Question 1

How does horizontal analysis of financial statements help forensic accountants in their investigations?

Accepted Answer

A)  It compares key financial statement items over time to identify changes. 
B)  It uses Dupont model to calculate and compare the return on equity. 
C)  It helps forensic accountants in identifying fraudulent journal entries. 
D)  It allows the comparison of financial statements regardless of firm size. 
A)  It compares key financial statement items over time to identify changes. 
B)  It uses Dupont model to calculate and compare the return on equity. 
C)  It helps forensic accountants in identifying fraudulent journal entries. 
D)  It allows the comparison of financial statements regardless of firm size. D

Question 2

Red Ram,Corp.suspected that the revenues of the company are being overstated.Which of the following conditions can confirm the reasonableness of this suspicion?

Accepted Answer

A)  The competition faced by the company increased due to the entry of a new competitor in the market. 
B)  The labor-force doubled over the previous year resulting in higher salaries and wages cost. 
C)  The expenses of the company increased by 150% as compared to the previous year. 
D)  The finance head has to show high turnover in order to avail a loan for the company's next project. 
A)  The competition faced by the company increased due to the entry of a new competitor in the market. 
B)  The labor-force doubled over the previous year resulting in higher salaries and wages cost. 
C)  The expenses of the company increased by 150% as compared to the previous year. 
D)  The finance head has to show high turnover in order to avail a loan for the company's next project. D

Question 3

Stealing cash revenue after it has been recorded in the accounting system is called cash larceny.

Accepted Answer

A) True 
 B)False  True

Question 4

What are the two alternative dispute resolution strategies which are available?

Accepted Answer

Alternative dispute resolution (ADR)is a

Question 5

Fraud is not an accounting problem - it is a social phenomenon.Explain.

Accepted Answer

Forensic accounting is rooted in law and

Question 6

Which of the following journal entries is most likely a fraudulent journal entry?

Accepted Answer

A)  an entry involving debit to Accounts Receivable and credit to Sales Revenue 
B)  an adjusting entry involving debit to Sales and credit to Loans to Employees 
C)  an entry involving debit to Cash and credit to Notes Receivable 
D)  an adjusting entry involving debit to Depreciation Expense and credit to Furniture 
A)  an entry involving debit to Accounts Receivable and credit to Sales Revenue 
B)  an adjusting entry involving debit to Sales and credit to Loans to Employees 
C)  an entry involving debit to Cash and credit to Notes Receivable 
D)  an adjusting entry involving debit to Depreciation Expense and credit to Furniture

Question 7

The internal auditor of Trinity,Inc.suspected that the books of accounts did not show a true and fair value of the business.On his advice,the management of the company appointed Ravenwood to investigate into the matter.Ravenwood found that the suspicions of the internal auditor were reasonable.He created a fraud hypothesis and tested and refined the hypothesis via financial statement analysis and journal entry analysis.Which of the following should be Ravenwood's immediate next step?

Accepted Answer

A)  Present recommendations for resolution and remediation of fraudulent activities. 
B)  Draw conclusions and communicate results of the analysis. 
C)  Test and refine the hypothesis via interactive evidence gathering. 
D)  Determine misappropriations if any and the specific scheme employed. 
A)  Present recommendations for resolution and remediation of fraudulent activities. 
B)  Draw conclusions and communicate results of the analysis. 
C)  Test and refine the hypothesis via interactive evidence gathering. 
D)  Determine misappropriations if any and the specific scheme employed.

Question 8

The interview sequence should always start with possible co-conspirators.

Accepted Answer

A) True 
 B)False

Question 9

A hypothesis is simply a statement of fact.

Accepted Answer

A) True 
 B)False

Question 10

Under the accrual method of accounting,income is accounted for (recognized)when earned.

Accepted Answer

A) True 
 B)False

Question 11

John Ambre has just accepted a forensic investigative engagement.Which of the following should be the first step to be taken by John?

Accepted Answer

A)  Create a fraud hypothesis. 
B)  Confirm the reasonableness of the suspicions of fraud. 
C)  Conduct interviews and gather relevant data and evidence. 
D)  Test and refine the fraud hypothesis via financial statements analysis. 
A)  Create a fraud hypothesis. 
B)  Confirm the reasonableness of the suspicions of fraud. 
C)  Conduct interviews and gather relevant data and evidence. 
D)  Test and refine the fraud hypothesis via financial statements analysis.

Question 12

Diverting proceeds of business loans for personal use is known as unauthorized disbursements.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is an example of false credits/discounts?

Accepted Answer

A)  Bjorn issued many sales invoices in the name of "Power Top Agency." However, no such agency existed, and the invoices were raised for overstating the revenue of the company. 
B)  Russell recorded a sale of $10,000 as sale of $9,000 and $1,000 as sales discount. However, no such discount was provided to the customer. 
C)  Shun altered a few adjusting entries in the company's cash books to conceal $4,000 that he had removed from the cash register. 
D)  Armin is given a reimbursement for the medical expenses incurred by her and her family. She inflated her hospital bills to the extent of $1,500 to obtain a higher amount from the company. 
A)  Bjorn issued many sales invoices in the name of "Power Top Agency." However, no such agency existed, and the invoices were raised for overstating the revenue of the company. 
B)  Russell recorded a sale of $10,000 as sale of $9,000 and $1,000 as sales discount. However, no such discount was provided to the customer. 
C)  Shun altered a few adjusting entries in the company's cash books to conceal $4,000 that he had removed from the cash register. 
D)  Armin is given a reimbursement for the medical expenses incurred by her and her family. She inflated her hospital bills to the extent of $1,500 to obtain a higher amount from the company.

Question 14

Ariel,the CFO of Zaria,Corp.,suspects that the profits of the company are being overstated.Ariel suspects that someone from the mid-level management is behind this.The bonus of the mid-level managers is directly linked to the growth of net profit.The mid-level managers have received no bonus since three years as the reported profit of Zaria has been declining.The books of accounts are only accessible to Ariel.Which of the following elements of the fraud triangle is missing in this case?

Accepted Answer

A)  need 
B)  rationalization 
C)  opportunity 
D)  integrity 
A)  need 
B)  rationalization 
C)  opportunity 
D)  integrity

Question 15

Journal entries can potentially undermine the validity of financial statements and the financial reporting process.

Accepted Answer

A) True 
 B)False

Question 16

Shiny Toys had failed to meet the projected revenues for the third year in a row.Yin,the owner,suspects Ginny,his long-time attendant,of skimming cash from the cash register with possible assistance from Aton,the cashier.Ginny is the only person apart from Yin and Anton who has the key to the shop.Rita,who comes to sweep the shop every morning,had seen Ginny hover around the cash register when Aton was at lunch.Yin enlists the help of a forensic accountant to investigate the possibility of a fraud.Which of the following statements are true?

Accepted Answer

A)  Rita will be considered a neutral third party. 
B)  Ginny will be considered a suspected co-conspirators. 
C)  Yin will be considered the target. 
D)  Aton will be considered a corroborative witness. 
A)  Rita will be considered a neutral third party. 
B)  Ginny will be considered a suspected co-conspirators. 
C)  Yin will be considered the target. 
D)  Aton will be considered a corroborative witness.

Question 17

Financial statements analysis may reveal unexpected relationships or the absence of expected relationships.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is a characteristic of fraudulent journal entries?

Accepted Answer

A)  These contain exact numbers or inconsistent ending numbers. 
B)  These are generally recorded at the beginning of the period. 
C)  These are made to regularly used accounts. 
D)  These are applied to intercompany or related parties. 
A)  These contain exact numbers or inconsistent ending numbers. 
B)  These are generally recorded at the beginning of the period. 
C)  These are made to regularly used accounts. 
D)  These are applied to intercompany or related parties.

Question 19

Which of the following is a rate of interest,prescribed by the applicable state (or federal)statute,that is applied to a determined amount of economic loss?

Accepted Answer

A)  federal rate 
B)  economic rate 
C)  statutory rate 
D)  penal rate 
A)  federal rate 
B)  economic rate 
C)  statutory rate 
D)  penal rate

Question 20

The rate prescribed by the applicable state (or federal)statute to be applied to a determined amount of economic loss is called a penal interest.

Accepted Answer

A) True 
 B)False

How does horizontal analysis of financial statements help forensic accountants in their investigations?

Red Ram,Corp.suspected that the revenues of the company are being overstated.Which of the following conditions can confirm the reasonableness of this suspicion?

Stealing cash revenue after it has been recorded in the accounting system is called cash larceny.

What are the two alternative dispute resolution strategies which are available?

Fraud is not an accounting problem - it is a social phenomenon.Explain.

Which of the following journal entries is most likely a fraudulent journal entry?

The interview sequence should always start with possible co-conspirators.

A hypothesis is simply a statement of fact.

Under the accrual method of accounting,income is accounted for (recognized)when earned.

John Ambre has just accepted a forensic investigative engagement.Which of the following should be the first step to be taken by John?

Diverting proceeds of business loans for personal use is known as unauthorized disbursements.

Which of the following is an example of false credits/discounts?

Journal entries can potentially undermine the validity of financial statements and the financial reporting process.

Financial statements analysis may reveal unexpected relationships or the absence of expected relationships.

Which of the following is a characteristic of fraudulent journal entries?

Which of the following is a rate of interest,prescribed by the applicable state (or federal)statute,that is applied to a determined amount of economic loss?

The rate prescribed by the applicable state (or federal)statute to be applied to a determined amount of economic loss is called a penal interest.

Introduction to the World of Forensic Accounting

The Legal Environment of Forensic Accounting

Screening and Staging Engagements

Gathering Evidence Interviews and Observations

Financial Statements Analysis Reading Between the Lines

Fraud and White-Collar Crime

Transforming Data Into Evidence

Transforming Data Into Evidence

Professional Responsibilities

Fundamentals of Business Valuation

Special Topics

Filters

Exam 7: Conducting a Fraud Investigation

How does horizontal analysis of financial statements help forensic accountants in their investigations?

Red Ram,Corp.suspected that the revenues of the company are being overstated.Which of the following conditions can confirm the reasonableness of this suspicion?

Stealing cash revenue after it has been recorded in the accounting system is called cash larceny.

What are the two alternative dispute resolution strategies which are available?

Fraud is not an accounting problem - it is a social phenomenon.Explain.

Which of the following journal entries is most likely a fraudulent journal entry?

The interview sequence should always start with possible co-conspirators.

A hypothesis is simply a statement of fact.

Under the accrual method of accounting,income is accounted for (recognized)when earned.

John Ambre has just accepted a forensic investigative engagement.Which of the following should be the first step to be taken by John?

Diverting proceeds of business loans for personal use is known as unauthorized disbursements.

Which of the following is an example of false credits/discounts?

Journal entries can potentially undermine the validity of financial statements and the financial reporting process.

Financial statements analysis may reveal unexpected relationships or the absence of expected relationships.

Which of the following is a characteristic of fraudulent journal entries?

Which of the following is a rate of interest,prescribed by the applicable state (or federal)statute,that is applied to a determined amount of economic loss?

The rate prescribed by the applicable state (or federal)statute to be applied to a determined amount of economic loss is called a penal interest.

Introduction to the World of Forensic Accounting

The Legal Environment of Forensic Accounting

Screening and Staging Engagements

Gathering Evidence Interviews and Observations

Financial Statements Analysis Reading Between the Lines

Fraud and White-Collar Crime

Transforming Data Into Evidence

Transforming Data Into Evidence

Professional Responsibilities

Fundamentals of Business Valuation

Special Topics

Filters