ACCT 562 Week 4 Midterm Exam Answers


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1. Question : (TCO D) The review team should be aware of various management and
operational techniques, which includes all of the following except:

Mental Models
2. Question : (TCO F) Manually altering entries in an organization‘s books in order to
conceal fraud is called:

Forced reconciliation
Padding the books
Instructor Explanation:Wells, Chapter 9
3. Question : (TCO F) During an interview, when an interviewee repeatedly fiddles
with a pen or picks lint from her clothing, he/she is giving non­verbal
clues called:

Instructor Explanation:Wells, Chapter 15
4. Question : (TCO F) When the subject of an investigation has been accused of
misconduct, establishing a morally acceptable rationalization might
allow the accused to reconcile his actions with his conscience. Which
of the following is not an example of an acceptable rationalization?

The accused felt that he needed to get back at someone in the
The accused engaged in the misconduct for the benefit of others.
The accused has personal demons that can’t be overcome.
Instructor Explanation:Wells, Chapter 15

5. Question : (TCO F) In one of the case studies in the Wells textbook (page 49),
Brian Lee, a top­notch plastic surgeon, collected payments from his
patients without giving a cut to the clinic where he practiced. What was
his motivation for committing the fraud?

Repay his students loans.
Fund his charitable doctor work.
None of the above
Instructor Explanation:Wells, Chapter 2


6. Question : (TCO F) Nicolette Garrison works part­time 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

False refund
Sales skimming
Cash larceny
Instructor Explanation:Wells, Chapter 9


7. Question :

(TCO F) Which of the following is not a method used to conceal false

shipments of inventory?

Falsely increasing the perpetual inventory

Writing off the inventory as scrap

Physical padding

Instructor Explanation:Wells, Chapter 9
8. Question : (TCO F) According to the 2009 Global Fraud Survey, the theft of which
type of non­cash asset was the least common but caused the highest
median loss?

Proprietary information
Instructor Explanation:Wells, Chapter 9


9. Question : (TCO A) Benefits derived from operational reviews include

assessing management information systems
locating opportunities to increase revenue
All of the above
Instructor Explanation:Reider Chapter 1


10.Question : (TCO B) Financial ratios used in planning include:

All of the above
Instructor Explanation:Reider Chapter 2
11.Question : (TCO A­D) Creating staff assignment, budgets, specific audit steps is
part of the _____ phase.


Work program

12.Question : (TCO A) Operational areas eligible for review include:

depreciation processes
inventory­raw material and finished goods
database access
Instructor Explanation:Reider Chapter 1
13.Question : (TCO F) Richard Moore is the controller for Ajax Company. Recently,
he has suffered several large losses at the race track, causing him to
incur enormous personal debts. Which type of non­sharable financial
problem best describes Richard’s situation?

Physical isolation
Violation of ascribed obligations
Status gaining
Instructor Explanation:Wells, Chapter 1
14.Question : (TCO F) Research in the Hollinger­Clark study suggests that the best
way to deter employee theft is by:

Increasing the perception of detection
Strengthening internal controls
Communicating the organization s fraud policies to employees
Instructor Explanation:Wells, Chapter 1


15.Question : (TCO F) Which of the following is not part of the fraud theory

Develop what­if scenarios.
Identify who committed the fraud.

16.Question : (TCO F) The technique for analyzing the percentage change in
individual financial statement items from one accounting period to the
next is known as:

Horizontal analysis
Vertical analysis
None of the above
Instructor Explanation:Wells, Chapter 12
17.Question : (TCO F) In the Fraud Tree, asset misappropriations are broken down
into cash and non­cash schemes. Which of the following is not
considered a misappropriation of cash?

Fraudulent Disbursement
Instructor Explanation:Wells, Chapter 2

18.Question : (TCO A) _____ and converting cash allow a business to survive.

Debt management
Employee satisfaction
None of the above
Instructor Explanation:Reider Chapter 1

19.Question : (TCO F) Which of the following is a method for concealing larceny of

Reversing entries
Instructor Explanation:Wells, Chapter 3

20.Question : (TCO F) Jeff Lewis is an accounts receivable clerk for FTB Industries.
As customers pay off their balances, Lewis posts the payments but
pockets the money. He can conceal his theft by

Adjusting the account with a discount
Destroying the records
All of the above
Instructor Explanation:Wells, Chapter 3

21.Question : (TCO F) Which of the following is a reason that a Chief Executive
Officer might commit financial statement fraud?

To avoid termination due to poor performance
To conceal the company‘s true performance
All of the above
Instructor Explanation:Wells, Chapter 11

22.Question : (TCO B) Information obtained during the course of planning includes:

Previous auditor credentials who worked in this area.
Information from Motley Fool message boards.
None of the above.
Instructor Explanation:Reider Chapter 2


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1. Question : (TCO A) Operational review procedures embrace the concept of conducting
operations for economy, efficiency, and effectiveness. Provide a brief
description of the ECONOMY aspect, and provide an example.
2. Question : (TCO F) The 2010 Report to the Nations on Occupational Fraud and Abuse
covered a number of factors that are related to occupational fraud. List and
explain at least three of these factors.

3. Question :

(TCO F) Albrecht, in his research, developed the “fraud scale” and furnished a

list of the reasons employees and executives commit occupational fraud. How are Albrecht’s conclusions similar to Cressey’s? How are they different?

4. Question : (TCO F) How can fictitious revenue be created through the use of false sales
to shell companies? Discuss the method and result of committing this fraud.