Practice Test Geeks(ACFE) Association of Certified Fraud Examiners Practice Test
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Financial Statement Fraud Flashcards

7 cards from real ACFE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Statement Fraud flashcards as text

  1. Which of the following best describes 'channel stuffing'?

    Answer: Shipping excess product to distributors to inflate period-end revenue

    Channel stuffing involves pushing unsold product onto distributors, often with side agreements allowing returns, to inflate reported revenues artificially.

  2. An auditor performs 'cut-off testing' primarily to detect:

    Answer: Revenue and expense transactions recorded in the wrong accounting period

    Cut-off testing verifies that transactions are recorded in the correct accounting period, a critical control against premature or delayed recognition.

  3. Which financial statement fraud motivation is described by the 'pressure' element in the fraud triangle?

    Answer: Personal financial stress or pressure to meet earnings targets

    Pressure (or incentive) is the motivating force — such as debt, bonus targets, or analyst expectations — that drives a person to commit fraud.

  4. Which PCAOB standard requires external auditors to assess the risk of material misstatement due to fraud?

    Answer: AS 2401

    PCAOB AS 2401 (Consideration of Fraud in a Financial Statement Audit) requires auditors to explicitly consider fraud risks during audit planning and execution.

  5. A company overstates goodwill by failing to record required impairment. The primary impact is:

    Answer: Overstated total assets and overstated net income

    Skipping a required impairment charge keeps goodwill inflated on the balance sheet (overstating assets) and avoids the expense that would reduce net income.

  6. Which ratio is most directly inflated by a scheme that understates cost of goods sold through inventory manipulation?

    Answer: Gross profit margin

    Understating COGS directly increases gross profit, causing the gross profit margin to appear higher than actual operating performance warrants.

  7. A whistleblower tip to the SEC alleging financial statement fraud would most likely be routed to which program?

    Answer: SEC Office of the Whistleblower under Dodd-Frank

    The SEC's Office of the Whistleblower, established by Dodd-Frank Section 922, accepts tips and awards 10–30% of sanctions exceeding $1 million to qualifying whistleblowers.