LSU ACCT 4235 EXAM SCRIPT 2026 FINAL
TEST QUESTIONS AND ALL CORRECT
ANSWERS
⩥ Horizontal analysis is a method that:
a. Examines financial statement numbers from period to period.
b. Examines percent changes in account balances from period to period.
c. Examines transactions from period to period.
d. None of these. Answer: b. Examines percent changes in account
balances from period to period.
⩥ In order to analyze financial statements for fraud, an auditor or fraud
examiner should consider all of the following except:
a. The types of accounts that should be included in the financial
statements.
b. The types of fraud to which the company is susceptible.
c. The nature of the company's business and industry.
d. The auditor should consider all of these. Answer: d. The auditor
should consider all of these.
⩥ When accounts payable-related liabilities are understated, the
financial statements won't balance unless purchases and inventory are:
a. Understated.
,b. Overstated.
c. It is impossible to tell.
d. Correctly stated. Answer: a. Understated.
⩥ Which of the following is a common way to perform financial
statement analysis while searching for revenue-related analytical
symptoms?
a. Look for unusual changes in revenue-related account balances from
period to period (trends).
b. Look for unusual changes in revenue-related relationships from period
to period.
c. Look for unusual changes in the cost of goods sold account from
period to period.
d. Both look for unusual changes in revenue-related account balances
from period to period (trends) and look for unusual changes in revenue-
related relationships from period to period are common ways to perform
within-statement analysis while searching for revenue-related analytical
symptoms.
e. All of these are common ways to perform financial statement analysis
while searching for revenue-related analytical symptoms. Answer: d.
Both look for unusual changes in revenue-related account balances from
period to period (trends) and look for unusual changes in revenue-related
relationships from period to period are common ways to perform within-
statement analysis while searching for revenue-related analytical
symptoms.
,⩥ Why might a company want to understate net income?
a. To increase profits.
b. To gain consumer confidence.
c. To pay less taxes.
d. To increase stock price. Answer: c. To pay less taxes.
⩥ Which financial ratio is not useful in detecting revenue-related fraud?
a. Gross profit margin ratio.
b. Accounts receivable turnover ratio.
c. Asset turnover ratio.
d. All of these are useful revenue-related fraud detection ratios. Answer:
d. All of these are useful revenue-related fraud detection ratios.
⩥ When examining whether a company has underrecorded accounts
payable, each of the following ratios is helpful except:
a. Acid-test ratio.
b. Current ratio.
c. Accounts payable/Cost of goods sold.
d. Unearned revenue/Accounts payable.
e. Accounts payable/Purchases. Answer: d. Unearned revenue/Accounts
payable.
⩥ Recording fictitious receivables will usually result in a(n):
, a. Sales return percentage that remains constant.
b. Increased sales discount percentage.
c. Increase in accounts receivable turnover.
d. Increase in the number of days in receivables. Answer: d. Increase in
the number of days in receivables.
⩥ Most financial statement frauds occur in smaller organizations with
simple management structures, rather than in large, historically
profitable organizations. This is because:
a. It is easier to implement good internal controls in a small
organization.
b. Smaller organizations do not have investors.
c. Management fraud is more difficult to commit when there is a more
formal organizational structure of management.
d. People in large organizations are more honest. Answer: c.
Management fraud is more difficult to commit when there is a more
formal organizational structure of management.
⩥ Generally accepted accounting practices require contingent liabilities
to be recorded as liabilities on the balance sheet if the likelihood of loss
or payment is:
a. Reasonably possible.
b. Remote.
c. Probable.
TEST QUESTIONS AND ALL CORRECT
ANSWERS
⩥ Horizontal analysis is a method that:
a. Examines financial statement numbers from period to period.
b. Examines percent changes in account balances from period to period.
c. Examines transactions from period to period.
d. None of these. Answer: b. Examines percent changes in account
balances from period to period.
⩥ In order to analyze financial statements for fraud, an auditor or fraud
examiner should consider all of the following except:
a. The types of accounts that should be included in the financial
statements.
b. The types of fraud to which the company is susceptible.
c. The nature of the company's business and industry.
d. The auditor should consider all of these. Answer: d. The auditor
should consider all of these.
⩥ When accounts payable-related liabilities are understated, the
financial statements won't balance unless purchases and inventory are:
a. Understated.
,b. Overstated.
c. It is impossible to tell.
d. Correctly stated. Answer: a. Understated.
⩥ Which of the following is a common way to perform financial
statement analysis while searching for revenue-related analytical
symptoms?
a. Look for unusual changes in revenue-related account balances from
period to period (trends).
b. Look for unusual changes in revenue-related relationships from period
to period.
c. Look for unusual changes in the cost of goods sold account from
period to period.
d. Both look for unusual changes in revenue-related account balances
from period to period (trends) and look for unusual changes in revenue-
related relationships from period to period are common ways to perform
within-statement analysis while searching for revenue-related analytical
symptoms.
e. All of these are common ways to perform financial statement analysis
while searching for revenue-related analytical symptoms. Answer: d.
Both look for unusual changes in revenue-related account balances from
period to period (trends) and look for unusual changes in revenue-related
relationships from period to period are common ways to perform within-
statement analysis while searching for revenue-related analytical
symptoms.
,⩥ Why might a company want to understate net income?
a. To increase profits.
b. To gain consumer confidence.
c. To pay less taxes.
d. To increase stock price. Answer: c. To pay less taxes.
⩥ Which financial ratio is not useful in detecting revenue-related fraud?
a. Gross profit margin ratio.
b. Accounts receivable turnover ratio.
c. Asset turnover ratio.
d. All of these are useful revenue-related fraud detection ratios. Answer:
d. All of these are useful revenue-related fraud detection ratios.
⩥ When examining whether a company has underrecorded accounts
payable, each of the following ratios is helpful except:
a. Acid-test ratio.
b. Current ratio.
c. Accounts payable/Cost of goods sold.
d. Unearned revenue/Accounts payable.
e. Accounts payable/Purchases. Answer: d. Unearned revenue/Accounts
payable.
⩥ Recording fictitious receivables will usually result in a(n):
, a. Sales return percentage that remains constant.
b. Increased sales discount percentage.
c. Increase in accounts receivable turnover.
d. Increase in the number of days in receivables. Answer: d. Increase in
the number of days in receivables.
⩥ Most financial statement frauds occur in smaller organizations with
simple management structures, rather than in large, historically
profitable organizations. This is because:
a. It is easier to implement good internal controls in a small
organization.
b. Smaller organizations do not have investors.
c. Management fraud is more difficult to commit when there is a more
formal organizational structure of management.
d. People in large organizations are more honest. Answer: c.
Management fraud is more difficult to commit when there is a more
formal organizational structure of management.
⩥ Generally accepted accounting practices require contingent liabilities
to be recorded as liabilities on the balance sheet if the likelihood of loss
or payment is:
a. Reasonably possible.
b. Remote.
c. Probable.
