1 Which of the following is an example of fraudulent financial reporting? d ut of 2.0 Question O a. Company management falsifies inventory count tags, therefore overstating ending inventory and understating cost of sales. O b. An employee diverts customer payments to his personal use. concealing his actions by debiting an expense account thus overstating expenses, Oc. An employee steals inventory and the "shrinkage" is recorded as a cost of goods sold. O d. An employee "borrows" small tools from the company and neglects to return them; the cost is reported as a miscellaneous operating expense. et ered 2 out of 2.0 ag question A CPA must sign the preparer's declaration on a federal income tax return O a. Only when the CPA prepares a tax return for compensation, O b. Oc Only when the CPA can declare that a tax is based on information of which the CPA has personal knowledge. Whenever the CPA prepares a tax return for others. Od. Only when the return is for an individual or corporation. estion 3 yet wered ints out of 2.0 Flag question A difference of opinion concerning accounting and auditing matters relative to a particular phase of the audit arises between an i assistant auditor and the auditor responsible for the engagement. After appropriate consultation, the assistant auditor asks to be dissociated from the resolution of the matter. The audit documentation would probably be O a Silent on the matter because it is an internal matter of the auditing firm. O b. Expanded to note that the assistant auditor is completely dissociated from responsibility for the auditor's opinion. Oc Expanded to record the additional work required because disagreements of this type will require expanded substantive testing. Od. Expanded to detail the assistant auditor's position and how the difference of opinion was resolved