Inventory And Other Assets Flashcards
Which of the following is NOT a method that is used to conceal inventory shrinkage?
A. Placing empty boxes on warehouse shelves
B. Writing off stolen inventory as scrap
C. Selling merchandise without recording the sale
D. Performing a forced reconciliation of the inventory records
C. Selling merchandise without recording the sale
Both falsely increasing the perpetual inventory balance and failing to reconcile inventory records are ways a fraudster might conceal inventory shrinkage.
A. True
B. False
False
Sales and cost of goods sold almost always move together unless there have been changes to purchase prices, quantities purchased, or quality of products being purchased.
A. True
B. False
True
___________________ is the unaccounted-for reduction in a company’s inventory that results from error or theft.
A. Defalcation
B. Shrinkage
C. Depreciation
D. Shortness
B. Shrinkage
The warehouse supervisor at South Corp. has stolen $50,000 worth of inventory over the last year and has made no effort to conceal the theft in any of the inventory records. During an analytical review of the financial statements, which of the following red flags might South Corp.’s auditors find that would indicate the inventory theft?
A. The percentage change in sales was significantly higher than the percentage change in cost of goods sold.
B. The percentage change in cost of goods sold was significantly higher than the percentage change in sales.
C. Sales and cost of goods sold moved together.
D. None of the above possible outcomes would indicate inventory theft.
Submit
B. The percentage change in cost of goods sold was significantly higher than the percentage change in sales.
Which of the following is a method that would help prevent the theft of company inventory?
A. Restricting inventory access to authorized personnel
B. Separating responsibility for incoming shipments and completing the inventory requisition form
C. Using prenumbered shipping documents, perpetual inventory records, and inventory receiving reports
D. All of the above
D. All of the above
Jackson is a receiving clerk at a warehouse. His job is to count the number of units in incoming shipments, record the amounts in receiving reports, and forward copies of the reports to the accounts payable department. One day, Jackson received a box of twenty laptop computers at the warehouse. His wife’s computer recently broke, so he stole one of the computers from the box. To conceal his scheme, Jackson sent a receiving report to accounts payable that twenty computers arrived, but he only recorded 19 on the copy of the receiving report used for the inventory records. What type of scheme did Jackson commit?
A. A purchasing and receiving scheme
B. A noncash larceny scheme
C. An asset transfer scheme
D. None of the above
A. A purchasing and receiving scheme
Unauthorized personal use of a company vehicle constitutes misuse of a noncash asset, a form of asset misappropriation.
A. True
B. False
True
Which of the following is considered misuse of a noncash asset?
A. Lisa is a paralegal, but she also works as a personal fitness trainer on the weekends. She stays after work at the law office one day to print invoices for her personal training clients.
B. Olivia had access to a company vehicle while working in a different city. She used the vehicle to run some personal errands after she was finished with work for the day, but she provided false written and oral information regarding her use of the vehicle.
C. Mike works for a lawn care service. One of his customers lives on his street. After Mike finishes mowing the customer’s lawn, he uses his employer’s lawnmower to mow his own lawn.
D. All of the above are considered misuses of noncash assets.
Submit
D. All of the above are considered misuses of noncash assets.
The person who is responsible for shipping inventory should also be responsible for converting inventory to scrap.
A. True
B. False
False
Which of the following is NOT a method that a fraudster might use to conceal inventory shrinkage?
A. Altering the perpetual inventory records to decrease the balance
B. Physical padding of inventory
C. Falsely increasing the perpetual inventory figure
D. Writing off stolen inventory as scrap
C. Falsely increasing the perpetual inventory figure
An analytical review reveals that Rollins Company’s cost of goods sold increased by 80% last year. Its sales, however, only increased by 40%. What might this discrepancy indicate?
A. The quantity of items purchased decreased.
B. There were more sales returns this year than in the prior year.
C. There were fewer sales this year versus last year.
D. Inventory has been depleted by theft.
D. Inventory has been depleted by theft.
Jessica worked at the cash register of a department store. Her friend Molly came to the store one day to help Jessica steal a watch she wanted but could not afford. Molly took the watch to Jessica’s register and, instead of charging Molly for it, Jessica performed a No-Sale transaction on the register. Molly pretended to give Jessica cash to make it look like she was paying for the watch. Molly then took the watch out of the store and later gave it to Jessica. What type of scheme did Molly and Jessica commit?
A. A false sale scheme
B. A skimming scheme
C. A register disbursement scheme
D. A purchasing and receiving scheme
Submit
A. A false sale scheme
Of the following, who should conduct physical observations of a company’s inventory to MOST EFFECTIVELY prevent inventory theft?
A. An internal auditor
B. The purchasing agent
C. The purchasing supervisor
D. Warehouse personnel
A. An internal auditor
