Deck 17: Bankruptcy, Divorce, Identity Theft

Question 1

Secretly transferring (or selling below market value) assets to others, perhaps to family or friends, in order to keep them out of the bankruptcy estate and maintain control over them is referred to as:

A) Concealment of assets fraud.
B) Multiple filing scheme.
C) Fraudulent conveyances.
D) Bust-outs.

Answer 1

C

Question 2

According to the U.S. Department of Justice, what percentage of bankruptcy cases involve fraud?

A) 5%.
B) 10%.
C) 25%.
D) 50%.

Answer 2

B

Question 3

If there is fraud suspected in the bankruptcy proceedings, who is the case turned over to?

A) U.S. District Court.
B) Department of Justice.
C) U.S. Attorney's Office.
D) Securities and Exchange Commission.

Answer 3

C

Question 4

Why would a forensic accountant want to investigate prior W-2's during a bankruptcy or divorce fraud investigation?

A) It may show investment income from investments not previously disclosed.
B) It may show the purchase of assets through a business that has been written off for depreciation.
C) It could show contributions to Keogh plans.
D) It could show contributions to 401K, 403(b) and other deferred compensation plans.

Question 5

What is a concealment of assets fraud?

A) It is when a business physically hides assets from investigators during an inventory of assets.
B) It is when debtors move large amounts of cash or other assets out of the business in anticipation of filing for bankruptcy.
C) It is when creditors move large amounts of cash or other assets out of the business in anticipation of filing for bankruptcy.
D) It is the selling of assets in order to increase cash reserves during a bankruptcy filing.

Question 6

Which chapter applies to both individuals and businesses, and is designed to completely liquidate the debtor's assets and discharge the debtor's liabilities?

A) Chapter 7.
B) Chapter 9.
C) Chapter 11.
D) Chapter 13.

Question 7

Multiple-filing schemes are when:

A) An individual takes on multiple identities in multiple states, acquires debt under those identities and then files bankruptcy under all of them.
B) An individual takes on debt from multiple states and then files bankruptcy in each state under their own name.
C) Multiple individuals take on the same debt and then file bankruptcy under each persons name for the same debt.
D) Multiple individuals take on multiple names in several states and acquire debt under all those names, then file bankruptcy in one state attempting to flood the courts with cases and confuse the court system.

Question 8

Which act or law created severe criminal penalties for fraud in a bankruptcy proceeding?

A) IRC revision of 1986.
B) SEC ruling of 2001.
C) U.S. Supreme Court Rulings of 2003.
D) Section 802 of the Sarbanes-Oxley Act of 2002.

Question 9

Which two chapters are most frequently used by individuals?

A) Chapters 7 and 9.
B) Chapters 13 and 15.
C) Chapters 11 and 13.
D) Chapters 7 and 13.

Question 10

When dealing with the issue of asset concealment in divorce cases, the forensic accountant must keep in mind that:

A) one or both parties will always be trying to conceal assets from the other party.
B) lawyers from either party may be employing the forensic accountant in order to drain marital assets.
C) assets may be accidentally concealed as some individuals are not good at financial record keeping.
D) All of the above.

Question 11

In cases where creditors force involuntary bankruptcy, what is a factor that may deem it to be an abusive filing?

A) If they attempt to file for more than the actual debit that is owed.
B) If the debtor actually has the ability to repay.
C) If there is only one creditor.
D) All of the above.

Question 12

Who causes the largest amount of identity theft in the United States?

A) Organized Crime.
B) Gangs.
C) Individuals on the internet.
D) Corporations.

Question 13

How many different chapters for bankruptcy are there?

A) 2.
B) 4.
C) 6.
D) 11.

Question 14

For divorce cases, why might the level of scrutiny be considerably less that in bankruptcy cases?

A) Divorce attorneys don't always have the financial expertise that many bankruptcy attorneys have.
B) In bankruptcy cases there tend to be creditors with experience in asset concealment, and who are in possession of information-rich credit applications from debtors.
C) In bankruptcy cases there is more of a tendency for fraudulent conveyances and the hiding of assets to take place immediately prior to the filing.
D) All of the above.

Question 15

What is a typical penalty for committing a bankruptcy fraud crime?

A) 5 years in prison; $250,000 fine or both.
B) 10 years in prison; $250,000 fine or both.
C) 5 years in prison; $500,000 fine or both.
D) 10 years in prison; $500,000 fine or both.

Question 16

Who administers bankruptcy proceedings?

A) Lawyers
B) U.S. District Courts.
C) Department of Justice.
D) U.S. Attorney's Office.

Question 17

What is a problem with the free annual credit report web site?

A) Free reports are typically 12-18 months old.
B) Free reports only give you the credit rating, not if someone has used your identity to get credit.
C) The web site requires you to subscribe to an annual subscription to a financial magazine.
D) The web site has many impostors with similar names that actually take consumer information and steal their identities.

Question 18

Why would a forensic accountant want to investigate all vendors listed for a business during a bankruptcy investigation?

A) To ensure that they are not owed any money by the debtor.
B) To ensure that they are actually real vendors and not just fronts for hiding assets.
C) To see if they want to recover any assets such as inventory that the business may have on hand prior to bankruptcy disposition.
D) All of the above.

Question 19

Which chapter applies to farmers and those in fishing business?

A) Chapter 7.
B) Chapter 9.
C) Chapter 12.
D) Chapter 15.

Question 20

Which of the following is not a commonly committed fraud during bankruptcy proceedings?

A) Conceals property from the bankruptcy proceedings.
B) Gives, offers, receives, or attempts to obtain money, property, reward or advantage for acting or forbearing to act in a bankruptcy case.
C) Withholds documents related to the debtor's property or financial affairs from the standing trustee or other officer of the court.
D) All of the above are commonly committed frauds.

Question 21

What are some methods that identity thieves may use to get information?

A) Picking information out of dumpsters.
B) Looking over the shoulder of someone while they fill out applications.
C) Stealing mail.
D) All of the above.

Question 22

Divorce fraud is very similar to bankruptcy fraud in that in both divorce and in bankruptcy a court may divide up the assets of some estate.

Question 23

The Fair and Accurate Credit Transaction Act of 2003 replaced the Federal Fair Credit Reporting Act by adding laws directed towards helping consumers protect themselves against identity theft.

Question 24

How does truncation of identity numbers work?

A) Machines encode account numbers when transmitting them over the internet.
B) Machines can only print the last 5 digits of an account number on anything that is printed for mailing.
C) Clerks and telephone operators are only allowed to verify identity by the last five letters of a persons name.
D) Older machines that do manual imprinting of credit card numbers must be modified to only copy the last five digits of the account numbers.

Question 25

What is a controlled delivery?

A) When individuals control when their personal information is delivered to creditors.
B) When law enforcement catches thieves doing something like receiving mail or withdrawing banks funds using a stolen identity.
C) When individuals control when their mail is delivered to their mailboxes to prevent mail theft.
D) The act of delivering controlled amounts of personal information to thieves that think its legitimate.

Question 26

Why is trying to catch identity thieves in the act not generally helpful?

A) They lie so well that you cannot know their true identity.
B) Only amateur identity thieves are sloppy enough to get caught in the act.
C) Immediate arrests don't normally take place unless a law-enforcement officer happens to be at the scene of the crime.
D) All of the above.

Question 27

What are financial institutions required to do for consumers when they are filing negative information against them?

A) Nothing.
B) Provide them an opportunity to rebut the negative information prior to its submission.
C) Ask for their concurrence prior to submitting the report.
D) Notify them within 30 days of negative information submitted with items that includes things like late, missed, or partial payments.

Question 28

Chapter 13 bankruptcy is less desirable for the debtor, since it requires debt repayment from the debtor's future income.

Question 29

Consumers are entitled to obtain free credit reports each year from the 3 largest U.S. credit card bureaus.

Question 30

Section 802 of the Sarbanes-Oxley Act of 2002 creates severe criminal penalties applicable to bankruptcy proceedings. What are they?

Question 31

The largest part of identity theft is caused by individuals on the internet stealing information.

Question 32

How can individuals repair their credit if it has been stolen by thieves?

A) Hire an attorney.
B) Contact their local representative to the U.S. Congress.
C) Hire one of many private agencies that specialize in identity theft repair.
D) All of the above.

Question 33

Which other crimes typically coexist with identity theft?

A) Check fraud.
B) Mortgage fraud.
C) Insurance fraud.
D) All of the above.

Question 34

The Congressional act that created stiffer penalties for identity theft, and even harsher penalties for terrorist related identity theft, was called:

A) The Identity Terrorism Protection Act.
B) Identity Terrorism Penalty Enhancement Act.
C) United States Identity Penalty Enhancement Act.
D) Identity Theft Penalty Enhancement Act.

Question 35

The typical penalty for committing bankruptcy fraud crimes has a maximum of 5 years in prison or a maximum fine of $250,000, or both, per offense.

Question 36

In bankruptcy or divorce, the involved party's recent federal tax returns should be carefully examined with respect to Investment interest expense deductions. Such deductions suggest the existence of a margin-based brokerage account.

Question 37

What is typically one of the first signs that an individual's identity has been stolen?

A) Unauthorized change in address.
B) Bill collectors begin calling for accounts the individual is not aware of.
C) Incorrect information appearing on credit reports.
D) Unauthorized charges appear on statements.

Question 38

Over 90% of bankruptcy cases involve fraud.

Question 39

Due to its complexity, the forensic accountant cannot perform a complete cash flow analysis for the individual or entity under investigation.

Question 40

Fraudulent conveyances typically involved unqualified persons offering fee-based financial advice, credit counseling, and bankruptcy-filing services.

Question 41

What did the Fair and Accurate Credit Transaction Act of 2003 (FACTA) accomplish?

Question 42

How are loan applications helpful in the asset discovery process?

Question 43

Describe the phishing process.

Question 44

How does the concealment of assets fraud occur in bankruptcy?

Question 45

Explain how involuntary bankruptcy can occur and give an example of how it can be abused.

Question 46

What are five things that a forensic accountant can look for in a tax return that will lead to the discovery of hidden assets?
E. (income from rental properties, royalties, and estates and trusts, partnerships, and S corporations). Verify the dispositions of the underlying assets. Also, activity loss carryovers should be treated as an asset.

Question 47

What is identity theft, how big is the problem and who is largely responsible for it?

Question 48

List at least three chapters of bankruptcy and describe who that chapter is applicable to.

Question 49

The Internet False Identification Prevention Act of 2000 made it illegal to do what and what is the penalty for doing it?