CFE - Financial Transactions and Fraud Schemes

CFE - Financial Transactions and Fraud Schemes practice questions, page 4 of 10, with answer review and explanations.

Question 16

Which of the following measures is MOST LIKELY to prevent cash larceny schemes from occurring?

  1. Having all employees use the same cash register
  2. Requiring the accounts receivable clerk to deposit cash receipts at the bank and perform bank reconciliations
  3. Restricting other employees from performing the duties of an employee on vacation
  4. Announcing that the company performs surprise cash counts

Question 17

Which of the following is a method that a fraudster might use to conceal inventory shrinkage?

  1. Placing empty boxes on warehouse shelves
  2. Selling merchandise without recording the sale
  3. Falsely increasing the perpetual inventory figure
  4. All of the above

Question 18

Financial statement fraud can BEST be described as:

  1. The misstatement or omission of financial information for the purpose of personal gain
  2. The intentional or accidental misstatement of amounts in the financial statements
  3. The intentional understatement of assets or overstatement of liabilities on the balance sheet
  4. The deliberate misrepresentation of a company’s financial condition

Question 19

Which of the following statements is TRUE with regard to the income statement?

  1. Gross profit is equal to revenues less operating expenses.
  2. Net profit is the difference between total sales and the cost of goods sold.
  3. A company’s cash balance is usually the first line item listed.
  4. Gross revenue is the total amount of sales before deductions are applied.

Question 20

A financial manager who pressures investors to take regular payouts rather than to reinvest their profits is a red flag of a Ponzi scheme.

  1. True
  2. False