Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

UAlbany BACC 522 Sp-19 > 522 - Exam 2 > Flashcards

522 - Exam 2 Flashcards

1
Q

Ch5: Indications of Financial Statement Fraud include: (5)

A
  1. Downward trends in earnings quality and quantity (ex. 1-time transactions < retail sales)
  2. Inadequate Cash Flows for reported earnings (CF should inc./dec. w/ earnings)
  3. Overstated Inventories or Accounts Receivable (Suspicious LIFO-FIFO & ADA Valuations)
  4. Aggressive Accounting (“Forced” Rev.Rec., Depreciation, Capitalization)
  5. “Short-Termism” (Mgmt. is overly concerned with quarterly earnings guidance)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Ch5: Def: Aggressive Accounting

A

“Forced” Rev.Rec., Depreciation, Capitalization

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Ch5: Common Rev. Rec. Schemes (7)

A
  1. Sham Sales
  2. Recognition before terms of sale are completed
  3. Conditional Sales (Unlimited Right of Return)
  4. Improper Sales Cutoff
  5. Percentage of Completion (vs. Completed Contract method)
  6. Unauthorized Shipments (Channel Stuffing)
  7. Consignment Sales (No transfer of title)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Ch5: Common asset accounts to overstate (8) [acronym CANO PIPI]

A

Cash
Notes Receivable
Accounts Receivable
Oil, gas, mineral reserves

PP&E
Inventory
Patents
Investments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Ch5: Common Approaches to Overstate Assets (5) [Keyword “Approaches’ think acronym = A FIFO]

A

A (ADA) - Understated ADA (Overstates AR)
F (Fictitious) - Fictitious assets
I (Improperly)- Improperly capitalized items (should have been expensed)
F (FMV) - Inflated FMV of existing assets
O (Owned) - Assets Owned by others

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Ch5: Def: Whistle-blowing

A

Whistle-blowing - An individual with knowledge of wrongdoing informs those with the authority to remedy the wrong

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Ch5: Whistle-blowing Process (6 steps)

A
  1. Serious wrongdoing (e.g. FS Fraud)
  2. Whistle-blower observes or becomes aware of event
  3. Whistle-blower informs internal authority (e.g. Supervisor, Audit Committee)
  4. No satisfactory internal response
  5. Whistle-blower does cost/benefit analysis of external reporting
  6. Whistle-blower informs external authority
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Ch5: SOX Whistleblowing Requirements (7 [Keyword “Requirements” think “AICPA” or acronym = A[I&E]CPA-90-DoL]

A
  1. Audit Committee MUST establish whistle-blowing procedures
  2. Internal AND External whistleblowing procedures are required
  3. Complaints must be accepted, retained, & responded to
  4. Procedures must maintain confidentiality/anonymity of whistle-blower
  5. Attacking whistleblowers is prohibited (SOX: Section 806) (ex. discharging, demoting, suspending, threatening, harassing, discrimination)
  6. Whistle-blower has 90 days to inform OSHA of violations
  7. Dept. of Labor resolves disputes (If not, District Courts)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Ch5: Whistleblowers could inform the following parties (6) [ALARM B]

A 
A - Audit Committee
L - Law Enforcement (DOJ, DAs, etc.)
A - Internal AND External Auditors
R - Regulatory Agencies (e.g. SEC, PCAOB, OSHA, etc.)
M - Mgmt. (Non-involved)

B - Board of Directors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Ch5: Def: TRA

A

Targeted Risk Assessment - refines the fraud detection process by focusing the investigator’s efforts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Ch5: TRA’s - Risk of Fraud is ALWAYS greater if: (4) [O OCI]

A

Mgmt. Override (O) of IC is likely
Collusion (C) is likely
Overseas (O) operations
High-risk industry (I) (FSO’s or industries under SEC scrutiny)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Ch.7: Def: Business Judgment Rule

A

Business Judgment Rule - Protects directors from undue liability when making business decisions in good faith & in the best interests of the company & its shareholders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Ch.7: Def: CEO Duality (def. and 5 concepts)

A

CEO Duality - CEO also serves as Chairman of the Board

  • Tends to compromise shareholder interests
  • Associated w/ Inc. FS fraud
  • NOT forbidden by US rules, regulations
  • Other countries (e.g. England) promote separation
  • If exists, board should be managed & run by lead director
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Ch.7: Directors and Officers Insurance (3) [PC-DE-SV]

A

Paid for by corporation
Deductible expense for firm
Reduces shareholder value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Ch.7: Corporate Liability costs (3) [LSD]

A

Litigation expenses (Usually paid by firm)
Settlements (Usually paid by firm or D&O insurance*)
Directors RARELY pay “out of pocket”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Ch.7: Plurality vs. Majority Voting (T/F Q on exam)

A

Plurality Voting – Highest number of affirmative votes wins
- Negative & abstaining votes are ignored
- One positive vote wins
Majority Voting – Must get majority of ALL shareholder votes
- Adoption began in 2005
- 2012 - 80% of corporations use it
- But some loopholes still apply

17
Q

Ch.7: Philosophies of Bod Stock Ownership - When ownership increases: (4) (Matching Q on exam)

A
  1. Likelihood of FS fraud dec. - Reason: Provides incentive to monitor FSs & ICFR
  2. Directors are more likely to promote activities that create shareholder value - Reason: They benefit financially
  3. CEO-CFO efforts to control these directors increases
  4. Independence, objectivity, effectiveness in monitoring CEO-CFO may be compromised
18
Q

Ch.9: Gamesmanship Def. (4 keywords in blue from slideshow)

A

Keywords in blue (from slide): earnings management, profit projections , analysts’ projections, stock prices

Definition: “Unacceptable, unethical, & illegitimate earnings management, to push accounting guidelines to the limit, create the rosiest profit projections possible, to meet analysts’ projections and sustain or boost stock prices” through:

  1. Smoothing earnings
  2. Overstating restructuring charges and creating a buffer (“Rainy day fund”)
  3. Overstating revenues and assets
  4. Deferring expenses
  5. Recognizing sales before completion
19
Q

L5: Measures of Variability

A 
Min
Max
IQR (Q3-Q1)
Range (Max-Min)
SD
CV (SD/Mean)
Anderson-Darling test
Levene’s Test
20
Q

L5: Skew + or -

A 
\+ = more small numbers
- = more large numbers
21
Q

L5: Measures of Central Tendency

A

MMM

22
Q

L5: IQR

A

IQR = Q3-Q1

Spread of middle 50% of data

23
Q

Excel Limitations

A

Max Rows = 2^20
Max Cols = 2^14
Max Mem: 2GB
Difficult to tell calc values from entered values

Import Limitation: Data is likely incomplete if it has exactly 16,384 records (max cols) , caused by automated imports that attempt to follow Excel’s limits

24
Q

COUNTIFS Syntax

A

=COUNTIFS (range1, criteria1, [range2], [criteria2], …)

range1 - The first range to evaulate.
criteria1 - The criteria to use on range1.
range2 - [optional] The second range to evaluate.
criteria2 - [optional] The criteria to use on range2.

25
Q

SUMIFS Syntax

A

SUMIFS(sum_range, criteria_range1, criteria1, [criteria_range2, criteria2], …)

Purpose - Sum cells that match multiple criteria
Return value - The sum of the cells that meet all criteria
Arguments:
sum_range - The range to be summed.
range1 - The first range to evaulate.
criteria1 - The criteria to use on range1.
range2 - [optional] The second range to evaluate.
criteria2 - [optional] The criteria to use on range2.

Notes:
Non-numeric criteria must be enclosed in double quotes, but numeric criteria does not need quotes EXCEPT with operators (i.e. “>32”)

26
Q

SUMIF vs. SUMIFS

A

Order of arguments is different

Sum_range is the first argument in SUMIFS, but the third argument in SUMIF

27
Q

SUMIF

A

Syntax =SUMIF (range, criteria, [sum_range])

Purpose - Sum numbers in a range that meet supplied criteria
Return value - The sum of values supplied

Arguments:
range - The range of cells that you want to apply the criteria against.
criteria - The criteria used to determine which cells to add.
sum_range - [optional] The cells to add together. If sum_range is omitted, the cells in range are added together instead.

Notes:
Text criteria, or criteria that includes math symbols, must be enclosed in double quotation marks (“).
Numeric criteria can be supplied without quotation marks

28
Q

L4: Data Profiles Verify:

A
  1. Completeness (Reconcile total of all values to known total)
  2. AUDIT: Completeness Assertion
  3. Normal Ranges (Ex. Low Value Invoices (< $50) ≈ 15% of total)
  4. Too many Zero invoices (Suspicious or wasteful)
  5. Credit Memos (Corrections ≈ 3% of total; Low (< 3%) = Not enough corrections being made; High (> 3%) = Why so many corrections?)
  6. Negative Amounts (Credits = deductions from invoiced amounts; shouldn’t exist for Inventory, Payroll, Mileage Readings, etc.)
29
Q

L4: Data Histogram (Frequency Graph)

A
  1. Graphic vs. Tabular (Data Profile)
  2. Shows distribution of numerical data
  3. SKEW
  4. Shows the number of items within a given range
  5. Upper and lower boundaries for each range must be specified

UAlbany BACC 522 Sp-19 (7 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions