a shipping clerk for a computer company that
manufactured microprocessor chips. After learning that the chips were valuable, he stole three boxes and
sold them to his girlfriend’s father. Since the scheme worked so well the first time, he continued stealing
and selling the chips, even letting a co-worker in on the scheme. How was the theft discovered?
a. A security guard found the chips in a routine check of his work cart.
b. An inventory manager filling an order noticed that many of the chips were missing.
c. The auditors found the shortage when they conducted the annual inventory count.
d. His co-worker notified the loss prevention department in exchange for a cash award.
26. In one of the cases in the textbook, Larry Gunter was a shipping clerk for a computer company that
manufactured microprocessor chips. After learning that the chips were valuable, he stole three boxes and
sold them to his girlfriend’s father. Since the scheme worked so well the first time, he continued stealing
and selling the chips, even letting a co-worker in on the scheme. How was Gunter punished?
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