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Q 2 A skimming scheme is easier to detect than a cash larceny scheme.
Explanation:
Option B is Correct.
Skimming is a off-book fraud. As no record of sales is mentioned in books, it is harder to detect. Cash larceny schemes are easier to detect than skimming schemes because they leave an audit trail.
Q 4 Revenues are generally recognized when goods are delivered to a customer, if we follow accrual basis accounting.
Explanation:
Option A is Correct.
Accrual-basis accounting requires revenues to be recorded when they are earned (generally, when goods are delivered or services are rendered to a customer), without regard to exchange of cash.
Q 5 To conceal the removal of a liability, which of the following actions would NOT balance the accounting equation?
Explanation:
Option D is correct.
Since the assets side would be greater than liabilities plus owners’ equity. Increasing an asset would only make the equation further out of balance.
Q 9 Early revenue recognition is what type of fraud scheme?
Explanation:
Option C is Correct.
Timing differences is the recording of revenues or expenses in improper periods. Early revenue recognition is a common type of timing difference scheme. This practice is also referred to as income smoothing.
Q 10 The quick ratio is used to determine the efficiency with which a company uses its assets.
Explanation:
Option B is Correct.
The quick ratio compares the most liquid assets to current liabilities. It is a conservative measurement of liquidity while the asset turnover ratio is used to determine the efficiency.
Q 12 An amount which used to be withheld from each draw request and not paid until the contract has been finished and approved by the owner, is known as?
Explanation:
Option A is Correct.
This is known as Retainage/holdback. The amount withheld from each draw request until such time as the construction is complete and the lien period has expired.
Q 13 When an employee uses force to demand money for making a business decision, scheme is known as?
Explanation:
Option B is Correct.
Extortion is defined as the obtaining of property from another, with the other party’s consent induced by wrongful use of actual or threatened force or fear. Economic extortion is present when an employee or official, through the wrongful use of actual or threatened force or fear, demands money or some other consideration to make a particular business decision. Thus, if an employee or government official demands money in exchange for making a business decision, this is an example of an economic extortion scheme. Similarly, if a politician threatens to shut down a business if it does not pay a bribe, this is also an example of an economic extortion scheme.
Q 16 In order for an hourly employee to commit a falsified hours and salary scheme, he may overstate either the number of hours worked or his rate of pay.
Explanation:
Option A is Correct.
For an hourly employee to fraudulently increase the size of his paycheck, he must either falsify the number of hours he has worked or change his wage rate.
Q 20 High overdue debtor's balance is a red flag of a fictitious revenue scheme.
Explanation:
Option A is correct.
Fictitious revenues involve the recording of sales of goods or services that did not occur. Since no cash is received , debtor's balance will accumulate. If the outstanding accounts never get collected, they will eventually accumulate.