Question : 12.2   Multiple-Choice Questions 1) The direct method of proof always preferable : 1222555

 

12.2   Multiple-Choice Questions

1) The direct method of proof is always preferable to the indirect method because it

A) provides a lesser level of uncertainty.

B) is generally more dissuasive.

C) is easier to refute.

D) uses more circumstantial evidence.

2) Which of the following statements is true of the methods of proof?

A) Unlike the indirect method of proof, the direct method of proof is based on inference rather than personal knowledge.

B) The indirect method of proof provides a lesser level of uncertainty compared to the direct method of proof.

C) Unlike the indirect method of proof, the direct method of proof is built on circumstantial evidence.

D) The indirect method of proof is easier to refute compared to the direct method of proof.

3) The indirect method of proof ________ compared to the direct method of proof.

A) provides a greater level of certainty

B) is harder to refute in court

C) is generally less persuasive

D) is more easily understood

4) Although both paper and witness testimony can serve as evidence, paper is the more critical of the two in a direct method case because a witness

A) provides a greater level of objectivity.

B) can be self-serving.

C) cannot change his/her mind.

D) is more persuasive.

5) Which of the following statements is true of the percentage markup method of indirect proof?

A) It extends the concept of application of funds to include the accumulation of assets and employs a balance sheet formula of sales minus costs equal net worth.

B) It is generally limited to wholesale establishments rather than retail establishments.

C) It requires reliable information regarding opening and closing inventories and the appropriate gross margin.

D) It focuses exclusively on expenditures made in bank deposits.

6) ________ of indirect proof is generally limited to retail establishments rather than illegal businesses.

A) Cash method

B) Gross margin method

C) Expenditures method

D) Bank deposits method

7) Which of the following statements is true of indirect methods of proof?

A) The cash method, which has limited application, is feasible only when the number of units and price can be determined easily.

B) When there is an accumulation of assets without a corresponding source of funds the unit and volume method is most commonly used.

C) The bank deposit method is used when the subject (individual or business) consumes income rather than accumulates assets.

D) Successful use of the net worth method requires a complete reconstruction of the subject’s financial history, including all assets, liabilities, expenditures, and sources of funds.

8) Bezone Corp. is being alleged of tax fraud for the financial year 2015-2016. The ending net worth for the period was $2.285m and beginning net worth was $1.595m. Expenditures (consumption) during the period amounted to $0.725m. The reported income in Bezone’s tax return amounted to $0.69. Other legitimate sources of funds in the tax return reported an income of $0.31. Calculate the inferred unreported income using the net worth method of indirect proof.

A) $0

B) $0.725m

C) $0.415m

D) $0.075m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9) Bezone Corp. is being alleged of tax fraud for the financial year 2015-2016. The ending net worth for the period was $2.285m and beginning net worth was $1.595m. Expenditures (consumption) during the period amounted to $0.725m. The reported income in Bezone’s tax return amounted to $0.69. Other legitimate sources of funds in the tax return reported an income of $0.31. Which of the following statements is true of Bezone?

A) Bezone has committed tax fraud as its reported other income is less than the expenditures during the period.

B) Bezone has not committed tax fraud as its reported income and expenditures during the period are the same.

C) Bezone has committed tax fraud even though its reported income and change in net worth during the period are the same.

D) Bezone has committed tax fraud as its reported income is less than the expenditures during the period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10) Which of the following statements best defines economic damages in civil litigation?

A) It refers to the economic loss suffered by businesses as a result of lack of knowledge or ignorance of law.

B) It refers to the intentional nonperformance of duties which results in economic losses to the claimant.

C) It refers to the monetary compensation that is awarded in civil litigation against losses.

D) It refers to the economic loss suffered by businesses as a result of the negligence of a defendant.