Chapter11-final..docVIP

CHAPTER 11 Multiple-Choice Questions 1. Which of the following best defines fraud in a financial statement auditing context? easy a. Fraud is an unintentional misstatement of the financial statements. b b. Fraud is an intentional misstatement of the financial statements. c. Fraud is either an intentional or unintentional misstatement of the financial statements. d. None of the above correctly defines fraud. 2. easy One of the earliest frauds occurred at McKesson-Robbins. This company committed fraud by doing which of the following? b a. Reporting fictitious sales. b. Reporting fictitious sales and nonexistent inventory. c. Reporting fictitious sales and underreporting expenses. d. None of the above correctly defines the fraud. 3. Which of the following is a category of fraud? easy a. Fraudulent financial reporting c b. Misappropriation of assets c. Both a and b d. Neither a nor b 4. With respect to fraudulent financial reporting, most frauds involve: easy a. inappropriate disclosures in the notes. b b. intentional misstatements of amounts. c. Both a and b d. Neither a nor b 5. ________ is fraud that involves theft of an entity’s assets. easy a. Fraudulent financial reporting c b. A “cookie jar” reserve c. Misappropriation of assets d. Each of the above is correct 6. ________ involves deliberate actions taken by management to meet earnings objectives. easy a. Expenditure management b b. Earnings management c. Top-line management d. Management-by-objective 7. easy ________ is a form of earnings management in which revenues and expenses are shifted between periods to reduce fluctuations in earnings. c a. Fraudulent financial reporting b. Expense smoothing c. Income smoothing d. Each of the above is correct 8. Which of the following is not one of the conditions for fraud described in SAS No. 99? easy a. Attitudes/rationalization d b. Opportunities c. Incentives/pressures d. Each of the