Forensic Accounting Modules 6-9 (Chapters 5-8)

While using n-grams, a match percentage of ________ or ________ generally indicates very similar values.

20 percent, greater

Which of the following is an alternative when original documents are too voluminous to permit careful examination?

A summary of its contents may be acceptable.

What is invigilation?

A theft act investigative technique that involves close supervision of the suspects during the examination period.

Inaccuracies in ledgers represent which type of fraud symptom?

Accounting anomalies

Recording an expense to conceal fraud involves making a fictitious journal entry. A faulty journal entry is an example of which fraud symptom?

Accounting anomaly

______ fraud symptoms are procedures or relationships that are unusual or that do not make sense.

Analytical

_____ are relationships in financial or nonfinancial data that do not make sense, such as an unreasonable change in a volume, mix, or price.

Analytical anomalies

An auditor noticed that Company B had an exorbitant increase in sales and drastic decreases in its inventory and accounts receivables. This statement symbolizes which fraud symptom?

Analytical anomaly

Which category of individuals is the least likely to detect fraud at the conversion stage?

Auditors

Who in an organization is NOT in a good position to recognize fraud during the theft act?

Auditors

Implementing a system of independent checks is one of the most effective ways to deter fraud. Which one of the following is NOT a way of providing independent checks on employees?

Authorization required for purchases of over $2,000 or more

Check My Work Which of the following is NOT a warning sign indicating a possible problem with a document?

Authorized initialed changes

How does a smart embezzler manipulate accounting records to conceal fraud?

By increasing expenses

Which of the following is the term for keeping a record of when a document is received and what has happened to it since its receipt?

Chain of custody

Identify the best pattern/order to go about a theft investigation.

Check personnel records, interview former employers, search public records, interview other buyers, and interview suspect.

Which step in the electronic evidence collection process is important to ensure that the original disk is kept in its seized state?

Cloning

Which of the following is least effective while searching for anomalies?

Comparing account balances in the statements from one period to the next.

What is the term for gathering and analyzing electronic evidence?

Computer forensics

Which general term refers to the gathering of electronic evidence?

Computer forensics

A divisional manager is suspected of adding ghost employees to the payroll. Which investigative method can most easily uncover this type of fraud?

Concealment

An audit is part of which type of investigative method?

Concealment

Computer-based queries of accounting and other databases are utilized in which of the following investigation methods?

Concealment

Which investigation technique usually does not work well in kickback situations?

Concealment

Electronic surveillance may have only limited value in the investigation of employee frauds and many other white-collar crimes. Why?

Concerns regarding employees' privacy

Which of the following is an increasingly popular form of gathering physical evidence of fraud?

Confiscating and searching computers

Check My Work Document symptoms to some extent can signal that embezzlement is taking place. Which among the following usually does NOT point to some problem with the source documents?

Different names or addresses of payees or customers

Which of the following proactive fraud detection methods use Benford's Law to detect fraud?

Digital analysis

Which statistical sampling allows an auditor to generalize and make inferences from the sample to the population?

Discovery sampling

________ is a simple, statistically based method of analyzing a subset of transactions from a larger pool.

Discovery sampling

Which of the following is NOT a method for theft investigation?

Electronic searches

Which of the following is NOT a fraud symptom related to internal control weaknesses?

Excessive turnover of executives

Which of the following is the most important step in data analysis?

Gathering the right data in the right format in the right time period

Which of the following is a highly suspicious financial statement relationship?

Increased inventory with decreased payables

Which investigative method is most useful after you have gathered other types of evidence and know who to interview and what questions to ask?

Inquiry

Which of the following is the last step in an investigation?

Interview suspect

Which of the following statements is true about ODBC?

It allows use of the powerful SQL language for searching and filtering data.

What is the primary drawback of the data-driven approach?

It is more expensive and time intensive than the traditional approach.

Which of the following statements regarding invigilation is accurate?

It is most commonly used in such high-risk areas such 'as expensive inventory.

Fraud examiners must be able to recognize signals that a journal entry may have been manufactured to conceal a fraud. Which of the following is a common journal entry fraud symptom?

Journal entries made near the end of an accounting period

Allowing the clerk who checked out customer A to handle a return by that same individual without presenting the receipt would NOT be an example of which of the following weaknesses in internal controls?

Lack of an adequate accounting system

Which of the following fraud symptoms is often the easiest to detect?

Lifestyle changes

Which aspect of documentary evidence should be kept in mind to ensure that the documents can be identified later and accessible for trial?

Marking of evidence

Which of the following is an example of accounting anomaly fraud symptom?

Missing documents

Which of the following statements regarding ODBC is NOT accurate?

ODBC stands for Open Database Communications

Which of the following is the most direct method of focusing on changes in the company's balance sheet and income statement?

Performing a horizontal analysis

Which of the following is an example of secondary evidence?

Photocopies of documentary evidence

Which of the following is NOT an action by fraud perpetrators to hide/conceal their illegal act(s)?

Photocopying fraud-related documents

Which of the following observations concerning physical evidence is true?

Physical evidence is more associated with non-fraud types of crimes.

______ are a two-dimensional view with cases in one dimension and the calculations in the other.

Pivot tables

______ means that there are symptoms or red flags that a fraud may be occurring.

Predication

Several factors are considered in deciding whether or not to investigate fraud. Which of the following is NOT one of them?

Preparation of a surveillance log

Which of the following acts by management could discourage someone from reporting an observed act of fraud?

Providing a clear list of possible consequences

Which of the following usually motivates embezzlers to indulge in a fraudulent activity?

Pursuit of immediate gratification

An employee decides to steal cash from his/her employer. What would be the best way to conceal such a fraud?

Recording the stolen cash as an expense

Which of the following is NOT a common accounting anomaly fraud symptom?

Rounding adjustments

What is the term for the risk that the sample was not representative of the population?

Sampling risk

Which of the following statements regarding sampling risk is NOT accurate?

Sampling risk is generally insignificant when looking for fraud.

Identify the first step in any electronic evidence collection process.

Seizure of the device

Which of the following is an analytical fraud symptom?

Significant increase or decrease in account balances

Which of the following financial statements can be used to answer the question, "Where did the cash come from to pay dividends?"

Statement of cash flows

An investigator locates the scene that should be observed, anticipates the action that is most likely to occur at the scene, and keeps detailed notes on all activities involving the suspect. Which type of surveillance is being used here?

Stationary surveillance

What is another term used for discovery sampling?

Statistical sampling

Which of the following is a control problem related to segregation of duties?

Steve records receivables and writes off bad debts

____ is the splitting of complex data sets into case-specific tables.

Stratification

Which of the following is true?

Stratification is the splitting of data into case-specific tables.

Which of the following is an extension of stratification?

Summarization

Which investigation technique relies on a person's senses, especially hearing and seeing?

Surveillance and covert operations

Which of the following are theft act investigation methods that usually involve observing or listening to potential perpetrators?

Surveillance and covert operations

What is the primary advantage of the data-driven approach?

The investigator takes charge of the fraud investigation process.

Which of the following items is NOT included on a subpoena?

The location of the documents being requested

_______ involves the actual taking of cash, inventory, information, or other assets, whereas _______ involves selling stolen assets or transferring them into cash and then spending the cash.

Theft, conversion

Which of the following is true of most accounting errors?

They are problems caused by failures in systems, procedures, and policies.

Which approach converts financial statement numbers to percentages of total assets or total sales?

Vertical analysis

What is the most common way to obtain private documents for investigation?

Voluntary consent

The four most common examples of hard-to-get documentary evidence are:

Web-based e-mail accounts, private bank records, tax returns, and brokerage records.

Which of the following statements regarding documents versus eyewitnesses is NOT accurate?

When faced with a choice between an eyewitness and a good document as evidence, most fraud experts choose the witness.

Which statistical approach is one of the most powerful and yet simple methods for identifying outliers?

Z-score

A traditional audit that includes discovery sampling is LEAST appropriate for:

accounting databases.

When investigating fraud, investigators should usually interview suspects:

at the end of the investigation process so that they can gather sufficient evidence against them.

The least reliable method of obtaining documentary evidence is:

by accident.

In most investigations of a fraud suspect, investigators should begin by:

checking personal and company records.

In a Matosas matrix, there is a ___ for each indicator.

column

The red flag that is generally identified when employee and vendor telephone numbers are the same is:

dummy vendors.

Benford's Law can help detect fraud by:

identifying possible attempts by fraudsters to make stolen amounts look random

All transactions related to specific accounts, such as cash or inventory, are summarized in the:

ledger

Once investigators enter their indicators into the centralized database, the software performs _______ to find connections between people, places, events, and documents.

link analysis

A major difference between financial statement auditors and fraud examiners is that most financial statement auditors:

match documents to verify whether support exists for recorded information.

Check My Work The risk that an auditor will examine a fraudulent check and not recognize it as being fraudulent is called:

nonsampling risk.

During a concealment investigation, an investigator fails to recognize that an invoice had been forged. This represents a:

nonsampling risk.

One of the most common errors investigators make when analyzing time trends is:

not standardizing for time.

A ______ is a financial statement that reflects account balances at a specific point in time like a snapshot.

position statement

For fraud to occur, usually three elements are necessary: pressure, opportunity, and:

rationalization.

Methods for concealment investigation include all of the following EXCEPT:

searching public records.

While methods like high-low slope, average slope, handshaking, and Box-Jenkins exist, one of the most popular techniques for summarizing the slope of a graph is:

statistical regression.

The three most common ways to obtain hard-to-get documentary evidence are:

subpoena, search warrant, and voluntary consent.

Specific implementations of delimited text are called TSV. What does TSV stand for?

tab separated values

Surveillance is usually used to investigate:

theft acts

The best way to obtain documentary evidence is:

through computer-based queries of full-population accounting and other databases.

Which of the following records data for each case in a graph and analyzes the slope?

time trend analysis

A ____ is a tool for explicitly considering all aspects of the fraud and for establishing fraud theories.

vulnerability chart