1-Depreciation of fixed assets fulfills which underlying principle of generally accepted accounting principles (GAAP)? A. Materiality B. Revenue recognition C. Matching D. Continuity

2-Which of the following techniques would be most appropriate for comparing the amount spent on various expenses to the total expense amount? A. Horizontal analysis B. Vertical analysis C. Reasonableness tests D. Current ratio

3-After developing a suspicion of fictitious sales, what step should be taken next? A. Consult with sales management about the sales validity. B. Contact the audit committee with your concerns. C. Consult with the customer concerning the sales. D. Consult with the employee suspected of making the sale.

4-Which of the following might be performed to detect improper recording of sales returns and allowances and discounts? A. Compare the current expense to prior and subsequent periods. B. Examine customer return activity by looking for an unusual amount of returns at year-end by a certain dollar threshold. C. Confirm accounts receivable balances by accounts receivable personnel. D. Review sales invoices and make sure any discounts are not recorded in the contra-sales account.

5-As part of an engagement, year-end sales must be confirmed. All confirmations have been returned; however, a significant number of the responses indicate that a sale did not occur even though the customer claims to have possession of the goods. Which of the following fictitious revenue schemes best describes this situation? A. Fabricated sales B. Conditional sales C. Inadequate provision for returns D. Sales on credit

6- When using skepticism to detect fabricated revenues, which of the following scenarios might require further investigation? A. Managements ability to answer questions related to inconspicuous transactions or situations B. Revenues increasing at rates beyond those of competitors C. Drastic decrease in the gross margin ratio D. Customer accounts that have not aged