Quiz 1: Introduction to the Problem of Fictitious Financial Reporting
Business
Q 1Q 1
Answer the following question with T for true or F for false for more practice with key terms and concepts from this chapter.
In civil fraud, the burden of proof is higher than in criminal fraud.
Free
True False
Fraud
Fraud refers to an illegal practice undertaken with an intention to mislead the truth, obtain money, personal gain, or receive undue advantage.
The requirement of burden of proof is generally higher in criminal fraud cases than in civil fraud cases. Hence, the given statement is "False".
Therefore, the correct answer is
.
Q 2Q 2
Answer the following question with T for true or F for false for more practice with key terms and concepts from this chapter.
By 2001, very little of top management compensation was in the form of stock options.
Free
True False
Stock Options
In the year 2001, when top management compensation was considered, most of them (80%)were stock options.
Answer: False
Justification: As per explanation given above, 80% of the top management compensation was in the form of stocks. Hence, the given statement is False.
Hence, the correct answer is
.
Q 3Q 3
Answer the following question with T for true or F for false for more practice with key terms and concepts from this chapter.
To deal with the turmoil caused by the various accounting scandals, the SOX Act was passed in 1999.
Free
True False
The Sarbanes Oxley Act (SOX)
Sarbanes Oxley Act was set up in the year 2002. The main objective of this act is "to develop corporate responsibility, financial disclosures, corporate conflicts and accounting fraud". "Public Company Accounting Oversight Board" (PCAOB)was formed to supervise the audit profession of the public companies. More than 100 years, auditing profession performed in a self ruling manner. PCAOB has replaced the Public Oversight Board (POB).
The Sarbanes Oxley Act was conceded in the year of "2002". Hence, this statement is incorrect.
Therefore, the correct answer is
.
Q 4Q 4
Answer the following question with T for true or F for false for more practice with key terms and concepts from this chapter.
The PCAOB ended the self-regulation of the external auditing profession.
Free
True False
Q 5Q 5
Answer the following question with T for true or F for false for more practice with key terms and concepts from this chapter.
The financial frauds at the turn of the millennium were limited to just a couple of varieties of sham reporting.
Free
True False
Q 6Q 6
Answer the following question with T for true or F for false for more practice with key terms and concepts from this chapter.
The National Crisis Inquiry Report (2011) concluded that the financial crisis was unavoidable.
Free
True False
Q 7Q 7
Answer the following question with T for true or F for false for more practice with key terms and concepts from this chapter.
According to the Financial Crisis Inquiry Report , the lack of transparency in the balance sheets of major financial institutions was one of the causes of the financial crisis of 2008.
Free
True False
Q 8Q 8
Answer the following question with T for true or F for false for more practice with key terms and concepts from this chapter.
The Glass-Stegall Act revised and increased the power of the SEC.
Free
True False
Q 9Q 9
Answer the following question with T for true or F for false for more practice with key terms and concepts from this chapter.
When companies settle a charge of civil fraud, they usually accept the SEC's findings.
Free
True False
Q 10Q 10
Answer the following question with T for true or F for false for more practice with key terms and concepts from this chapter.
Most countries in Europe do not have stringent laws to protect whistleblowers.
Free
True False
Q 11Q 11
Fill in the blank with information and concepts from this chapter.
One of the most contentious parts of the SOX legislation was Section _________, which addressed internal controls.
Free
Short Answer
Q 12Q 12
Fill in the blank with information and concepts from this chapter.
It was problematic for WorldCom that its internal _________ department reported to the CFO, Scott Sullivan, who was the major originator of the company's accounting fraud.
Free
Short Answer
Q 13Q 13
Fill in the blank with information and concepts from this chapter.
In 1999, the Glass-Steagall Act was repealed and the Financial Services Modernization Act was passed to deregulate the _________ sector in the United States.
Free
Short Answer
Q 14Q 14
Fill in the blank with information and concepts from this chapter.
According to Lawrence and Wells, the three elements necessary to prove fraud are "a material false statement made with intent to deceive, a victim's reliance on the statement and _________."
Free
Short Answer
Q 15Q 15
Fill in the blank with information and concepts from this chapter.
In the year _________, the Dodd-Frank Act established the Financial Stability Oversight Council (FSOC) as well as the Consumer Financial Protection Bureau (CFPB) in response to the financial crisis of 2008.
Free
Short Answer
Q 16Q 16
Fill in the blank with information and concepts from this chapter.
For the last few years, the FBI has had special _________ working in place at the SEC.
Free
Short Answer
Q 17Q 17
Fill in the blank with information and concepts from this chapter.
CEO compensation in 2012 was _________ than CEO compensation in 2002.
Free
Short Answer
Q 18Q 18
Fill in the blank with information and concepts from this chapter.
One of the reforms of the Dodd-Frank Act is the requirement that has become known as the _________ Rule, which calls for a reduction of risky investments on the balance sheets of large financial firms.
Free
Short Answer
Q 19Q 19
Fill in the blank with information and concepts from this chapter.
In this text, the company used to illustrate the failure to disclose related-party transactions is _________.
Free
Short Answer
Q 20Q 20
Fill in the blank with information and concepts from this chapter.
In 2008, countless investors held mortgage-backed securities that were backed by _________ mortgage loans.
Free
Short Answer
Q 21Q 21
Which of the following gatekeepers or gatekeeping functions was not identified by WorldCom's Bankruptcy Examiner as having failed WorldCom in some way? (a) The structure of its internal audit department.
(b) Its external auditors.
(c) The SEC.
(d) Its board of directors.
Free
Multiple Choice
Q 22Q 22
According to SEC enforcement releases, which of the following was a major reason company executives orchestrated accounting frauds at the turn of the millennium? (a) Receiving government-based subsidies.
(b) Meeting Wall Street analysts' earnings expectations.
(c) Meeting international bankers' expectations.
(d) Meeting employees' expectations.
Free
Multiple Choice
Q 23Q 23
Which of the following statements about the PCAOB is not true? (a) It was established to oversee the activities of the auditing profession.
(b) It was created by the Dodd-Frank Act.
(c) It ended 100 years of self-regulation by the auditing profession.
(d) It replaced the Public Oversight Board (POB).
Free
Multiple Choice
Q 24Q 24
Which of the following situations would not limit a director's autonomy, according to Levitt? (a) "Inside" directors who are company employees.
(b) "Outside" directors who are either friends or relatives of the company's CEO.
(c) "Outside" directors who are associated with competing businesses or had been involved in business transactions with the corporation and earned lucrative fees.
(d) "Outside" directors who do not have a stake in the company.
Free
Multiple Choice
Q 25Q 25
Which of the following is not a goal of the Dodd-Frank Act? (a) To increase the number of audit firms.
(b) To regulate financial products.
(c) To increase transparency.
(d) To protect consumers.
Free
Multiple Choice
Q 26Q 26
Which of the following is an important financial reporting consequence of Dodd-Frank? (a) Smaller public companies will be exempt from Section 404(b) of the SOX Act of 2002.
(b) Auditors of nonpublic broker-dealers will be subject to oversight by the PCAOB.
(c) Changes to asset-backed securitization practices.
(d) All of the above.
Free
Multiple Choice
Q 27Q 27
Judy, an internal auditor at Fermented Fruits, has found evidence of accounting fraud at the company. She is worried about the repercussions of reporting her firm to the SEC. You remind her that under Dodd-Frank, a whistleblower: (a) Is eligible to receive money from a $453 billion SEC fund.
(b) Is not eligible to receive a monetary award.
(c) Will likely be ignored by the SEC.
(d) Will likely be vilified by the SEC.
Free
Multiple Choice
Q 28Q 28
Which of the following might undermine the independence of a member of the board of directors at Fermented Fruits? (a) One of the outside directors works for another dried fruit company, Raining Raisins.
(b) One of the outside directors is a high school teacher.
(c) One of the outside directors is a former CEO of a law firm.
(d) One of the outside directors is an actor.
Free
Multiple Choice
Q 29Q 29
Ethical Auditors is the external auditor for Fermented Fruits. Which of the following might undermine the ability of Ethical Auditors to impartially audit Fermented Fruits? (a) Some auditors don't like dried fruit.
(b) Judy does not like the personality of the CEO of Fermented Fruits.
(c) Fermented Fruits has added nuts to its inventory.
(d) Ethical Auditors has been auditing Fermented Fruit since it went public ten years ago, and Judy has always been the managing partner on the job.
Free
Multiple Choice
Q 30Q 30
The SOX Act of 2002 introduced reforms in which of the following areas? (a) Internal control reporting requirements.
(b) The registration of hedge funds with the SEC.
(c) Changes in the practices of ratings agencies.
(d) All of the above.
Free
Multiple Choice