1- A company plans to go public. The investment bank involved in the initial public offering suspects that the company is engaging in channel stuffing to improve its financials and hires a fraud examiner to investigate. Which of the following is a red flag that channel stuffing might be occurring? A. Abnormally large orders with extended payment terms placed at the end of the accounting period B. A large sales contract with multiple billing phases booked over the course of several accounting periods C. A decline in shipping expense at year-end D. Channel stuffing is impossible to detect

2-Timing differences schemes are in violation of which underlying principle of GAAP? A. Materiality B. Conservatism C. Matching D. Going concern

3. A customer orders goods on 12/29/20X4, but the order is not fulfilled until 01/02/20X5. The sale should be booked on ________ and the inventory reduction for cost of goods sold should occur on ________. A. 12/29/X4; 12/29/X4 B. 12/29/X4; 01/02/X5 C. 01/02/X5; 01/02/X5 D. Any of the above

4. Which of the following revenue recognition schemes involves the sale of a large quantity of product to distributors who are encouraged to overbuy using deep discounts or extended payment terms? A. Holding the books open B. Channel stuffing C. Shipping merchandise before the sale is finalized D. Recording revenue when goods or services are still due

5. Premature revenue recognition affects profits in _________. A. The current period only B. The subsequent period only C. Both the current and subsequent periods D. None of the above

6. According to generally accepted accounting principles, which of the following expenses should be capitalized? A. Additions to assets that increase their useful life B. Property maintenance costs C. Administrative expenses D. Salaries