Which of the Following Fraudulent Activities Most Likely Could Be

question 1

Multiple Choice

Which of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal controls in the revenue cycle?

• A)Merchandise received is not promptly reconciled to the outstanding purchase order file.
• B)Obsolete items included in inventory balances are rarely reduced to the lower of cost or market value.
• C)The write-off of receivables by personnel who receive cash permits the misappropriation of cash.
• D)Fictitious transactions are recorded that cause an understatement of revenue and overstatement of receivables.

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Definitions:

Mortgage Markets

The financial markets where mortgages are originated, bought, and sold, including both primary and secondary markets.

Fannie Mae

A government-sponsored enterprise established to expand the flow of mortgage money by creating a secondary market for mortgage loans.

Money Market Instrument

Short-term financial instruments that are highly liquid and considered safe, such as treasury bills and certificates of deposit.

Preferred Stock

A class of ownership in a corporation with a fixed dividend, senior to common stock but junior to bonds in claim on assets and earnings.