Question 1

__________ are used when third parties (persons other than the client) have knowledge of some aspect of a financial or non-financial matter and can be asked to provide this information.

Accepted Answer

Confirmations are used to obtain information from third parties (such as banks, customers, vendors, etc.) regarding the accuracy of financial or non-financial information. This information is obtained to provide assurance on the financial statements or other information being audited or reviewed. Engagement letters establish the terms of the engagement and the responsibilities of both the auditor and the client. Subpoenas and grand juries are legal tools for obtaining evidence, but are not typically used in the context of an audit or review engagement.

Question 2

Through Net Worth Analysis, you are attempting to determine:

Accepted Answer

Net Worth Analysis attempts to determine the change in an individual's or company's net worth for a specific period, usually a year. It is not concerned with total earnings or the amount of debt financing.

Question 3

The basis for net worth calculations is:

Accepted Answer

The best choice for calculating net worth is D, which is Assets = Liabilities + Owner's Equity. This formula takes into account all aspects of an individual's financial situation by including all assets and liabilities. It shows the residual amount that will belong to the owner if all assets were liquidated and all of the liabilities were paid off.

Question 4

The pre-announcement of a forensic accountants investigation might do what in a business?

Accepted Answer

Pre-announcing a forensic accountant's investigation might force the guilty parties to stop their fraud, which will subsequently show up on the financial statements. This is because they would fear getting caught, leading to a halt in their fraudulent activities. While it may not necessarily make the guilty party confess or stop the fraud once and for all, it would certainly be an effective way of uncovering any fraudulent activity that's been going on.

Question 5

Vehicle, license and boat registrations are all examples of public databases.

Accepted Answer

Vehicle, license, and boat registrations are typically maintained by government agencies and contain personal information, making them private databases with restricted access, not public databases open to general access.

Question 6

If skimming has been in practice for years in a business, why might it be hard to detect using horizontal analysis?

Accepted Answer

Skimming involves stealing cash before it is recorded, so it does not show up in any financial statement. The amount of revenue would be lower, but expenses would not necessarily increase, since the stolen money was not recorded as an expense. Horizontal analysis compares financial data from different periods, so it would not reveal any differences when skimming has been occurring over multiple years.

Question 7

Social networking sites such as Facebook® and MySpace® can be a source of evidence.

Accepted Answer

Yes, social networking sites can provide digital evidence in various forms such as conversations, posts, photos, and location data. This information can be useful in investigations and court cases.

Question 8

Financial statement fraud is always discovered through missing documents.

Accepted Answer

Financial statement fraud can be discovered through a variety of methods, including but not limited to missing documents. Other red flags may include inconsistencies or errors in financial data, unusual transactions or patterns, unexplained changes in account balances or other financial metrics, and discrepancies between reported results and external indicators such as market conditions or industry benchmarks. Effective fraud detection and prevention programs typically involve a combination of internal controls, data analysis, and employee training to identify and mitigate fraud risks.

Question 9

Tracing and vouching are opposite investigation techniques.

Accepted Answer

The answer of Tracing and vouching are opposite investigation techniques....

Question 10

Confirmation is the receipt of evidence from third-parties of information that is (or should be) in the financial statements.

Accepted Answer

Confirmation is the process of obtaining evidence from third-parties about certain information that is presented in the financial statements. This evidence helps to verify the accuracy and completeness of the financial statements. Therefore, the given statement is true.

Question 11

Questioned documents are documents that are contested because their authorship or authenticity (or both) is not established.

Accepted Answer

This statement is true. Questioned documents are documents that are disputed or challenged because it is unclear who wrote them or whether they are authentic or not. Examples of questioned documents include wills, letters, contracts, and other written materials that are subject to legal or forensic scrutiny.

Question 12

Investigation methods used to detect financial statement fraud are similar to those used to audit financial statements.

Accepted Answer

The investigation methods used to detect financial statement fraud are similar to those used to audit financial statements. Both types of reviews involve analyzing financial data, comparing it to various sources of documentation, and conducting interviews with individuals involved in financial processes. However, the focus of an investigation of financial statement fraud is to uncover intentional misrepresentation or manipulation of financial information, whereas an audit is designed to provide assurance that financial statements are free from material misstatement due to error or fraud.

Question 13

Which of the following will NOT explain a change in net worth?

Accepted Answer

Inflation will affect the purchasing power of a person's net worth, but it does not represent a change in the actual value of assets or liabilities. Therefore, it does not explain a change in net worth. B, C, and D can all directly impact a person's net worth.

Question 14

It is impossible to determine which printer printed a document.

Accepted Answer

Forensic analysis can often determine which printer printed a document based on unique characteristics of the printout, such as microscopic imperfections, patterns specific to a printer model, or sometimes even encoded tracking information.

Question 15

When can a search warrant be executed?

Accepted Answer

A search warrant can generally be executed between 6 a.m. and 10 p.m., unless there is an exception allowed by law, such as if there is reason to believe that evidence may be destroyed if the search is delayed. However, a search warrant cannot be executed in the middle of the night unless there is a valid reason to do so.

Question 16

A process that allows information in various databases and files to be evaluated and integrated in such a way that associations become apparent is called a(n):

Accepted Answer

Link analysis is a process that involves the evaluation and integration of information from various databases and files to identify associations and relationships between people, entities, and other information. It helps in finding hidden connections, patterns, and anomalies that would be difficult to identify with traditional database search methods. The other options, such as Boolean search and financial records search warrant, are specific search techniques or legal procedures that may be used in certain situations but do not necessarily involve the integration of information from multiple sources.

Question 17

Chemical analysis is performed by means of infrared, fluorescence, and spectro-chromatography to establish the difference between inks appearing on the same paper in handwriting analysis.

Accepted Answer

The answer of Chemical analysis is performed by means of...

Question 18

Only a forensic accountant can present a search warrant for financial records to a suspect.

Accepted Answer

A search warrant for financial records can be presented by law enforcement officers, not necessarily limited to forensic accountants. Forensic accountants may assist in the investigation and analysis of financial records after they have been obtained with a search warrant, but they cannot present the warrant themselves.

Question 19

What is a search warrant?

Accepted Answer

A search warrant is a legal document issued by a judge or magistrate that authorizes the police or law enforcement officers to search a specific location and seize specific items or evidence related to a crime. It is a crucial tool in criminal investigations and allows law enforcement to conduct a thorough search while respecting the individual rights of privacy and protection from unreasonable search and seizure. Option A and B are incorrect because they do not relate to search warrants, while option C is incorrect because a search warrant is not vague, but rather provides specific information and instructions for the search.

Question 20

Besides a judge, what other person may issue a search warrant in certain jurisdictions?

Accepted Answer

In certain jurisdictions, a magistrate may issue a search warrant in addition to a judge. The other options listed (District Attorney, Elected Sheriff, and Grand Jury Foreman/woman) are not typically authorized to issue search warrants.

Quiz 9: Fraud Examination Evidence I: Physical, Documentary, and Observational Evidence