AUDITING LL W/ CONNECT <C>
11th Edition
ISBN: 9781307416268
Author: MESSIER
Publisher: MCGRAW-HILL HIGHER EDUCATION
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 4, Problem 4.20MCQ
To determine
Concept Introduction:
Misstatements are incorrect entries or disclosures in financial statement. A misstatement may be due fraud or error on the part of the management. The auditor covers all the material misstatements during the process of its audit.
To choose: The fraudulent financial reporting.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Which of the following is an example of fraudulent financial reporting?
a. The treasurer diverts customer payments to his personal due, concealing his
actions by debiting an expense account, thus overstating expenses.
O b. An employee steals inventory and the "shrinkage" is recorded in cost of goods
sold.
O c. Company management changes inventory count tags and overstates ending
inventory, while understating cost of goods sold.
O d. An employee steals small tools from the company and neglects to return them;
the cost is reported as a miscellaneous operating expense.
If an employee skims sales from a customer, which of the following will likely occur?
a. The stolen payment if not material, will not be noticed by the organization.
b. The receivable will become past due
C. The customer will not be able to show proof that payment has been made.
O d. The organization is likely to notice the theft of the payment immediately.
Which of the following combinations is a good way to conceal employee fraud but an ineffective means of perpetrating management (financial reporting) fraud?a. Overstating sales revenue and overstating customer accounts receivable balances.b. Overstating sales revenue and overstating bad debt expense.
c. Understating interest expense and understating accrued interest payable.d. Omitting the disclosure information about related-party sales to the president’s relatives at below-market prices.
Chapter 4 Solutions
AUDITING LL W/ CONNECT <C>
Ch. 4 - Prob. 4.1RQCh. 4 - Prob. 4.2RQCh. 4 - Prob. 4.3RQCh. 4 - Prob. 4.4RQCh. 4 - Prob. 4.5RQCh. 4 - Prob. 4.6RQCh. 4 - Prob. 4.7RQCh. 4 - Prob. 4.8RQCh. 4 - Prob. 4.9RQCh. 4 - Prob. 4.10RQ
Ch. 4 - Prob. 4.11RQCh. 4 - Prob. 4.12RQCh. 4 - Prob. 4.13MCQCh. 4 - Prob. 4.14MCQCh. 4 - Prob. 4.15MCQCh. 4 - Prob. 4.16MCQCh. 4 - Prob. 4.17MCQCh. 4 - Prob. 4.18MCQCh. 4 - Prob. 4.19MCQCh. 4 - Prob. 4.20MCQCh. 4 - Prob. 4.21MCQCh. 4 - Prob. 4.22MCQCh. 4 - Prob. 4.23PCh. 4 - Prob. 4.24PCh. 4 - Prob. 4.25PCh. 4 - Prob. 4.26PCh. 4 - Prob. 4.27PCh. 4 - Prob. 4.28PCh. 4 - Prob. 4.29PCh. 4 - Prob. 4.30PCh. 4 - Prob. 4.31PCh. 4 - Prob. 4.32P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Fraud refers to any intentional act to achieve gain, usually monetary. Committing a fraud isunethical and resulting in bad consequences, not just to the perpetrator, but also others (e.g.shareholders, workers etc.). Several example of fraud scenario are listed as follows:i). Store manager misused company’s car for personal purpose because he is the onlyperson that monitor the movement and usage of the car.ii). The accountant and the store keeper of AAA Enterprise co-operate in stealing thecompany’s inventory and they gain a lot of money from it.iii). The Chief Financial officer (CFO) of ABC Sdn Bhd had reported over $700,000 fakeearnings because he wants to achieve sales target.iv). XYZ Sdn Bhd booked revenues earlier than it should have because it was at risk ofmissing analyst estimates.Required;a. Identify the type of fraud committed in the scenario i). to iv). b. Based on the fraud triangle (i.e. pressure, opportunity and rationalization), identify thecause of fraud happen in the…arrow_forwardProvide an appropriate response based on the following scenarios. Assume that the accounting clerk posts a customer’s payment for the wrong amount, giving the customer credit for less than he or she actually paid. How will this error be detected? How might this error have been prevented? Assume that the employee who opens the mail steals a customer payment. How will this theft be detected? How might this theft have been prevented?arrow_forward1. What does it mean to say that internal control has limitations and what are these limitations? 2. Provide an appropriate response based on the following scenarios. Assume that the accounting clerk posts a customer’s payment for the wrong amount, giving the customer credit for less than he or she actually paid. How will this error be detected? How might this error have been prevented? Assume that the employee who opens the mail steals a customer payment. How will this theft be detected? How might this theft have been prevented? 3. What is petty cash and what purpose(s) does it serve? 4. What types of controls should be in place to make sure people in the office don't just take from petty cash (for their own personal use) whenever they feel like it? In your opinion, what is an appropriate amount to have in petty cash? 5. Prepare the necessary journal entries for each of the following: (a) On March 1, issued a check to establish a petty cash fund of $1,410 (b)…arrow_forward
- The fraud triangle asserts that the following three factors must exist for a person to commit fraud.A. Opportunity B. Pressure C. RationalizationIdentify the fraud risk factor (A, B, or C) in each of the following situations. A worker sees other employees regularly take inventory for personal use.arrow_forwardEXPLAIN IT SIMPLE AND BRIEFLY. YOU CAN ALSO INCLUDE EXAMPLES.arrow_forwardA purchasing agent for a home improvement center is also part owner in a wholesale lumber company. The agent has sole discretion in selecting vendors for the lumber sold through the center. The agent directs a disproportionate number of purchase orders to his company, which charges above-market prices for its products. The agent’s financial interest in the supplier is unknown to his employer.What type of fraud is this and what controls can be implemented to prevent or detect the fraud?arrow_forward
- 1. A threat to the expenditure cycle that involves an employee creating and approving fictitious purchase orders is known as: A. Inventory theft B. Unauthorized access C. Check tampering D. Billing schemes 2. Purchase orders are used to initiate a payment in the disbursement cycle. True or False 3.Vendor audits are conducted to address the threat of unauthorized access in the disbursement cycle. True or falsearrow_forwardTwo very common ways that employees commit fraud against their employers is the misstatement of reimbursable expense accounts and the misuse of office supplies for personal purposes. Although these schemes are usually not individually significant, their magnitude can be damaging if these practices are widespread. Please comment on these types of fraud (and other examples of employee fraud) and what internal controls they would put in place in an organization to curb this activity.arrow_forwardThe kickback is a form of fraud often associated with purchasing. Most organizations expect their purchasing agents to select the vendor that provides the best products at the lowest price. To influence the purchasing agent in his or her decision, vendors may grant the agent financial favors (cash, presents, football tickets, and so on). This activity can result in ordersbeing placed with vendors that supply inferior products or charge excessive prices.Required;i) Describe two preventive controls that an organization can employ to deal withkickbacks fraud ii) Describe two detective controls that an organization can employ to deal with kickbacksfraud iii) Describe two corrective controls that an organization can employ to deal with kickbacks fraudarrow_forward
- Which of the following are external threats to revenue security? (select all that apply) A guest who walks out before the bill is presented An employee using voided sales to steal cash A quick-change artist A guest who forgot to payarrow_forwardWhich of the following are examples of the misappropriation of assets? O A. An employee theft of inventory. O B. A kickback scheme in the purchasing function. OC. An employee overstates an expense reimbursement request after a company trip. O D. all of the above Click to select your answer. 11:59pm 99+ charrow_forwardOne of the typical characteristics of management fraud isa. Falsification of documents in order to misappropriate funds from an employer.b. Victimization of investors through the use of materially misleading financialstatements.c. Illegal acts committed by management to evade laws and regulations.d. Conversion of stolen inventory to cash deposited in a falsified bank account.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College PubBusiness/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:Cengage
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub
Business/Professional Ethics Directors/Executives...
Accounting
ISBN:9781337485913
Author:BROOKS
Publisher:Cengage