1. Research has found that three factors exist when fraud occurs. Which of the following is one of the three factors of the fraud triangle? a. Covenants b. Assessments c. Rationalization d. Monitoring 2. Which of the following would overstate a company's net income? a. Counting shipments of customers' orders as revenue before payment has been received. b. Shipping goods to customers without receiving orders from those customers, and recording the transactions as revenue. c. Accruing liabilities for marketing expenses before they are incurred. d. Making an accrual adjusting entry for interest earned on a bond investment. to commit fraud. 3. A strong system of internal __reduces the a. controls; opportunity b. audits, rationalization c. financial statements, opportunity d. loan covenants; incentive 4. Why was the Sarbanes-Oxley Act (SOX) enacted? a. To bring GAAP closer to global financial reporting standards. b. The lack of significant corporate frauds during the late 1990s and early 2000s warranted less monitoring for external stakeholders. c. To improve the financial reporting and restore investor confidence. d. Accounting rules had become so complex that investors could no longer understand them. 5. Protecting against theft of assets and enhancing accounting information is the objective of: a. loan covenants. b. government regulations c. internal controls d. the external auditors 6. The main purposes of internal controls include all of the following except: a. prevention of error, theft, and fraud. b. promotion of operational efficiency. c. ensuring compliance with laws and regulations. d. providing more favorable financial information. 7. The control environment: a. is the attitude that people in the organization hold regarding internal control. b. requires managers to continuously assess the potential for fraud and other risks. c. generates and communicates information about activities affecting the organization. d. includes the various work responsibilities and duties completed by employees to reduce risks. 8. Assigning responsibilities so that related activities are assigned to two or more people is the goal of: a. restricting access. b. segregating duties. c. independently verifying. d. documenting procedures. 9. The volume of transactions is enormous and the risk of handling errors is significant for: a. cash. b. inventory. c. accounts receivable. d. computer software. 10. Which of the following is the primary goal of internal controls for cash payments? a. Ensure that the business pays only for properly authorized transactions. b. Confirm that the request for payments is made by someone who is approved to order goods or services of the type and amount requested. c. Ensure that the supplier charges only for items received at approved prices. d. Make payments only when a purchase is supported by complete voucher documentation