1) A company should develop a system of internal controls that provides absolute
assurance that assets are protected and financial statements are fairly presented.
2) Output controls address how to monitor waste and how to identify who is responsible
for data accuracy, report distribution, and end-user controls.
3) Risk and return are inversely related.
4) In litigation advisory services, accountants use their knowledge, skills, abilities,
experience, training, and education to support legal actions.
5) In a fraud examination, evidence is usually gathered in a manner that moves from the
specific to the general.
6) Kickbacks are undisclosed payments made by vendors to employees of purchasing
companies.
7) Financial statement frauds can be broken down into five distinct categories:
concealed liabilities and expenses, fictitious revenues, improper asset valuations,
improper disclosures, and timing differences.
8) Reporting practices within certain industries may not deviate from generally
accepted accounting principles as a matter of fair and clear presentation.
9) To measure and analyze financial transactions, a common standard is necessary. In
our society, that common denominator is money
10) Benfords Law can be used as an indicator of potential fraud.
11) Generally accepted accounting principles require that assets be carried on the
financial statements at the price established by the exchange transaction. This figure is
referred to as historical or acquisition cost.
12) To prove fraud, the investigator needs to provide evidence that the perpetrator was
involved in the act (money or other assets are missing), the concealment (there was an
attempt to hide the act and possibly the assets), and the conversion (benefits accrued to
the perpetrator).
13) The premise of the economic entity assumption is that the activity of a business
enterprise should be kept separate and distinct from its owners and other business
entities
14) The need for competent staffing in fraud and financial forensics is expected to
outpace supply:
A.at the Securities and Exchange Commission
B. at the Public Company Accounting Oversight Board
C.in private industry
D.At all of the above
15) After an invoice is vouched, a check is generated by the computer: The next step
should be:
a.Having accounts payable mail the check to the vendor
b.Having Purchasing mail the check to the vendor
c.Having the cashier mail the check to the vendor
d.Any of the above
16) Off shore banks:
a.Are illegal to do business with if you are a US citizen
b.Are used by US high net worth individuals for favorable tax treatment
c.Often are subsidiaries of US banks
d.All of the above
17) Forged endorsement of checks requires:
a.Access to the check prior to signing
b.Access to the check prior to delivery
c.Access to the check prior to making
d.None of the above
18) This type of graphic organizes information about events chronologically to
determine what has occurred:
A.Link chart
B.Association matrix
C.Timeline
D.Flow diagram
19) Which of the following is an example of invigilation:
a.The before and after behavior of a cashier
b.The pattern of behavior prior to, during, and after an event
c.The change in behavior prior to and during an employees absence
d.All of the above
20) Common violations pertaining to occupational fraud and abuse include all of the
following except:
A.asset misappropriation
B.pilferage
C.false overtime
D.All of these are common violations
21) Which of the following is an example of confirmed validity:
a.A witness offers direct evidence
b.A co-worker offers corroborating evidence of another witness
c.A pattern of theft consistently points to the defendant as the culprit
d.None of the above
22) The board of directors primary responsibility is:
A.financial reporting to meet SEC requirements
B.internal control to protect the interests of shareholders, creditors, and other
stakeholders
C.to minimize the ability of management to expropriate shareholder value through
financial statement and other forms of fraud and financial malfeasance
D.All of the above are correct answers
23) The function of a deposition EXCLUDES:
Y.Test or confirm theories and hypotheses
Z.Develop a record under oath and thereby freeze a witnesss testimony
AA.Prove the defendants guilt
BB.Move the case toward settlement or trial
24) Forensic accountants working for a law firm would most likely investigate all of the
following except:
A.uncover instances of companies cooking the books to falsely inflate company profits
B.minimize losses
C.divert large amounts of money to company managers
D.tortuous interference
25) RICO:
a.Specifically targets money laundering
b.Targets organizations that reinitiate illicit funds into the financial system
c.Targets organizations that focus on the placement of illicit funds in the money
laundering process
d.All of the above
26) The graphic 10-4 is called a(n):
A.Association matrix
B.Link chart
C.Familial chart
D.Grouping chart
27) Verbal cues to deception include all EXCEPT:
A.Changes to Speech Patterns
B.Immediate answer to interviewers questions
C.Making excuses
D.Answering with a question
28) Targeted fraud risk assessment is consistent with the PCAOBs Auditing Standard
No. 5 (AS5) which:
A.requires a top down approach
B.requires the audit team to hold a brainstorming session at the beginning of each
investigation to determine who has the ability to commit the potential fraud
C.requires the board of directors to review the internal controls of the entity when fraud
of a material amount is detected
D.requires the audit committee report directly to the independent auditor
29) The difference between a predator fraudster and an accidental one is:
a.The accidental fraudster does not seek opportunity, the predator does
b.The predator fraudster is a repeat offender; the accidental fraudster is not
c.The accidental fraudster is in need of funds; the predator fraudster is not
d.Both a and b
30) Financial statement fraud is complex because:
a.More than one account is usually affected
b.More than one person is usually involved
c.Most people do not have access to the source documents and therefore cannot detect
the fraud
d.All of the above
31) Assets hidden from easy detection are often identified by:
a.Tax returns
b.Property records
c.Divorce proceedings
d.All of the above
32) Overpayment and subsequent reimbursement will not work if:
a.Original supporting documents are cancelled
b.There is separation of duties between the payment requestor and accounts payable
c.Vouching of the payment requires the controllers approval
d.All of the above
33) Albrecht notes types of symptoms that may indicate a fraud is occurring. Which is
not such a symptom?
Y.Accounting anomalies including irregular, unusual, or missing source documents
Z.Internal control weaknesses including the lack of segregation of duties, physical
safeguards, independent checks, proper authorization of documents and records
AA.Tips and complaints from employees, customers, suppliers, family, and friends
BB.A company listing in a national business magazine of Top 100 companies to work
for
34) Financial statement fraudsters often:
a.Start as accidental fraudsters and progress to predator fraudsters
b.Rely on collusion to mask the fraud
c.Frequently go from company to company committing the same type of fraud
d.All of the above
35) Which of the following is the most likely reason that Cressey believes an employee
tries to solve a financial problem in secret?
A.because they are afraid of losing the approval of those around them
B.because they are afraid of getting arrested
C.because they worry that someone else will want part of the money they steal
D.because they are afraid they will have to go back to college
36) Who should be charged with adding a new vendor to the master file:
a.Purchasing
b.Accounts payable
c.The cashier
d.None of the above
37) Which of the following is NOT an attribute of M.I.C.E,:
a.Motive
b.Coercion
c.Ego
d.Ideology
38) Detecting fraudulent makers requires review of:
a.The bank statement
b.The cancelled checks
c.The accounting records
d.All of the above
39) Which of the following is not one of the three-pronged processes of remediation?
A.The prevention and detection of a fraud that has already occurred
B.The recovery of losses through insurance, the legal system, or other means
C.Support for the legal process as it tries to resolve the matter in the legal environment
D.The modification of operational processes, procedures, and internal controls to
minimize the chances of a similar fraud recurring
40) Auditors in identifying and assessing the risks of material financial statement fraud
should do all but which of the following?
A.Make inquiries of the board of directors, senior executives, legal counsel, and others
charged with government governance within the client organization to gather sufficient
information about the risk of the fraud
B.Communicate with legal counsel about the allegations of fraud and how they are
addressed
C.Consider all evidence gathered through analytical procedures that is considered
unusual, unexpected, or even suspiciously normal based on the financial condition and
results of the business
D.Consider evidence gathered only through the audit of internal control of financial
reporting that may suggest the existence of one or more fraud risk factors, and that
adequate and effective internal controls did not address and account for the detected
risk
41) Chain of custody is achieved in which of the following scenarios:
a.A police officer tags each unit of evidence and places it in a separate envelope
b.A detective seals each unit of evidence in a manila envelope, signs and dates the
envelope, and places it in protective custody
c.An evidence technician tags each unit of evidence in a sealed envelope, signs and
dates the envelope, and places it with the evidence locker personnel for safekeeping
d.A police officer tags each unit of evidence, places it in a secure envelope, signs and
dates the envelope, gives the envelope to evidence personnel for safekeeping and
logging of access
42) At a minimum, professional skepticism:
A.is supportive of clients claim of fraud
B.is a neutral but disciplined approach to detection and investigation
C.assumes that the management is dishonest and therefore must pull every loose thread
to find the evidence and fraud
D.assumes unquestioned loyalty by newer and younger employees
43) The defendant has an account at a local bank. As part of the trial, bank statements
showing the defendant made several large cash deposits are admitted. Which type of
evidence is this:
a.Testimony
b.Real
c.Demonstrative
d.All of the above
44) Audit committees generally have the right to all of the following except:
A.retain legal counsel, investigators, and forensic accountants
B.take testimony of employees under oath
C.retain nonauditor accountants
D.retain other professional advisors as necessary to carry out their duties
45) Inventory with a negative quantity balance may indicate:
A.Fraudulent cash receipts
B.Fraudulent cash payments
C.False shipments
D.Improper access of accounts receivable system
46) With the ________ Rule, the basis of foundation for the opinion may not be based
on junk science. Just because a person qualifies as an expert, that person cannot offer
any opinion unless that opinion is reasonably grounded in scientific fact.
Y.Frye
Z.Daubert
AA.Campbell
BB.Brislin
47) The Statement of Auditing Standards (SAS) No 1 states (select the most correct
answer):
A.management is responsible for adopting sound accounting policies and for
establishing and maintaining internal control consistent with managements assertions
embodied in the financial statements
B.management is responsible for adopting sound accounting policies which will result
in adequate protection of entrusted assets
C.management is responsible for adopting sound accounting principles which will
result in accurate and proper financial statements
D.management is responsible for adopting sound internal control policies which will
protect entity assets from reasonable loss and damage
48) The 2008 biennial ACFE Report to the Nation:
A.shows that almost half, 46.2 percent, of the frauds are detected by accident
B.shows that frauds detected or exposed by tips and accident total almost 55 percent of
the frauds discovered
C.shows that tips and internal controls are the two largest identifiers for fraudulent
activities
D.shows that fraud exposed by accident has increased in the last two years from 20
percent to approximately 25.4 percent
49) What are the different types of commercial damages?
50) What types of damages may ensue as a result of personal injury, wrongful death,
and survival actions?
51) Improper capitalization of expenses was one of the key methods financial statement
fraud allegedly used by:
Q.Enron
R.Tyco
S.Raptor
T.WorldCom
52) ________ requires an estimate of future earnings or cash flows, a sense of the
duration of those, and the derivation of an appropriate risk adjusted discount rate.
U.The discounted earnings or cash flows method (DCF)
V.Payback method
W.Accounting rate of return method
X.Book value method
53) General rules for conduction an introductory interview for potential suspect(s)
include all EXCEPT:
E.Discussing the source of the allegations
F.Seeking continuous agreement
G.Ask non-sensitive questions
H.Conduct the interview under conditions of privacy
54) The threat of ________, especially in businesses that are currency-intensive, may be
a powerful deterrent to occupational fraud and abuse.
L.jail time
M.surprise audits
N.conflicts of interest policy
O.external reviews
55) What are some of the reasons that persons often fail to identify lies?
56) Discuss the essence of organizational crime.