Deck 15: Consulting, Litigation Support, and Expert Witnesses: Damages, Valuations, and Other Engagements

Question 1

Generally, in order to pursue a claim for legal damages successfully, the injured party must prove two points: liability and damages.

Answer 1

True

Question 2

The fraud examiner or forensic accountant often uses public records to verify the existence of the vendor business, the vendor's ownership, and the vendor's address and phone number.

Answer 2

True

Question 3

The accepted concept for measuring lost revenues or excess expenses over a loss period is to project incremental lost sales or increased expenses.

Answer 3

True

Question 4

In some cases, documents are not only subjected to confirmation with external transaction participants but also subjected to fingerprint analysis and procedures for forgery and/or fictitious or altered documents.

Question 5

Torts occur when a party has been injured, even though the parties to the suit do not have a contractual relationship.

Question 6

Essentially, two considerations ultimately determine the market and fair market value of an asset: the past income stream that can be verified and the difference between that and the income stream from alternative investment options.

Question 7

Although auditors rely heavily on documentation that supports transactions generated in the normal course of business; they typically do not often search public records.

Question 8

Practicing professionals, because of the nature of their independence and objectivity, should not accept contingent fee arrangements.

Question 9

Physical and video surveillance by the forensic professional is permitted and electronic audio evidence capturing spoken words does not require court permission.

Question 10

The asset valuation model starts with the assumption that the organization's balance sheet does a reasonably good job of identifying the company's assets and liabilities.

Question 11

Professional standards for expert witnessing require independence, as described in the AICPA code of conduct.

Question 12

Risk and return are inversely related.

Question 13

Fraud examination, forensic accounting, and litigation support activities can expose the traditional accountant to more risk than consulting engagements and, possibly, to more liability than traditional auditors.

Question 14

It is generally not necessary to determine the loss period in measuring commercial damages.

Question 15

Interviews are normally conducted under oath, so they carry the same weight as testimony and are invaluable tools used by the fraud examiner and forensic accountant for gathering information.

Question 16

Undercover operations are another tool used primarily by forensic accountants and sometimes by private investigators.

Question 17

Valuation engagements are created to value a business, business ownership interest, security, or intangible asset.

Question 18

The SEC has created the "Forensic and Valuation Services Section" to provide support to forensic accounting professionals.

Question 19

In litigation advisory services, accountants use their knowledge, skills, abilities, experience, training, and education to support legal actions.

Question 20

The unfortunate death of a person where another party may be held accountable can result in two general types of cases: wrongful death and survival actions.

Question 21

Public recodes EXCLUDE information about:

A) Real and personal property records
B) Criminal and civil litigation records
C) Credit history on individuals
D) Stock trading activities for public companies by executives

Question 22

Generally, in order to pursue a claim for legal damages successfully, the injured party must prove:

A) Liability
B) Damages
C) Both A and B
D) None of the above

Question 23

________ requires an estimate of future earnings or cash flows, a sense of the duration of those, and the derivation of an appropriate risk adjusted discount rate.

A) The discounted earnings or cash flows method DCF
B) Payback method
C) Accounting rate of return method
D) Book value method

Question 24

Which of the following is a concern in determining incremental costs?

A) Allocated costs
B) Accounting estimates
C) Time value of money
D) All of the above

Question 25

Valuations can be developed to address a number of issues. For example, they may help facilitate asset transfers by helping to determine value for all the following EXCEPT:

A) Asset liquidations
B) Mergers and acquisitions
C) Bankruptcy
D) Expect longevity of the CEO

Question 26

The accepted concept for measuring lost revenues or excess expenses over a loss period:

A) Project incremental lost sales or increased expenses
B) Validate opportunity costs
C) Validate sunk costs
D) Validate the fair value of assets

Question 27

________ value assumes a specific buyer or class of buyers. This may dictate the type of use that the buyers have for the assets and thus may create a price that is something other than market value or fair market value.

A) Book
B) Liquidation
C) Market
D) Investment

Question 28

________ value represents the amount of cash likely to be received by owners of an asset, assuming that pressure exists that will require the sales transaction to be completed quickly.

A) Book
B) Liquidation
C) Market
D) Investment

Question 29

Generally, damages result from a:

A) Tort
B) Breach of contract
C) Either A or B
D) None of the above

Question 30

Risk and return are ________ related.

A) Inversely
B) Positively
C) Not
D) Exponentially

Question 31

The venues where the fraud examiner or forensic accountant can expect to be evaluated, scrutinized, challenged, etc. excludes the following:

A) Deposition testimony
B) FASB
C) Trail testimony
D) Meetings with counsel where they determine how to proceed with the case

Question 32

The Accredited Senior Appraiser's ASA's Principles of Appraisal Practice suggests the following items be included from a valuation report with the exception of:

A) Description of the property that is the subject of the appraisal
B) The objectives of the appraisal work
C) The statement of contingent and limiting conditions to which the appraisal findings are subject
D) An opinion from FASB

Question 33

________ value represents an asset's balance sheet value, derived by subtracting accumulated deprecation from historical acquisition cost.

A) Book
B) Liquidation
C) Market
D) Investment

Question 34

CPAs may provide consulting services that are concerned with fraud but are not necessarily fraud examination services, auditing, or litigation support services. These might include all EXCEPT:

A) Assessing the risk of fraud and illegal acts
B) Performing bookkeeping services for the client
C) Evaluating the adequacy of internal control systems
D) Preparing company codes of business ethics and conduct

Question 35

Some of the methods that can be used to develop estimates of lost sales and incremental expenses include:

A) The Before and After Method
B) The Benchmark "Yardstick" Method
C) Either A or B
D) Neither A nor B

Question 36

The amount of loss in commercial damages may be affected by all EXCEPT:

A) The general economy
B) The conditions of the industry
C) The damages entity's completive environment
D) Compliance with GAAP

Question 37

________ value is used to describe the price of an asset, assuming that a willing buyer and willing seller can come to terms under normal market conditions.

A) Book
B) Liquidation
C) Market
D) Investment

Question 38

Generally, all employment benefits are lost when an injury or permanent disability occurs.

Question 39

In a forensic accounting investigation, documents are not only subjected to confirmation with external parties but also subjected to:

A) Fingerprint analysis
B) Destruction testing
C) Biometric analysis
D) Aural testing

Question 40

Successful plaintiffs may be awarded different types of damages. Which of the following is not considered damages?

A) Compensatory
B) Economic loss or restitution
C) Punitive
D) Emotional

Question 41

Define four different measures of value used by a forensic accountant.

Question 42

The decedent or his or her surviving family in a wrongful death suit may have suffered the following types of losses, both past and future, that need to be considered with the exception of:

A) Loss of earnings
B) Loss of employment benefits associated with the earnings
C) Losses associated with the ability to perform "nonmarket services"
D) Losses associated with intangible assets

Question 43

What must an injured party prove to be successful in a claim for damages?

Question 44

How may lost profits be calculated using typical benchmarks?

Question 45

What is included as an expert's work product?

Question 46

What are the considerations related to forecasting income and cash flows?

Question 47

What is the purpose of practice aids in forensic and valuation services?

Question 48

How many outs are there in an inning?

Question 49

What types of damages may ensue as a result of personal injury, wrongful death, and survival actions?

Question 50

Compare two methods that can be used to develop estimates of lost sales and incremental expenses.

Question 51

In Jones and Laughlin vs. Pfeifer, the Supreme Court allowed an option for projection earnings and the appropriate discount rate:

A) Case-by-case method
B) Below market discount method
C) Total-offset method
D) All of the above

Question 52

The estimate of earnings losses in a wrongful death case requires the evaluation of investigative areas with the exception of:

A) Determining the basis for earning losses: expected earnings versus diminished earnings capacity
B) Evaluating the deceased individual's strength of character
C) Analysis of employment history and related past earnings
D) Projected of probable career paths: before and after the loss

Question 53

What are the various categories and calculations used in ratio analysis?

Question 54

What are the different types of consulting and litigation support activities for fraud and forensic professionals?

Question 55

What are the different types of commercial damages?

Question 56

________ can have a significant negative impact on award calculation amounts in personal injury and wrongful death over time.

A) Deflation
B) Inflation
C) The payback period
D) The accounting rate of return

Question 57

What are some of the decisions that need to be made with regard to quantifying lost revenues and increased expenses?