(Multiple Choice)
1. The most common way to overstate revenues is to:
a. Record revenues prematurely.
b. Abuse the cutoff line for recording revenues.
c. Create fictitious revenues.
d. None of the above.

2. Which of the following is a possible scheme for manipulating revenue when returned goods are accepted from customers?
a. Understate allowance for doubtful accounts (thus overstating receivables).
b. Record bank transfers when cash is received from customers.
c. Write off uncollectible receivables in a later period.
d. Avoid recording of returned goods from customers.

3. All of the following ratios are useful in detecting large revenue frauds except:
a. Gross profit margin.
b. Current ratio.
c. Working capital turnover.
d. Accounts receivable turnover.

4. Each of the following illicit revenue transactions is correctly linked with the financial statement accounts involved except:
a. Recognizing revenues too early-Accounts Receivable, Revenue.
b. Understate allowance for doubtful accounts-Bad Debt Expense, Allowance for Doubtful Accounts.
c. Don't write off uncollectible receivables-Sales Returns, Sales Discounts.
d. Don't record discounts given to customers-Cash, Sales Discounts, Accounts Receivable.
e. Record returned goods after the end of the period-Sales Returns, Accounts Receivable.

5. Identify which ratio is correctly linked to the information it could reveal about the company's potential for revenue fraud.
a. Gross profit margin-this ratio will increase if management overstates inventory.
b. Sales return percentage-a sudden decrease in this ratio can mean that customer discounts are not being recorded in the accounting records.
c. Allowance for uncollectible accounts as a percent of receivables-when a company records fictitious receivables, this ratio increases.
d. Operating profit margin-a dramatic decrease in this ratio could indicate fraud.

6. Which of the following is a common way to perform financial-statement analysis while searching for revenue-related analytical symptoms?
a. Look for unusual changes in revenue-related account balances fromperiod to period (trends).
b. Look for unusual changes in revenue-related relationships from period to period.
c. Look for unusual changes in the cost of goods sold account from period to period.
d. Both a and b are common ways to perform within-statement analysis while searching for revenue-related analytical symptoms.
e. All of the above are common ways to perform financial-statement analysis while searching for revenue-related analytical symptoms.

7. Primarily occurring at the end of the year in an attempt to inflate sales, the practice of shipping more items to distributors than they can sell in a reasonable time period is known as:
a. Lapping.
b. Channel stuffing.
c. Bill-and-hold transactions.
d. Consignment sales.