Shared Flashcard Set

Details

AC 534
Test 2
18
Accounting
Graduate
03/31/2008

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Cards

Term
What are 3 ways to detect fraud?
Definition
Chance, Tips/Complaints, Proactive Auditing
Term
What are the 3 parts of proactive auditing, and what does each of these parts contain?
Definition
3 parts:
1) accounting anomalies (source documents, faulty entries, ledger inaccuracies)
2) analytical anomalies (financial statements, ratios)
3) IC Weaknesses
Term
What does detection depend upon?
Definition
Existence of red flags, skill in recognizing red flags, knowledge of what to do next, willingness to do it
Term
What are 2 forms of "proactive" fraud detection?
Definition
Deductive (Laser) Methods and Inductive (Shotgun) methods
Term
What do deductive (laser) methods entail?
Definition
Understandin specific business, types of fraud that could occur, and searching for specific symptoms, deductive is general to specific (theory, hypothesis ,then gather info. to support it)
Term
What do inductive (shotgun) methods entail?
Definition
Data mining and digital analysis, large databases and search for anomalies, Benford's law, look for specific things that are unusual then look for a general theory
Term
What kind of indicators are background checks?
Definition
Leading
Term
What is the definition of analytical procedures?
Definition
The study or comparison of relationships among financial and nonfinancial data to assess reasonableness
Term
What are 3 ways to perform financial statement analysis?
Definition
Trend analysis, Common size statements (vertical and horizontal analysis), and ratio analysis
Term
What should the relationship be between operating cash flows (OCF) and NI?
Definition
They should remain fairly stable
Term
What should the relationship be between COGS and Sales, OCF and Sales?
Definition
Parallel
Term
What should be the relationship between A/R, Inventory, and Sales?
Definition
A/R and inventory should parallel sales
Term
What should the relationship be between A/P, COGS, and Inv?
Definition
A/P and COGS should parallel Inv
Term
What should the relationship be between Acc. Depr. and fixed assets?
Definition
Parallel!
Term
What should the relationship be between Allowance for Bad Debts and A/R?
Definition
Parallel
Term
What should the relationship be between Sales, Prepaid Exp. and SG&A?
Definition
Sales and prepaid expenses should parallel SG&A
Term
What is the difference between time series analysis and cross series analysis?
Definition
Time series: within the company
Cross series: comparing to other companies
Term
How do you calculate the days sales in receivables index?
Definition
[AR(Year 1)/Sales(Year 1)]/[AR(Year 0)/Sales (Year 0)]
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