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1)The forensic accounting field is broader than fraud auditing
1)The forensic accounting field is broader than fraud auditing
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1)The forensic accounting field is broader than fraud auditing.
a. True b. False
2. Forensic accountant qualifications work together to support each other like a four-layered wedding cake.
a. True b. False
3. A forensic accountant can normally assume that the books and records are true and correct.
a. True b. False
4. Forensic accounting courses in universities and colleges have been growing rapidly in numbers since 1983.
a. True b. False
5. Knowledge of both statute law and case law may be relevant to the goals or objectives of a forensic accountant.
a. True b. False
6. Criminology is one area of the forensic accountant's knowledge base.
a. True b. False
7. Courtroom procedures are one area of the necessary forensic accountant's knowledge base.
a. True b. False
8. A psychology course would not be helpful for a forensic accountant.
a. True b. False
9. Both professors and practitioners ranked "Fundamentals of Fraud" number 1 with respect to the importance of content in a forensic accounting course.
a. True b. False
10. Professors ranked "Effective Report Writing" number 2 with respect to the importance of content in a forensic accounting course.
a. True b. False
11. In 2002, a magazine ranked forensic accounting as one of the most secure career tracks.
a. True b. False
12. Salaries for forensic accountants range from $40,000 to $115,000.
a. True b. False
13. Shoplifters steal more than employees.
a. True b. False
14. On a Kessler survey, more than 85% of employees admitted to stealing office supplies and falsifying expense reports.
a. True b. False
15. On a Kessler survey, more than 90% of the employees said they lied on their job applications that asked whether they stole from a previous employer.
a. True b. False
16. Cr.FA is an advanced credential that recognizes the holder with an expertise in valuation and damage analysis.
a. True b. False
17. The Certified Fraud Examiner (CFE) designation is provided by the National Association of Certified Valuation Analysts.
a. True b. False
18. The CFFA certificate refers to a Certified Financial Fraud Analyst.
a. True b. False
19. Data-driven forensic techniques will always detect fraud schemes, including bribery and kickbacks.
a. True b. False
20. CFEs gather evidence, take statements, write reports, and assist in investigating fraud.
a. True b. False
21. A CFE should not express an opinion regarding the guilt or innocence of any person or party.
a. True b. False
22. The FASNA is a member-driven network of CPA firms who adhere to high standards of quality and services.
a. True b. False
23. In order to obtain the FASNA certificate, a person must pass a 500question examination.
a. True b. False
24. In order to obtain a CVA certificate, a person must hold a valid CPA certificate.
a. True b. False
25. In order to obtain the NLSSA certificate, a person must hold a valid CPA certificate.
a. True b. False
26. The Network of Independent Forensic Accountants is a group of independent forensic accountants in the United States.
a. True b. False
27. The Institute of Business Appraisers (IBA) is the oldest not-forprofit organization devoted solely to the appraisal of closely held businesses.
a. True b. False
28. A kick-back scheme can normally be caught by a data-driven approach.
a. True b. False
29. Fraud is much like an iceberg: many of the behavioral factors lurk on top of the water ready to sink a corporation.
a. True b. False
30. A bribery scheme can best be caught by behavioral factors.
a. True b. False
31. Just like termites, fraud can destroy an organization.
a. True b. False
32. Recessions often increase fraud and abuse.
a. True b. False
33. The stimulus packages should decrease the need for forensic accountants.
a. True b. False
34. AICPA research that indicates CPAs represent more than 90 percent of forensic accounting experts hired over a two year period.
a. True b. False
35. According to the FBIs definition of fraud, there should be an application or threat of physical force or violence.
a. True b. False
36. One need not be a CPA to obtain the Certified in Financial Forensics (CFF).
a. True b. False
37. Forensic accountants need an understanding of:
a. Accounting.
b. Law.
c. Criminology.
d. Investigative auditing.
e. All of the above.
38. Which curriculum content item was ranked number 1 by practitioners in a recent research study?
a. Effective report writing.
b. Financial statement fraud.
c. Cooking the books.
d. Elements of fraud (e.g., pressure).
e. None of the above ranked number 1.
39. Which curriculum content item was ranked number 1 by professors in a recent research study?
a. Effective report writing.
b. Fundamentals of fraud.
c. Shareholder litigation.
d. Internal control evaluation.
e. None of the above ranked number 1.
40. What would be a task of a litigation services practitioner?
a. Issue identifications.
b. Expert testimony.
c. Mediation.
d. Arbitration.
e. All of the above.
41. An AICPA committee did not suggest the following area would be available to an accounting litigation consultant:
a. Computations.
b. Business valuation.
c. Tax issues assessment.
d. Auditing issues.
e. All of the areas were listed.
42. Which organization or group controls forensic accounting?
a. ACFEI.
b. Association of Certified Fraud Specialists.
c. ACFE.
d. NACVA.
e. None of the above.
43. Which certificate is provided by the American College of Forensic Examiners?
a. CFE.
b. CFA.
c. CFFA.
d. Cr.FA.
e. None of the above.
44. Which forensic certificate is provided by the National Association of Certified Valuation Analysts?
a. CFE.
b. Cr.FA.
c. CFFA.
d. FASNA.
e. None of the above.
45. Which task probably would not be required of a Certified Fraud Examiner?
a. Gather evidence.
b. Write reports.
c. Assist in investigating fraud.
d. Testify in the courtroom.
e. All of the above may be required.
46. Which is not a forensic-type certificate?
a. FASNA.
b. CFE.
c. Cr.FA.
d. CFFA.
e. None of the above.
47. The National Association of Certified Valuation Analysts does not provide the following certification:
a. CVA.
b. AVA.
c. CFFA.
d. CFA.
e. None of the above.
48. Which is the oldest professional organization devoted to the appraisal of closely held businesses?
a. Institute of Business Appraisers.
b. National Association of Certified Valuation Analysts.
c. American Association of Appraisers.
d. Certified Forensic Investigator.
e. None of the above.
49. Which certification program requires the passing of a two-year university program?
a. American Association of Appraisers.
b. CA.IFA.
c. Certified Forensic Investigator.
d. Cr.FA.
e. None of the above.
50. Which of the following is not included in a forensic accountant's knowledge base?
a. b. c. d. Computer science. Criminology. Accounting. Law.
e. All of the above are included.
51. Which statement is false?
a. Fraud courses are increasing in the United States.
b. Practitioners rank litigation services higher than educators.
c. Finding fraud is not easy.
d. Arthur Anderson was the auditor at HealthSouth during the massive fraud.
e. None of the above.
52. Which Italian company had major fraudulent financial statements?
a. Parmalat.
b. Carlo Z Industries.
c. Monsanto Company.
d. Dairy Food, Inc.
e. None of the above.
53. Which would not be useful in searching for hidden assets?
a. Looking at lifestyles of major players.
b. Computing industry ratios.
c. Comparing cash flow with income.
d. Using the net worth method.
e. None of the above. '
54. Which certification is given by the AICPA?
a. CVA.
b. CFE.
c. CFF.
d. Cr.FA.
e. All of the above.
- President George W. Bush established the Corporate Fraud Task Force within the Department of Justice.
- Transparency is one of the nine qualities and characteristics that make financial information useful for investors and creditors according to the AICPA committee (No. 2).
- The audit committee is one leg of the six-legged stool of the financial reporting process.
- Misrepresentation is one of the three M's of financial reporting fraud.
- The bill-and-hold practice involves selling inventory to customers and holding the merchandise, with an agreement to deliver the goods later.
- Cendant Corporation shifted almost $11 billion of expenses into capital accounts.
- A restaurant may reduce income (and expenses) if its lease agreement payments are based upon restaurant sales.
- Booking income before receiving payments is called "channel stuffing" by the SEC.
- Almost 75% of earnings misstatements from 1995 to 1999 had to do with revenue recognition.
- A KPMG survey breaks fraud into internal and external fraud.
- Under the KPMG survey scheme of fraud, lapping is only considered to be an employee fraud.
- Under the KPMG survey scheme of fraud, check forgery is always an external fraud.
- The older fraud pyramid of Edwin Sutherland had these three factors of fraud: motive, opportunity, and rationalization.
- A gambling problem would be considered an example of the rationalization factor in the fraud pyramid.
- Ineffective internal controls is a tempting open door or opportunity for fraud.
- Effective internal controls will always stop fraud.
- AICPA SAS No. 99 supplemented, but did not supersede SAS No. 82.
- Sherron Watkins stated that there is a defining moment when one becomes corrupt.
- A business in a declining industry would be an example of a motivation risk factor.
- High turnover of senior management would be an example of a motivation risk factor.
- The control environment is one of the five interrelated components of internal controls.
- In an Ernst & Young study, 50% of the most serious fraud was committed by the organization's own management.
- An exact profile has been developed of a potential fraudster by several large CPA firms.
- Senior-level management fraudsters often surround themselves with "yes people."
- According to KPMG studies, management override is the one factor most likely to cause fraud.
- An ethical "tone at the top" helps deter white-collar crime.
- David Duncan was the so-called whistle-blower inside Enron who wrote the seven-page smoking gun letter.
- Abusive earnings management is an intentional and material misrepresentation of financial results according to the SEC.
- Forensic investigators uncover financial statement fraud by looking for unusual red flags or patterns.
- Wildcatting is an investigative technique adopted by the SEC to investigate a specific company for check forgery.
- Large companies tend to more frequently manage earnings to avoid losses than small companies.
- Financial fraud is more likely to occur if a company has a poor management control philosophy.
- Check forgery can be both an internal and external fraud.
- Credit card fraud is generally an internal fraud.
- Continuing presence of a firm's founder is a red flag of a poor management philosophy.
- Obtaining national stock exchange listing status is not a major motive for fraud.
- Absence of a long-term institutional investor is a red flag of a poor management philosophy.
- Evaluating the business rationale for a significant unusual transaction is a way to overcome management overriding controls.
- Significant related-party transactions is an industry condition risk factor.
- The presence of an aggressive incentive program is an industry condition risk factor.
- The FBI has developed a profile of a fraudster.
- Firms sacrifice on the average 8 cents in additional income taxes per dollar by cooking their books.
- A hockey stick pattern indicates that a company is using the bad debt account to cook the books.
- The United States ranks in the top 15 of the more transparent countries in 2008.
- The turmoil in the financial markets in 2008 and 2009 caused a number of pension funds to be underwater.
- Behavioral psychologists call rationalizing white collar crime reframing.
- Stamping down the desire to steal is an excellent way to prevent fraud.
- Poor controls or missing controls cause loss of assets and poor business decisions.
- Excessive internal controls can cause increased regulations.
- Excessive controls can cause noncompliance.
- Training employees would be considered a detective control.
- Reconciliations of bank statements would be considered a detective control.
- A drug testing program would be considered a preventive control.
- One research study found that the number one reason for fraud was pressure to do whatever it takes to meet goals.
- A second surprise cash count would be a preventive type control.
- Counting the inventory by an auditor would be a corrective control.
- Restatements of earnings fell in 2008.
- Class action securities fraud actions fell in 2008 and 2007.
- Which is not one of the three M's of financial statement fraud?
- a. Missing general ledger.
- b. Manipulation.
- c. Misrepresentation.
- d. Intentional misapplication.
- e. None of the above.
- Which group is not one of the members of corporate governance in the six-legged stool as outlined by Professor Zab Razaee?
- a. Board of Directors.
- b. Audit Committee.
- c. Internal auditors.
- d. Employees of the company.
- e. All of the above are one of the six groups.
- Which quality or characteristic is not outlined in Statement of Financial Concepts No. 2?
- a. Relevance.
- b. Materiality.
- c. Timeliness.
- d. Transparency.
- e. All of the above is in the No. 2 statement.
- Which would be an example of the bill-and-hold strategy?
- a. Books are kept open beyond the appropriate time.
- b. Sell products and hold them, with an agreement to bill customers later.
- c. Combine restricted fund account with the general fund account.
- d. Inflate revenues with phony software sales.
- e. None of the above.
- An example of "channel stuffing" would be:
- a. Keeping books open beyond the appropriate time.
- b. Combining restricted fund account with the general fund account.
- c. income Booking before receiving payments.
- d. Inflating revenues with phony software sales.
- e. None of the above.
- Which statement is false with respect to Howard M. Schilit's financial shenanigans?
- a. Five of the shenanigans boost current-year earnings.
- b. Two of the shenanigans shift current-year earnings into the future.
- c. Recognizing current revenues as deferred revenues is one of the shenanigans.
- d. He suggested nine financial shenanigans.
- e. None of the above.
- Under the KPMG categories of fraud, what would probably not be an external fraud?
- a. Check forgery.
- b. False invoices.
- c. Stock theft.
- d. Credit card fraud.
- e. All of the above are considered external fraud.
- Under the KPMG categories of fraud, what would probably not be an employee internal fraud?
- a. Lapping.
- b. Petty cash fraud.
- c. Kickbacks.
- d. Check forgery.
- e. All of the above are considered employee internal fraud.
- Under the KPMG categories of fraud, what would probably not be an employer internal fraud?
- a. False insurance claims.
- b. Ghost vendors.
- c. Check forgery.
- d. False financial statements.
- e. All of the above are considered employer internal fraud.
- The proving guilt pyramid does not contain this factor:
- a. Motive.
- b. Rationalization.
- c. Opportunity.
- d. Means.
- e. Both c and d.
- The older fraud pyramid does not contain this factor:
- a. Means.
- b. Motive.
- c. Rationalization.
- d. Opportunity.
- e. Both c and d.
- Which is not a factor, according to Professor Razaee, present in a company that explains the fraud triangle with respect to financial statement fraud?
- a. Conditions.
- b. Transparency.
- c. Corporate structure.
- d. Choice.
- e. Factors a and d.
- COSA defines "internal controls" as a process, effected by an entity's board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories except:
- a. A reasonable degree of transparency.
- b. Effectiveness and efficiency of operations.
- c. Reliability of financial reporting.
- d. Compliance with applicable laws and regulations.
- e. All of the above.
- Which statement is false?
- a. The flexibility in GAAP gives management discretion to use its professional opinion to choose from a range of guidelines and standards in selecting those that suit the needs of a company (e.g., FIFO or LIFO inventory methods).
- b. Nonfraudulent earnings management is accomplished within the GAAP framework.
- c. Fraudulent earnings management does not follow GAAP.
- d. Transparency is one of the five interrelated components of internal controls.
- e. All of the above are true.
- Which item would not be a fraud identifier to spot fraudsters?
- a. Large ego.
- b. Gambling addiction.
- c. Hard worker.
- d. Takes few or no vacations.
- e. All of the above are fraud identifiers.
- Based upon KPMG studies, what factor is most likely to cause fraud?
- a. Management override.
- b. Employee collusion.
- c. High risk industry.
- d. Poor internal controls.
- e. Some other factor is most likely.
- Employee fraud can be discovered by considering:
- a. Behavioral habits.
- b. Employee stress factors.
- c. Lifestyle of the employee.
- d. Assets owned by the employee.
- e. All of the above.
- COSO suggests which of the following are major motives for fraud?
- a. To obtain national stock exchange listing status.
- b. To cover up assets misappropriated for personal gain.
- c. To increase stock prices and benefit inside traders.
- d. All of the above.
- Which of the following is a red flag for forensic accountants?
- a. Complex financial products.
- b. Recurring charges.
- c. Aggressive revenue recognition policies.
- d. Both a and c.
- e. None of the above.
- f. All of the above.
- What is an industry conditions risk factor?
- a. Company in a declining industry.
- b. Significant accounts based upon estimates.
- c. Significant related-party transactions.
- d. Aggressive incentive programs.
- e. None of the above.
- What is an operating and financial stability risk factor?
- a. New accounting requirements for the company.
- b. Substance over form questions.
- c. Company declining in the industry.
- d. High degree of competition.
- e. All of the above.
- What is an industry risk factor?
- a. Aggressive incentive programs.
- b. Significant related-party transactions.
- c. New accounting requirements.
- d. Significant accounts based upon estimates.
- e. All of the above.
- What is an investigative technique used by the SEC to investigate specific companies for cooking the books?
- a. Lapping.
- b. Kiting.
- c. Wildcatting.
- d. Ghosting.
- e. Channeling.
- Which variable is in the fraud pyramid but not in the fraud diamond?
- a. Opportunity.
- b. Motive.
- c. Rationalization.
- d. Capacity.
- e. None of the above.
- Elements in the fraud triangle can be restated as all of the following except:
- a. Individual is either dishonest or able to rationalize theft.
- b. Notices or creates an opportunity to commit fraud.
- c. Generally acts alone, out of embarrassment.
- d. Feels some sort of pressure or incentive to commit fraud.
- e. None of the above.
- A typical lower-level employee in a public business would engage mostly in which type of crime?
- a. Fraud.
- b. Misappropriation of assets.
- c. Error.
- d. Embezzlement.
- e. Lapping.
- Which financial statement should be studied to determine if a company has the ability to pay a significant debt?
- a. Balance sheet.
- b. Shareholders equity.
- c. Income statement.
- d. Cash flow statement.
- e. Annual budget.
- Which is not one of the classic "red flags" of "cooking the books"?
- a. Double billing a customer.
- b. Personal expenses paid with company funds.
- c. Sudden raises or bonuses to employees.
- d. Unnecessary use of collection services.
- e. Income increasing faster than cash.
- Which would be a good name for the scheme of listing investment income as operating revenue?
- a. Period shift.
- b. Expense manipulation.
- c. Liability trap.
- d. Revenue trick.
- e. Asset scam.
- What is an equitable remedy that allows a person to win a dispute against a company that does not have standing to suit?
- a. Equity doctrine.
- b. Alter ego.
- c. Two-prong test.
- d. Division analysis.
- e. Dominance doctrine.
- Which would be a preventive control?
- a. Segregation of duties.
- b. Reconciliations.
- c. Surprise cash count.
- d. Surprise inventory count.
- e. All of the above.
- Which would be a detective control?
- a. Required approvals.
- b. Job rotation.
- c. Passwords.
- d. Surprise cash account.
- e. All of the above.
- Which would be a corrective control?
- a. Training.
- b. Event notifications.
- c. Perpetual inventory system.
- d. Job rotation.
- e. Alarm system.
- Which is not one of the three types of controls?
- a. Minimizing.
- b. Corrective.
- c. Preventive.
- d. Detective.
- e. Both a and b.
- Which would be a nonfraudulent earnings management scheme?
- a. Bill-and-hold technique.
- b. Channel stuffing.
- c. Cookie-jar reserves.
- d. Backdating stock options.
- e. None of the above. '
- Corruption would not include:
- a. Bribery of a government official.
- b. Kickbacks to a purchasing agent.
- c. Free vacation to an acquisition agent.
- d. Stealing petty cash by a purchasing agent.
- e. None of the above.
- Which is not a detective control?
- a. Reconciliations.
- b. Training of employees.
- c. Reviews.
- d. Surprise cash count.
- e. None of the above.
- Which is not a preventive control?
- a. Process redesign.
- b. Segregation of duty.
- c. Passwords on a computer.
- d. Job rotation.
- e. Requiring approvals.
