Deck 1: Introduction to the World of Forensic Accounting

Question 1

Which of the following statements is true of forensic accounting investigative services?

A) These are provided in connection with actual, pending, or potential legal or regulatory proceedings-criminal or civil.
B) These are only performed after a crime has occurred.
C) These include fraud detection, fraud examination, and fraud deterrence.
D) These generally involve actual or threatened litigation.

Answer 1

C

Question 2

Fact witnesses can express opinions but expert witnesses cannot.

Answer 2

False

Question 3

Which of the following is most likely a short-term strategy for fraud deterrence?

A) financial statement analysis
B) employee invigilation
C) time series analysis
D) evaluation of hiring practices

Answer 3

D

Question 4

Which of the following situations shows Kelcie,a forensic accountant,exercising professional skepticism?

A) Kelcie argues that the immediate previous year's records serve as a better basis for the investigation than the earlier years.
B) Kelcie believes that the reputation of the external auditor is an indicator of the reliability of the audit report.
C) Kelcie believes in the phrase "guilty, until proved otherwise" and does not presume innocence until she has reasonable doubt.
D) Kelcie verifies the reports given by the internal auditor against available evidence before using it in her reports.

Question 5

Which of the following is NOT the primary focus of a fraud examination by a forensic accountant?

A) Who committed the fraud?
B) How was the fraud committed?
C) When was the fraud committed?
D) Why was the fraud committed?

Question 6

Forensic accounting can be defined as the application of financial facts to legal situations.

Question 7

The first line of defense against accounting failures within an organization is the external auditor.

Question 8

The need or motive of the fraud is not the immediate challenge of a fraud examination.

Question 9

Fraud detection and fraud examination describes reactive strategies while fraud deterrence describes proactive strategies.

Question 10

Deductive reasoning draws conclusions from patterns.

Question 11

Which of the following is recognized as the first forensic accountant?

A) Frank J. Wilson
B) Maurice Peloubet
C) Alphonse Capone
D) Leslie A. Shuway

Question 12

The accounting process has three basic steps: recording,classifying,and summarizing.

Question 13

Expert reports prepared in the course of litigation are exempt from professional report writing standards.

Question 14

Which of the following is a difference between fraud examination and fraud detection?

A) Fraud examination is done before a fraud has been committed, whereas fraud detection is done after a fraud has been committed.
B) Fraud examination is the investigation specific allegations or suspicions of fraud, whereas fraud detection is the identification of an error or irregularity after it has occurred.
C) Fraud examination focuses on the time and duration of the fraud, whereas fraud detection focuses on the need or motive of the fraud.
D) Fraud examination adapts proactive strategies, whereas fraud detection adapts reactive strategies.

Question 15

Fraud deterrence strategies include statistical analysis.

Question 16

Which of the following best describes the term forensic accounting?

A) It is a discipline that deals with the preparation and analysis of financial statements of companies.
B) It is the use of accounting principles to consolidate financial statements of foreign corporations.
C) It is a discipline that primarily deals with methods of preparation of financial budgets of a company.
D) It is the use of accounting theories, principles, or analyses in a legal action, often through expert witness testimony.

Question 17

Which of the following shows Paul,a forensic accountant,indicating an intellectually curious mindset?

A) He relies on the reports given by the management to form an opinion on the financial viability of the business.
B) He bases his judgments on the existing industry standards and not on the environment in which the organization operates.
C) He gives room for the possibility that mistakes maybe attributable to negligence.
D) He questions his understanding of an issue, in spite of being an expert in the field.

Question 18

Which of the following statement is true of forensic accountants?

A) They should have a reactive mindset.
B) They should focus their investigations on numbers rather than looking beyond them.
C) They should embrace systematic thinking.
D) They must trust their preexisting judgments.

Question 19

Which of the following is a technique of fraud detection?

A) perception of detection
B) analysis of financial statement
C) preemployment screening
D) evaluation of hiring practices

Question 20

"Trust,but verify" is the general rule while exercising professional skepticism.

Question 21

Which of the following are the two major components of forensic accounting services?

A) fraud detection services and fraud deterrence services
B) expert services and consulting services
C) investigative services and litigation services
D) fraud examination services and business valuations services

Question 22

The purpose of the ________ is to form and express an opinion as to whether the organization's financial statements,taken as a whole,reflect its financial position on a given date and the results of its operations for a given period.

A) forensic accountant
B) external auditor
C) transactional accountant
D) internal auditor

Question 23

Which of the following is a process flowing from a set of specific observations,facts,or data to a working hypothesis and then a general conclusion?

A) intuitive reasoning
B) inductive reasoning
C) deductive reasoning
D) critical reasoning

Question 24

Which of the following is true of transactional accountants?

A) They evaluate the internal control systems of an organization and test the accounts to ensure that all economic events are recorded and reported properly.
B) They form and express an opinion as to whether an organization's financial statements, taken as a whole, reflect its financial position on a given date and the results of its operations for a given period.
C) They report on the adequacy of internal controls, the accuracy and propriety of transactions.
D) They employ generally accepted accounting principles (GAAP) to process information useful in decision making.

Question 25

All kids like Jelly Bean.Sam is a kid.Therefore,we can conclude that Sam likes Jelly Bean.Which type of reasoning does this indicate?

A) intuitive reasoning
B) inductive reasoning
C) deductive reasoning
D) critical reasoning

Question 26

Which of the following is a proactive employee strategy of fraud deterrence?

A) perception of detection
B) analysis of financial statement
C) analysis of statistical data
D) employee contracts

Question 27

Which of the following is a difference between an internal auditor and an external auditor?

A) An internal auditor conducts the audit because a deficiency has been identified, whereas an external auditor conducts audits on a recurring basis.
B) An internal auditor manages accounting and internal control of an organization, whereas an external auditor examines the financial data of an organization.
C) An internal auditor's reports are used by the users of the financial statements, whereas the external auditor's reports are used by the management and internal auditor.
D) An internal auditor reports on the level of compliance with a company's internal policies, whereas the external auditor reports on the level of compliance with external laws and regulations.

Question 28

The internal auditor's functions exist to support the other three representatives of an organization:

A) the board of directors, executive management, and the external auditor.
B) the board of directors, executive management, and the transactional accountant.
C) the transactional accountant, board of directors, and the external auditor.
D) the transactional accountant, executive management, and the external auditor.

Question 29

Which of the following best describes a whistle blower complaint?

A) It is an informal disclosure of personal issues of an employee with other employees within an organization.
B) It is a disclosure by a person of wrong doing or misconduct within an organization.
C) It is an annual complaint forum designed to discuss issues of an organization.
D) It is a complaint raised by the SEC toward an organization.

Question 30

Which of the following defines the term deductive reasoning?

A) It is defined as reasoning from the general to the specific.
B) It is defined as reasoning from a logically valid conclusion to the premises.
C) It is defined as generalizing results to arrive at a valid conclusion.
D) It is defined as reasoning from particular facts to general conclusions.

Question 31

Which of the following is the objective of an external auditor?

A) form an opinion on the overall financial statements taken as a whole
B) capture and record all economic transactions of the organization
C) ensure compliance with policy and procedures; offer recommendations for improvement of internal controls
D) address a specific question/issue

Question 32

Which of the following is true of an internal auditor?

A) The responsibilities of an internal auditor extend beyond the processing functions of a transactional accountant.
B) A qualified opinion from the internal auditor adds credibility to the organization and its financial statements.
C) The internal auditor issues reports that are used by the stakeholders and other users to understand the financial statements of an organization.
D) The budgets, cash flow statements, income statement, and balance sheet of an organization is prepared by the internal auditor.

Question 33

Which of the following is a difference between an external auditor and a forensic accountant?

A) An external auditor captures and records all economic transactions of the organization, whereas a forensic accountant ensures compliance with policy and procedures.
B) An external auditor manages the organization's accounting and internal control system, whereas a forensic accountant validates effectiveness of controls in various processes or areas of the organization.
C) An external auditor adds credibility to reported financial information, whereas a forensic accountant provides assurance that management is adequately identifying and mitigating risks.
D) An external auditor forms an opinion on the overall financial statements taken as a whole, whereas a forensic accountant addresses a specific question/issue.

Question 34

A ________ records,classifies and summarizes the financial transactions a company.

A) transactional accountant
B) internal auditor
C) external auditor
D) management accountant

Question 35

Which of the following forensic accounting services primarily focuses on determining who committed the fraud,the scheme of the fraud,the time frame and duration,how much was taken,and who else was involved?

A) fraud detection
B) fraud deterrence
C) fraud examination
D) fraud anticipation

Question 36

Which of the following is the most significant practice component of forensic accounting As indicated by the results of a 2011 AICPA survey?

A) bankruptcy
B) business valuations
C) insolvency and reorganization
D) computer forensic analysis

Question 37

Which of the following forensic accounting investigation services includes proactive employee strategies such as preemployment screening,employee training,and employee monitoring strategies?

A) fraud detection
B) fraud deterrence
C) fraud examination
D) fraud anticipation

Question 38

Which of the following exemplifies the role of an internal auditor?

A) Chloe classifies the transactions of Pole Star, Inc. and records it in the books of accounts.
B) Chloe reports on the sufficiency of the insurance policies taken out on the assets of Pole Star, Inc.
C) Chloe reports on the financial position of Pole Star, Inc. at the end of the accounting period.
D) Chloe assists the management of Pole Star, Inc. to determine the taxes and tax benefits..

Question 39

Which of the following exemplifies the role of an external auditor?

A) Victor recorded the transactions entered in to by Trident, Inc. in the proper accounting period.
B) Victor prepared the annual budget of Trident, Inc., and he also helped the department heads prepare budgets for each department.
C) Victor evaluated the internal controls of Trident, Inc. and reported on the financial position as at the year end.
D) Victor conducted an investigation into the affairs of Trident, Inc. to allay suspicions of mismanagement of funds.

Question 40

All clouds are white.Some clouds are round.Which of the following can be concluded using deductive reasoning?

A) Some clouds are white.
B) No conclusion can be obtained.
C) White clouds are round.
D) Round clouds are white.

Question 41

List the major areas of the body of knowledge covered in the Certified in Financial Forensics (CFF)
Exam and Accredited in Business Valuation (ABV)Exam.

Question 42

Which of the following is a primary responsibility of a testifying expert?

A) to render an opinion that will assist the judge in understanding the evidence
B) to render an opinion that will assist the attorney in advocating for the client
C) to render an opinion that will assist the attorney in understanding the evidence
D) to render an opinion that will assist the trier of fact in reaching a judgment

Question 43

All birds have wings.Kiwis have wings.Which of the following can be concluded using deductive reasoning?

A) Kiwis are birds.
B) No conclusion can be obtained.
C) All birds are Kiwis.
D) Kiwis can fly.

Question 44

Apart from fraud-related investigations,what other investigations are forensic accountants commonly engaged in?

Question 45

Which of the following represents the relative importance of the three components of oral communication?

A) body language - 55%, voice tone - 35%, and words - 10%
B) body language - 30%, voice tone - 50%, and words - 20%
C) body language - 45%, voice tone - 25%, and words - 30%
D) body language - 20%, voice tone - 10%, and words - 70%

Question 46

Which of the following organizations provide forensic accounting certifications?

A) Institute of Certified Cost & Management Accountants
B) Institute of Management Accountants
C) American Institute of Certified Public Accountants
D) Chartered Financial Analyst Institute

Question 47

Write a short note on career opportunities for forensic accountants in both the private and public sectors.

Question 48

In 2008,the sales of the Trident Inc.went up by 10% and its stock prices increased by 20%.In 2010,the sales of the Trident Inc.went up by 15% and its stock prices increased by 30%.You conclude that in 2013,since the sales increased by 5%,the stock price will increase by 10%.Which type of reasoning are you using?

A) deductive reasoning
B) intuitive reasoning
C) suggestive reasoning
D) inductive reasoning

Question 49

Write a short note on value of critical thinking for forensic accountants.

Question 50

Define forensic accounting.