Forensic Exam 2

Digital analysis is: a. the art of analyzing the digits that make up numbers like invoice amounts, reported hours, and costs. b. a technique which calculates the average probability for each grouping of data. c. the searching for expected relationships between numbers. d. the use of numeric values for decision making.

A

Fraud is best detected through financial statements by focusing on: Unexplained changes in financial statement balances Consistencies Intuition Management's behavior when financial statements are released

A

Kickbacks from vendors to buyers might generate one of the following symptoms. a. Buyer doesn't relate well to other buyers and vendors b. Decreasing purchases from favored vendor c. Increasing purchases from other vendors d. Decreasing prices and increasing quality

A

What are detectlets? a. ​Detectlets are small program plugins that discover specific indicators. b. ​Detectlets are infrequent accounting anomalies discovered during an audit. c. ​Detectlets are fraud indicators highlighted by the data process program during an audit. d. ​Detectlets are items discovered by the program that indicate the percentage possibility that fraud is present.

A

What is the primary drawback of the data-driven approach? Group of answer choices More expensive and time intensive than the traditional approach. Long wait time for tips or other indicators. Cannot highlight frauds while they are still small. The investigator loses control charge of the fraud investigation process.

A

When detecting fraud, it is important that fraud investigators: Remain objective and neutral. Assume guilt. Assume innocence. None of the above.

A

Which of the following is a commercial data-mining software? a. ACL b. QuickBooks c. Peachtree d. Excel

A

Which of the following is an analytical symptom of a kickback? Group of answer choices Decreasing purchases from other vendors Charging reasonable price for goods supplied Providing better quality goods Smaller purchase quantities

A

Which of the following is least effective while searching for anomalies? a. Comparing account balances in the statements from one period to the next. b. Calculating key ratios and comparing them from one period to the next. c. Performing horizontal analysis. d. Performing vertical analysis.

A

Which of the following is the most important step in data analysis? a. ​gathering the right data in the right format in the right time period b. ​understanding the available data c. ​learning the basics of table structure and field types d. ​learning the basics of key relationships and query syntax

A

Which of the following is true?​ a. ​Stratification is the splitting of data into casespecific tables. b. ​Stratification is an extension of summarization. c. ​Summarization provides detail for each grouping into tables. d. ​Stratification is utilized to create a zscore across data sets.

A

Which of the following statements is true about ODBC? a. It allows use of the powerful SQL language for searching and filtering of the data. b. It is generally slower and less robust than text files. c. IT departments are very comfortable in giving out ODBC connections. d. It is an application-level setting rather than a systemwide setting.

A

A ______ is a financial statement that reflects account balances at a specific point in time like a snapshot. a. periodic statement b. position statement c. change statement d. static statement

B

ACL stands for: a. Account Coverage Level. b. Audit Command Language. c. Actuarial Confidence Level. d. Auditors' Common Language.

B

According to Benford's law, 5 will be the first digit of a random number set: more often than 1. less often than 4. about the same as 6. more often than 3.

B

According to Benford's law, the first digit of random data sets will begin with a ______ more often than 2. Group of answer choices 7 1 3 4

B

Benford's Law: Is usually unsuccessful as a fraud detection tool Predicts that the first digit of random number sets will begin with a 1 more often than a 2, a 2 more often than a 3, and so on Applies to personal ID numbers All of the above

B

From the information given below, calculate the quick ratio. Particulars Amount (in $) Particulars Amount (in $) Cash 20,000 Accounts payable 11,000 Notes receivable 15,000 Wages payable 5,000 Stock 5,000 Retained earnings 20,000 Inventory 6,000 Notes Payable 8,000 a. .83 times b. 1.25 times c. 1.63 times d. 1.08 times

B

Horizontal analysis is different from vertical analysis in that: There is no difference between horizontal and vertical analysis Horizontal analysis calculates the percentage change in balance sheet and income statement numbers from one period to the next, while vertical analysis converts balances in a single period to percentages Horizontal analysis converts balances in a sigle period to percentages, while vertical analysis calculates the percentage change in balance sheet and income statement numbers from one period to the next Key ratios are compared from one period to the next

B

Horizontal analysis is performed when: Group of answer choices total assets are set at 100% and all other balances are a percentage of total assets. the percentage change in the balance sheet and income statement numbers is computed for one period to the next. there is a need to calculate and compare key ratios from period to period. detecting fraud through financial statements demands calculation of key ratios and comparing them from period to period.

B

If a search reveals that an employee and a vendor have the same telephone number, this result may indicate that: Vendors are overcharging for goods purchased Employees may be establishing dummy vendors Contractors are billing at the wrong rates A vendor is receiving kickbacks or other favors

B

Profit margin, return on assets, and return on equity are all examples of: Vertical analysis Key financial statement ratios Horizontal analysis None of the above

B

Which approach converts financial statement numbers as percentage of total assets or gross sales? Group of answer choices Horizontal Analysis Vertical Analysis Ratio Analysis Variance Analysis

B

Which of the following is a true statement regarding the United States Social Security Administration (U.S. SSA)? a. ​The U.S. SSA publishes a monthly list of newly issued Social Security numbers. b. ​The U.S. SSA publishes a monthly list of Social Security numbers that are no longer in use. c. ​The U.S. SSA database of valid numbers can be accessed by interested parties. d. ​The U.S. SSA database can be used to create mailing lists.

B

Which of the following is similar to ACL Audit Analytics data analysis software and is ACL's primary competitor? Group of answer choices Picalo IDEA Microsoft Office + ActiveData Z-score

B

Which of the following proactive fraud detection methods use Benford's Law to detect fraud? Group of answer choices Vertical analysis Digital analysis Real-time analysis Time trend analysis.

B

Which of the following records data for each case in a graph and analyzes the slope? a. ​summarization analysis b. ​timetrend analysis c. ​fuzzymatching method d. ​cross tables method

B

Which statistical approach is one of the most powerful and yet simple methods for identifying outliers? a. N-grams b. Z-score c. Time-trend analysis d. Soundex algorithm

B

While using n-grams, a match percentage of ________ or ________ generally indicates very similar values. a. 10 percent, smaller b. 20 percent, greater c. 5 percent, smaller d. 40 percent, greater

B

____ is the splitting of complex data sets into case-specific tables. a. Deviation b. Stratification c. Data mining d. Soundex

B

A detection method that focuses on the kinds of frauds that can occur and then uses technology to determine whether those frauds actually exists is called: Fishing fraud detection Data mining Data-driven fraud detection Benford's Law

C

A mathematical algorithm that predicts the percentage of the time each digit will appear in a sequence of numbers is: Group of answer choices inductive fraud detection. deductive fraud detection. Benford's law. horizontal analysis.

C

An advantage of ODBC to import data into a data warehouse is that: ODBC doesn't require the use of corporate database servers. ODBC compresses data when stored on a CD or DVD. ODBC automatically retrieves column names and types from the database. ODBC keeps the investigator from dealing with the difficult SQL language.

C

Benford's law: Group of answer choices applies to numbers that have built-in limits. is most effectively used with assigned numbers. applies best to numbers that occur naturally. uses ratios to detect fraud.

C

Data-driven fraud detection: Determined the cost of the fraud Identifies possible fraud suspects Looks for anomalies in databases All of the above

C

Identify the formula used to calculate z-score. Group of answer choices (Mean - Value)/Standard Deviation (Mean - Value)/(Mean + Value) (Value - Mean)/Standard Deviation (Value - Mean)/Median

C

Specific implementations of delimited text are called TSV. What does TSV stands for? a. toxicity screening value b. time segmented volume c. tab separated values d. tactical secure voice

C

The red-flag that is generally identified when vendors with invoices for the same amount on the same day are found is: a. dummy vendors. b. employees purchasing goods for personal use. c. billing more than once for the same purchase. d. providing poor-quality goods

C

What defines an extension of stratification? a. Matosas matrix b. A pivot table c. Summarization d. Soundex

C

What is the primary advantage of the data-driven approach? a. The investigator makes hypotheses and tests to see if each one holds true. b. It is less expensive and time intensive than the traditional approach. c. The investigator takes charge of the fraud investigation process. d. Data-driven fraud detection is proactive in nature

C

When conducting financial statement analysis, which ratio will be the most useful in determining whether a company has erroneously inflated accounts receivable? Current ratio Profit margin Accounts receivable turnover Debt percentage

C

When vertical analysis is performed: Ratios are used to detect fraud. Changes in significant balance totals are examined. Financial statement balances are converted to percentages. Total revenues are compared to total expenses.

C

Which of the following is an advantage of using data analysis software to detect fraud? It is a static approach, and results cannot be recombined in different ways. Data analysis software can only be used to analyze small data sets. Data analysis software can analyze entire populations rather than just samples. Significant numbers of hits can occurr, requiring iterative refinement of analyses.

C

Which of the following is true for accounting anomalies? Group of answer choices They are primarily caused by lack of training. They represent intentional sabotage of controls. They are problems caused by failures in systems, procedures, and policies. They represent fraud and normally result in legal action being taken.

C

Which of the following may result from a careful review of a Matosas Matrix? a. ​This action identifies indicators that have been circumvented. b. ​This action identifies indicator information that has been incorrectly input. c. ​This helps investigators improve the set of indicators utilized. d. ​This helps investigators identify fraud perpetrators.

C

Which of the following ratios can be used to assess a company's solvency? a. Current Ratio b. Return on assets c. Times-interest-earned d. Inventory turnover

C

Which of the following statements is NOT true? a. In recent years there have been many cases of financial statement fraud. b. Proactive fraud detection methods are in their infancy. c. Accounting anomalies indicate fraud has or is occurring. d. Fraud investigation involves determining who committed the fraud, the schemes used and how much money or assets were taken.

C

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 _______ . a. summarization b. stratification c. statistical regression. d. arithmetic progression

C

______ are a two dimensional view with cases in one dimension and the calculations in the other. a. N-grams b. Z-scores c. Pivot Tables d. Soundex algorithms

C

________ is an extension of stratification. Group of answer choices Matosas matrix A pivot table Summarization Soundex

C

An appropriate red flag search to detect kickbacks or other fraud being committed by vendors would include: Group of answer choices invoices without valid purchase order. employee and vendor telephone numbers are the same. purchase orders with zero dollar amounts by buyer. price increases greater than 30% for four consecutive years.

D

Benford's Law is: The most expensive of all the digital analysis methods to implement and use. The most effective way to identify actual frauds. A method that uses vertical financial statement analysis. An effective way to identify anomalies in data sets.

D

Benford's law can help detect fraud by: a. establishing weaknesses in the accounting control system. b. identifying accounting anomalies. c. focusing on unexplained changes. d. identifying possible attempts by fraudsters to make stolen amounts look random.

D

Identify the true statement about detecting fraud using financial statement reports. Group of answer choices Performing horizontal analysis requires converting the financial statement balances to percentages of total assets or gross sales. Vertical analysis is the most direct method of focusing on changes from period to period. Before performing a data-driven analysis that targets fraud and corruption in financial statements, all three types of financial statements need to be converted to change statements. Small frauds may not affect the summarized financial statements significantly to be detected.

D

Once a buyer starts accepting kickbacks from a supplier: Prices often increase Purchases from other vendors often decrease The supplier usually takes control of the purchasing relationship All of the above

D

One of the disadvantages of Benford's law in detecting fraud is: a. potential suspects are more likely to know you are trying to detect fraud than if you use such detection techniques. b. users must be thoroughly trained in its complexities to implement and use. c. that those cases with the lowest probabilities do not match Benford's law and may need further investigation. d. it only broadly identifies the possible existence of fraud; it fails to narrow possibilities to a manageable field of promising leads.

D

One of the most common errors investigators make when analyzing time trends is: a. incorrect data preparation. b. focusing only on one variable, time (the x-axis if graphed). c. not monitoring the time taken. d. not standardizing for time.

D

One way to view the results of multiple indicators is to use a chart called a ____________ . Group of answer choices Soundex algorithm summarization chart pareto chart Matosas matrix

D

The Soundex algorithm: Uses consonants but ignores vowels. Creates a numerical score representing how a word sounds. Is useful when fuzzy matching values. All of the above.

D

The proactive method of fraud detection is a six-step process. Which of the following is the correct process sequence? a. Identify possible frauds that could exist; catalog possible fraud symptoms; understand the business; use technology to gather data about symptoms; automotive detection procedures; analyze results; and investigate symptoms b. Catalog possible fraud symptoms; understand the business; identify possible frauds that could exist; analyze results; use technology to gather data about symptoms; and investigate symptoms c. Understand the business; identify possible frauds that could exist; catalog possible fraud symptoms; investigate symptoms; use technology to gather data about symptoms; and analyze results d. Understand the business; identify possible frauds that could exist; catalog possible fraud symptoms; use technology to gather data about symptoms; analyze results; and investigate symptoms

D

What is a unique feature of Picalo, the data analysis toolkit that differentiates it from other packages? a. ​Picalo includes sampling techniques. b. ​The primary focus of Picalo is auditing. c. ​The Picalo program mames automation of procedures possible. d. ​The Picalo program is free.

D

When deciding which detection method to use, it is important to: Determine the advantages and disadvantages of each approach. Identify the costs involved. Determine which method will meet the client's objectives. All of the above.

D

When trying to identify outliers, what is one of the best statistical approaches? A pie graph indicating the relative amounts. Stratification of cases by value. Time trending using the high-low slope method. The z-score calculation.

D

Which of the following in the most complete definition of a Matosas Matrix?​ a. ​The Matosas Matrix is a table of data useful during audits. b. ​The Matosas Matrix is a compromise between prior and realtime data. c. ​The Matosas Matrix is a highlevel chart that lists a specific group of items (i.e., contracts) with their demographics over a specific period of time.. d. ​The Matosas Matrix is a highlevel chart listing possible fraud indicators related to a group of items (i.e., contracts) for a specific period of time.

D

Which of the following is the most direct method of focusing on changes in the company's balance sheet and income statement? a. Calculating key ratios and comparing them from period to period b. Comparing account balances in the statements from one period to the next c. Performing a vertical analysis d. Performing a horizontal analysis

D

Which of the following statements is true about the characteristics of real-time analysis? Group of answer choices With real-time analysis in place, there is no need for continual improvement and updating of indicators. It is a distinct technique because it specifically analyzes each transaction for correctness rather than for fraud. It does not allow real-time modification and deletion of less-effective indicators. Indicators are hard-coded into the system.

D

While using financial statement analysis, which ratio will be most useful in assessing the company's operational efficiency? Group of answer choices Current Ratio Quick ratio Cost of goods sold percentage Inventory turnover

D

____ include statistical summaries of each column that include control totals, mean, maximum, minimum, standard deviation, number of zero values, number of empty records, etc a. Captions b. Histograms c. Headings d. Descriptives

D

A single symptom (red flag) is almost always enough information to identify the type of fraud scheme occurring. True False

False

According to Benford's Law, the first digit of natural sets of numbers will begin with a 9 more often than with an 8. True False

False

According to Benford's law, the first digit of natural sets of numbers will begin with a 9 more often than with an 8. True False

False

Data-driven analysis uses the company's database to search for normal relationships between numbers. True False

False

The z-score calculation is the best way to stratify data. True False

False

Understanding the kinds of frauds that can occur is not important when using a data-driven detection method. True False

False

Unexplained changes are common in financial statements True False

False

Unusual patterns always indicate the existence of fraud. True False

False

Vertical analysis is a more direct method than horizontal analysis in focusing on changes in financial statements from one period to another. True False

False

Balance sheets must be converted to change statements before they can be used in detecting fraud. True False

True

Digital analysis using Benford's law can be performed on databases of any size. True False

True

ODBC is the best approach to import because it achieves a direct, rich connection to the source database. T/F

True

Vertical analysis is a useful detection technique because percentages are easily understood. True False

True

When using Benford's law, potential suspects are less likely to know you are trying to detect fraud than if you use more direct detection techniques. True False

True