Fraud & Internal Controls
Missing from the fraud triangle element list below, this element most closely relates to internal controls
Incentive/Pressure
Rationalization
What is opportunity?
Gross profit is calculated as...
What is
Net Sales
Less: Cost of Goods Sold ?
This long-lived, tangible asset should not be depreciated
What is land?
This equation calculates ____
BI+P-EI
What is CGS (cost of goods sold)?
The purchase of a new engine for a FedEx delivery van should be ___ (capitalized or expensed)
What is capitalized?
In a bank reconciliation, deposits in transit must be ___
What is added to the bank balance?
Otis Corp. has beginning inventory of $7,000, purchases of $30,000, and ending inventory of $4,000. The cost of goods sold is ___
What is $33,000 CGS?
This method of depreciation results in the same depreciation expense in each year
What is straight-line method?
(Cost - Residual)*(1/Useful Life in Years)
These terms indicate that ownership transfers to the buyer when the goods arrive at the buyer's location
What is FOB destination?
T/F: In a bank reconciliation, not sufficient funds (NSF) checks from a company's customers must be subtracted from the company's cash balance
What is true?
This fraud triangle element is the means by which the employee commits fraud, such as weak internal controls
What is opportunity?
Having up to date records of inventory at any given time is an advantage of this type of inventory system
What is perpetual?
The purpose of this process is to recognize expenses associated with related revenues in the same period, with regards to tangible, long-lived assets
What is depreciation?
What is NBV (net book value)?
Calculated as Net Sales/Average Net Fixed Assets, this ratio measures how efficiently sales are generated with a given amount of fixed assets
What is Fixed Asset Turnover?
In a bank reconciliation, an outstanding check must be ___
What is subtracted from the bank balance?
Transportation costs paid by the buyer (freight-in) to bring goods to the buyer's location should be included in this account
What is Inventory?
Net Book Value is calculated as
Cost - A/D (NOT related to market value!)
G/L on sale = SP - NBV
Under these terms, the seller recognizes revenue when the goods leave the seller's loading dock
What is FOB shipping point?
Home Cleaners, Inc. purchased a van for use in their business on July 1, 2025. Home Cleaners, Inc. made a $10,000 down payment on the van and signed a bank note for the remaining $38,000 of the purchase price. The van has an estimated useful life of 15 years and estimated residual value of $3,000. At year end on December 31, 2025, Home Cleaners should record this journal entry to account for the use of the van for the past 6 months.
What is
Dec. 31 Depreciation Expense 1,500
Accumulated Depreciation - Van 1,500
?
This type of fraud occurs when employees work together to get around internal controls
What is collusion?
These terms indicate the buyer is entitled to a 1% discount if payment is made within 10 days, otherwise the net amount is due in 30 days
What is 1/10, n/30?
On December 31, 2025, XYZ Corporation sells factory equipment for $5,000. When first purchased, XYZ paid $12,000 for the equipment, and estimated a residual value of $2,000 and a useful life of 5 years. The factory equipment has been in use for three years. Record the journal entry for the sale and related gain or loss.
What is
Dec. 31 Accumulated Depreciation 6,000
Cash 5,000
Loss on Sale 1,000
Equipment 12,000 ?
Congress passed this Act in 2002 with goal of restoring investor confidence in capital markets
What is SOX (Sarbanes-Oxley Act)?
Buying a company for more than the fair value of its net assets results in the recording of this balance sheet account
What is goodwill?