WGU C254 Topic 7 Questions and

WGU C254 Topic 7 Questions and Answers Already Graded A

With asset-based financial statement frauds, assets are most often: ✔✔Overstated

Which of the following is a way to commit asset fraud?

• Overstating fixed assets
• Under-recording payroll taxes
• Over-recording contingent liabilities
• Recording sales discounts too high ✔✔Overstating fixed assets

The WorldCom fraud was primarily an example of which type of fraud? ✔✔Overstatement of asset fraud

Which of the following is not a common way in which companies overstate their assets during a merger or acquisition?

• Inappropriately use market values instead of book values.
• Improperly allocate book values to assets.
• Under-record various liabilities. ✔✔Under-record various liabilities. 1 / 2

Which of the following ratios is not useful in detecting overstatement of asset fraud?

• Individual fixed asset account balances/Total fixed assets.
• Fixed asset/Total current liabilities.
• Total deferred charges/Total assets.
• Deferred charge write-offs (amortization)/Deferred charge balance. ✔✔Fixed asset/Total

current liabilities.

Which of the following is not a common way to overstate fixed assets (property, plant, and equipment)?

• Inflated amounts are recorded in non-arm's-length purchase transactions.
• Assets are not written down to their appropriate book, market, or residual values.
• Allowance for doubtful accounts is recorded too high.
• Assets that simply do not exist are fictitiously recorded in the financial statement accounts.

✔✔Allowance for doubtful accounts is recorded too high.If the allowance for doubtful accounts is recorded too high, the company will appear less profitable than it actually is. As a result, this is not a common method used to manipulate the financial statements.

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