Forensic Accounting Final Exam
Terms in this set (120)
Which of the following organizations provide forensic accounting certifications?
American Institute of Certified Public Accountants (AICPA), Association of Fraud Examiners (ACFE), National Association of Certified Valuator and Analysts (NACVA).
Which of the following represents the relative importance of the three components of oral communication?
Body Language 55%, Voice Tone 35%, Words 10%
Which of the following is a primary responsibility of a testifying expert?
Assess the trier and fact to understand the evidence or to determine a fact and issue.
Which of the following is a process of flowing form a set of specific observations, fact or data to a working hypothesis and then a general conclusion?
Which of the following defines the term deductive reasoning?
Reasoning from the general to specific or from a promise to a logical conclusion.
Which of the following is the objective of an external auditor?
Purpose is to form or express an opinion as to whether the origination's financial statements, reflect its financial position on a given date and the results of its operation for a given period.
Which of the following exemplifies the role of an external auditor?
Which of the following exemplifies the role of an internal auditor?
They are the first line of defense against accounting failures within an organization. Function is to report on the adequacy of internal controls the accuracy and propriety of transactions and the level of compliance. The extent to which assets are accounted fro and safeguarded with a companies internal policies as well as external laws and regulations.
The purpose of the _ is to form and express an opinion as to whether the origination's finical statements, taken as a whole, reflect its financial position on a given date and the results of its operations for a given period.
A _ records, classifies and summarizes the financial transactions of a company.
What was the result of the amending FRCP 26(b)(4) to allow the extension of work product protection to most attorney-expert communications and to all draft expert reports?
This rule limited discovery
Which of the following is a similarity between the attorney-client privilege and work product doctrine?
Both can be extended to items prepared by non-attorneys who assist in rendering legal services.
Which of the following best defines the term attorney-client privilege?
The clients right to refuse to disclose and to prevent any other person from disclosing confidential communications between the client and the attorney.
A requisite element for establishing privilege in an attorney-client privilege includes a communication that:
-Relates to the rendering of legal service.
- Is made in confidence.
- Is made to a person the client reasonably believed was an attorney.
What is the underlying theory of privileged communication?
A legal principle that protects communications taking place within a protected relationship. Ex. Doctor-Patient
Which of the following is a legal principle that protects communications taking place within a protected relationship?
Which of the following is a drawback of the Frye test?
It is not flexible enough to address new scientific issues where general acceptance has not yet been established.
Which rule does the Daubert trilogy serve to interpret?
Which of the following three cases make up the Daubert trilogy?
1. Daubert, in G.E. Vs. Joener
2. Kumho Tire Vs. Carmichael
3. Daubert Vs. Merrell Dow Pharmaceuticals
Which of the following best describes the Daubert challenge?
A special hearing conducted before the trial judge to determine the relevance and reliability of an experts opinion.
Which of the following is a reason why research is considered valuable to forensic accountants?
Which of the following is a reason why online research requires exercise of caution and skepticism?
It can contain false and misleading information, which is inconsistent with Daubert standards and the volume of available information can be easily overwhelming and difficult to navigate, leading the researcher off track.
Which of the following is an example of secondary sources of information?
Published statistics, economic forecasts, academic publications, professional publications, law review articles, published court cases and media.
Which of the following is true of secondary research?
It involves the collection, analysis and interpretation of data that has been compiled and published by others.
Which of the following is an example of primary sources of information?
Witness interviews, on-site observations, financial data, bank records, asset protection data, organizational data, communications data, personal data.
Which of the following is a key function of a research plan?
specifically identified data to be collected and analyzed.
Which of the following is a difference between primary research and secondary research?
Primary research means data collected from original sources while secondary research means data collected that has already been compiled and published by someone else.
Which of the following are characteristics of good research?
- Starts with a clearly stated problem or question.
- Follows a specific plan of procedures that is designed to gather sufficient, relevant and reliable data.
- Is guarded by a specific problem and working hypothesis.
- Accepts certain critical assumptions that provide a foundation or framework for the analysis.
- Requires reliable methodology that facilitates the collection, analysis and interpretation of data.
Which of the following is the last step of the five step scientific process?
Which of the following is a special benefit of the scientific approach?
Provides order, reasoning and direction to an assignment. Enhances the credibility of the expert's opinions and the case of communicating those opinions.
Which of the following best describes a questioned document?
A document in its entirety or in part, is subject to question regarding its authenticity and/or origin.
Which of the following actions are specifically prohibited by the Fair Credit Reporting Act?
- Asking someone to get another persons customer information using false, fictions or fraudulent statements or using counterfeit, forged, lost or stolen documents.
- Ising false, fictions or fraudulent statements or documents to get customer information from a financial institution or directly from a customer of a financial institution.
- Using forged, counterfeit, lost or stolen documents to get customer information from a financial institution or directly from a customer of a financial institution.
_ is the use of deception by one party to obtain information from another party who would not otherwise disclose such information is often considered inappropriate and may even be illegal.
Which of the following is a primary advantage of searching public records in a forensic accounting engagement?
- The information is pubic so anyone can access it.
- Access is fast and cheap, especially when the information is available on the internet.
- The search is discreet compared to other methods of investigation.
- Results are tangible and can be replicated.
Which of the following is an example of an illegal observation?
Bank records, phone records, email records.
Which of the following is an example of a legal observation?
A car in a driveway, license plate number, location of residence or business, times and locations of meetings, a persons routine or schedule, lifestyle observations.
Which of the following statements is true of the interviewing process in a forensic accounting engagement?
It is a direct means of obtaining information and it provides immediate results.
Which of the following is a reason to schedule witness interviews in the order of probable culpability?
Allows the forensic accountant to gather as much information as possible before the target is interviewed.
Which of the following is true of the order of witness in an investigative process?
Moving from the outside in. 1. Neutral Third Parties. 2. Corrobative Witnesses. 3. Suspected Co-Conspirators 4. Target
Which of the following is true of a personal balance sheet?
They should present assets at their estimated current values and liabilities at their estimated current amounts.
Which of the following is a difference between personal financial statements and business financial statements?
Personal serve to provide information about an individuals financial condition, income profile and cash flow. Business serve to provide information about a companies financial condition, income profile and cash flow.
Which of the following is true of financial statements?
They provide a reasonable level of assurance to their users.
Which of the following is a systematic technique for categorizing words into content categories using special coding rules?
Research conducted by Churyk and Clinton (2008) identified certain "tells" or communication characteristics in the context of the management discussion and analysis section of annual reports, related to financial statement deception. Which of the following characteristics is an indicator of deception?
- Significantly fewer colons.
- Few words per sentence.
- Fewer optimistic words.
- More words related to downward direction.
- Fewer self references.
- Fewer present-tense words.
- More past-tense words.
- Fewer instances of the words note and see.
- Fewer words describing certainty.
Which of the following is a limitation?
The journal entry testing prescribed by SAS No. 99 identifies several common characteristics of fraudulent entries. Which of the following is one such characteristic?
- Made to unrelated, unusual or seldom-used accounts.
- Recorded at the end of the period or at post-closing entries with not explanation.
- Having no account number.
- Made by individuals who do not normally make journal entries.
- Applied to accounts that contain complex transactions, contain significant estimates or end-of-period adjustments, have been prone to errors in the past, have not been timely reconciled, contain inter company transactions or otherwise associated with an identified fraud risk.
- Containing round numbers or consistent ending numbers.
Which of the following does a discrepancy in cash flow reconciliation indicate?
- The cash flow statement has not been prepared currently.
- All cash transactions are not correctly reflected in the income statement and balance sheet.
Which of the following is true of the application of ratio analysis?
Provides useful information caution should be exercised in their interpretation.
Which of the following is true of Altman's Z-Score Boundaries?
Provides a prediction of bankruptcy. Also look at table for details.
Which of the following is an example of prosecutorial misconduct?
An act, especially involving an attempt to avoid required disclosure or to persuade the jury to wrongly convict a defendant or assess an unjustified punishment.
Which of the following statements is true of white-collar crime?
A crime committed by a person of respectability and high social status in the course of his occupation.
Which of the following scenarios indicate post-conviction strategies used by white-collar offenders?
Which of the following is the goal of post-conviction strategies used by offenders?
Which of the following is true of typical white-collar fraudsters?
Six Attributes: Deceit, Intent, Breach of Trust, Losses, Concealment, Outward Respectability.
Which of the following is a characteristic of a white-collar fraudster?
Very-intelligent, well educated, 36-45, white male, risk taker, commits fraud against own employer, works in collusion, employed 10+ years, senior management, finance or accounting, lacks anxiety or empathy, lack of control.
Which of the following is true of organizational misconduct?
It is defined as the misconduct performed by individuals on behalf of an organization.
According to the general theory of crime, which of the following is also necessary in addition to criminal motivation to produce a crime?
Which of the following is true of the general theory of crime?
Natural consequence of uncontrolled human desire to seek pleasure and avoid pain
Which of the following is a technique of neutralization used by offenders?
Denial of Responsibility, Denial of Injury, Denial of Victim
Which of the following statements comparing alternative dispute resolution (ADR) with litigation is true?
Mediation is less expensive and less time consuming.
Which of the following is true of arbitration?
A binding process where both sides present evidence and argue their positions to an arbitration panel (less formal than trial - focused on fact finding).
Which of the following is a difference between mediation and arbitration?
Less expense and less time consuming.
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?
A ___ is a payment back by a seller of a portion of the purchase price to a buyer to induce purchase or influence future purchases.
Which of the following is an example of false credits/discounts?
Disguise theft or revenue.
Which of the following terms describes a fraud scheme in which two conspiring companies exchange payments and services for the sole purpose of inflating revenues?
Which of the following terms describes the act of stealing cash revenue after it has been recorded in the accounting system?
Which of the following scenarios involves skimming?
An artful plot or plan, usually to deceive others is called a
Which of the following best describes reduction as a key form of influence while transcribing an interview?
Determining how the information is obtained in the interview is reduced into words.
Which of the following is true with regard to identifying themes while transcribing interviews?
Based on facts, experiences, behaviors, view, and any other factors.
Which of the following describes the process of coding with regard to qualitative research?
Interview notes are transcribed in order and then rearranged into categories based on themes.
Which of the following is true of the process of transcribing an interview?
A valuable tool that can serve a variety of purposes, involves the concurrent activities of data collection, analysis and interpretation.
Which of the following is true of timelines?
Summary of events arranged in chronological order along a line. Suitable material includes witness statements, organizational records, and communications.
Which of the following is a drawback of link analysis?
___ describes the tracing of the incremental effects of some initial stimulus.
Which of the following is a difference between relationship charts and timelines?
Relationship charts map relationships and timelines map sequence of events.
Which of the following is an advantage of data analysis tools?
Widely applicable, multifunctional and easy to apply, customize and understand.
An organized collection of data that has been created for a specific purpose is called a
Which of the following is a reason why the size of the data set is important to apply to Bendford's Law?
It requires a large data set. It is more difficult to identify significant deviations from Benford's profile in small data sets.
Which of the following is a use of the last-two-digits test?
Identifying round or whole numbers: Red flags for invented numbers.
Which of the following is an advantage of the first-two-digits tests?
It offers more precision than the first-digit test.
Which of the following describes the profile for the first digit according to Benford's Law?
Which of the following is an example of numbers that do NOT follow Benford's Law?
Data sets with built in maxs and mins and assigned numbers. (Social Security Numbers, Accounts Numbers, Zip Codes)
Which of the following is an example of numbers that display a geometric tendency?
Almost all natural numbers: City populations, stock prices, size of geological objects, company revenues, trading volume, account numbers.
To conform to Benford's Law, a number series must approximately follow a
Which of the following is a disadvantage of generalized audit software?
High cost and extensive training needed.
Which of the following is an advantage of generalized audit software?
User-interface attributes and their ability to record the analytics, thus creating an audit trail.
Which of the following is a disadvantage of basic data analysis programs?
Data can be altered without record, errors can be introduced, they cannot accommodate data in certain formats, integrity of data can be compromised.
Steven Smith has been engaged by a counsel to assist a fellow CPA in an accounting malpractice action against Krynton Company. Five years back, Steven's wife used to work as a finance manager for Krynton. During the engagement, Krynton warned Steven that his wife will be sued for financial treachery if the prevailing accounting malpractice action is ruled against the company. Which of the following is the threat faced by Steven Smith as per AICPA's Guide for Complying with Rules 102-505 (2008)?
Integrity and Objectivity
John Miller is employed at an auditing firm which offers forensic accounting and income tax services. His next engagement is with a tax client, a partnership firm, to assist in the determination of a withdrawing partner's entitlement. The withdrawing partner owns another firm also and John's elder brother is an employee in that firm. Which of the following is the threat faced by John Miller as per AICPA's Guide for Complying with Rules 102-505 (2008)?
Conflict of interest
Which of the following is a primary driver of professional responsibility failure?
Lack of knowledge, pressure, objectivity, training, conflicts of interest
As per AICPA's Guide for Complying with Rules 102-505 (2008), _ implies that a member will subordinate his or her judgement to that of an individual associated with a client, employer or other relevant third party because of the individuals's reputation or expertise.
Which of the following statements best defines the adverse interest threat as per AICPA's Guide for Complying with Rules 102-505 (2008)?
The threat that a member will not be objective because his or her interests are in opposition to those of a client or employer.
Which of the following statements is true of unconscious adversarial bias for testifying expert witnesses?
Extremely prevalent among law enforcement and government witnesses.
_ occurs when a testifying expert is specifically hired to represent the engaging attorney's theory?
Which of the following is true of the standards of professional organizations?
Their essential qualities include integrity, objectivity, competence, due professional care, sufficient data and professional behavior.
Which of the following is a fundamental principle of NACVA's Professional Standards?
1. Integrity and Objectivity
2. Professional Competence
3. Due Professional Care
4. Understanding and Communications with Clients
5. Planning and Supervision
6. Sufficient Relevant Data
8. Discreditable Acts
9. Client Interest
10. Financial Interests
As per ACFE Standards of Professional Conduct, which of the following requires a member not to disclose privileged information obtained during the course of an engagement without the express consent of the client or order of a court?
Which of the following business valuation organizations merged with the NACVA in 2012?
Institute of Business Appraisers (IBA)
Which of the following is the foremost professional organization of the business valuation discipline?
National Association of Certified Valuators and Analysts (NACVA)
Which of the following methods is used in combination with net asset value method in the absence of valid market comps?
Net Asset Value Method (NAVM)
Which of the following methods involves the development of a proxy benefit?
Capitalization of Earnings Method (COE)
Which of the following methods is used under the income approach of business valuation?
Capitalization of Earnings Method (COE)
Which of the following valuation approaches employs the time value of money?
Which of the following is true of the net asset method?
It determines a company's value as the difference between the fair market value of its assets and the fair market value of its liabilities.
Which of the following methods is commonly used to establish a floor value for the company?
Net Asset Value Method (NAV)
Which of the following methods is a logical selection when engaged to value a non operating company or a company pending liquidation?
Net Asset Value Method (NAV)
Which of the following standards of value is also known as strategic value?
To make a report effective a forensic accountant
Should prepare a written pre report outline, following by a memo to file.
Which of the following statements is true of a forensic accountant's summary report?
A summary report offers an abbreviated version of the information contained in a detailed report.
After the December 2010 amendment of Rule 26 of the Federal Rules of Civil Procedure, _ is protected from discovery.
under prevailing Rule 26 of the Federal Rules of Civil Procedure, an expert report
was avoided or protected from discovery.
The purpose of a _ in computer forensics is to detect and recover data that has been concealed on a computer system.
Hidden Data Analysis
Which of the following statements is true of digital data in computer forensics?
Which of the following statements is true of static forensics?
The analysis of static data which involves creating a copy of all the data stored on the subject device and analyzing the copy in a secure environment.
Which of the following statements is true of a computer forensics engagement?
The goal of computer forensic accountants is to uncover data that has been intentionally hidden or deleted with the goal of securing the data for use as evidence.
Which of the following is an example of data stored in "the clouds?"
Data on devices maintained by others that can be accessed through the internet. Examples: Google Docs, Microsoft SkyDrive, Gmail, Hotmail, Facebook, Twitter, Youtube
Which of the following is an example of a flash memory media?
Data is stored in memory chips that are modified electronically, there are no moving part or sensitive surfaces making the device less vulnerable to damage. Examples: USB Drives, Memory Cards, External Solid State Disk Drives.
_ occurs when a testifying expert is specifically hired to represent the engaging attorney's theory?
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