Chapter 1
Critical Thinking Q&A
Anthony and Cleopatra are lying dead on the floor in a villa. Nearby on the floor is a broken
bowl. There is no mark on either of their bodies and they were not poisoned. With this
information, determine how they died.
Review Questions & Answers
1-1 Define fraud and identify a potentially fraudulent situation.
Answer: Fraud is an intentional deception, whether by omission or co-mission,
that causes its victim to suffer an economic loss and/or the perpetrator to realize a
1-2 Differentiate between fraud and abuse.
Answer: Although both fraud and abuse involve an intentional deception that
1-3 Describe the services that a forensic accountant might provide related to a marital
dispute.
Answer: Forensic accountants may assist attorneys with assembling the financial
1-4 Explain the differences between an audit, fraud examination, and forensic
accounting engagement.
Answer: Audits, fraud examinations, and forensic accounting engagements have six
major differences:
1. Timing – Audits are conducted on a regular recurring basis while a fraud
examination is nonrecurring and is only conducted on sufficient predication. A
1-5 Explain the theory of the fraud triangle.
Answer: The fraud triangle provides an explanation for the conditions necessary
1-6 List the legal elements of fraud.
Answer: Under common law, fraud includes four essential elements:
1. A material false statement
1-7 Identify common fraud schemes.
Answer: Common fraud schemes include asset misappropriation, corruption, and
1-8 Give examples of non-fraud forensic and litigation advisory engagements.
Answer: Engagements may be criminal, civil or administrative cases that involve
1-9 Describe the fraud examiner/forensic accountant’s approach to investigations.
1-10 Explain fraud examination methodology.
Answer: Fraud examination involves obtaining documentary evidence,