Fraud and Forensic Accounting

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Lockboxes are used for

collects payments, deposits them into the company's bank account, and send the company a remittance list. Minimizes the risk of theft and embezzlement

what does the principle of predication require

requires reasonable justification for each step in the evidence collection process

crime of using the threat of force to gain some benefit from a victim is

robbery

which of the following is a source of law in the United States? Case law, Constituational Law, Administrative Law, Statutory Law

Constitutional, Statutory, Case, and Administrative law

segregation of duties relates primarily to which of the following

Control activities

a false positive is said to occur when which of these occurs

a fraud indicator incorrectly indicates an ongoing or past fraud

one important element to include in an engagement letter is

a mediation or arbitration requirement

how is a determination of whether a segment is materially misstated made

by comparing the tolerable misstatement to the results of testing

investigation risk is...

chance of making less than than optimal decision in deciding what evidence to collect how to collect it and how to interpret it

what is the ultimate item of evidence that is admissible in court

confession

What is a term that some business processes are called

cycles

what elements must be present in a criminal matter?

damages

what happens in an arraignment

defendant brought before judge, receives copy of charges, defendant enters a plea of guilty or not guilty

what is the reason that auditors audit companies

determine whether their financial statements present the companies' financial position, results of operations, and cash flows in accordance with the accounting basis specified in the footnotes

how would you describe auditing

distinct from accounting

Fraud investigation process involves systematically gathering and reviewing evidence for the purpose of

documenting the presence or absence of fraud

what are the steps in a systematic fraud investigation

engagement process, evidence collection process, reporting process, loss recovery process

the first 10 amendments of the U.S. Constituion are the

Bill of rights

inspector general applies to ...

government agents

fraud theory is similar to a fraud schem except with respect to what

why?

best approach during interviews

withhold knowledge of evidence for strategic or tactical reasons

are corrective controls more expensive than detective controls

yes

the fraud theory approach to evidence collection

1. analyze data 2. create hypothesis regarding a possible fraud 3. test hypothesis 4. fraud theory is supported by evidence

what are specific objectives of internal controls

1. ensuring compliance with applicable laws, regulations, professional rules and contractual obligations. 2. promoting strategic, tactical and operational efficiency and effectiveness.

How many components of risk must an auditor consider

4, audit risk, inherent risk, control risk, detection risk

who has the descretion to bring charges against a suspect

District attorney and Grand jury

what is an exception to the hearsay rule

Dying declaration, state of mind, business and governmental records, excited utterance, prior inconsistent statements.

likely incidence of fraud discovered by accident in small companies?

Higher

the usual penalty in a civil case is

Monetary Damages and Equitable Releif

which of the following groups is the primary promulgator of financial auditing standards for private companies

PCAOB

which of the following organizations were created by sox

PCAOB

what are the primary rule make body that affects the auditing profession

PCAOB, Fasb, Gasb, SEC

the concept of preliminary judgment of materiality is defined in which of the following

Practice

Direct appeals of U.S. District court cases are heard by the

U.S. district court of appeals

a business process is a set of coordinated activities and tasks that...

accomplish some organization goal

segregation of duties applies to separating which three functions

accounting, authorization and custody

application controls help ensure

accuracy, integrity and security

the client changes accounting principles in the last year, what does the auditor do

add a paragraph that draws the readers attention to this change

what provides the most protection for a tipster's privacy?

anonymity

evidence is

anything that affects the truth or falsity of an assertion made in an investigation or legal proceeding

approval applies to transactions that...

are fully authorized

primary person responsible for collecting the actual evidence to be introduced in court is

attorney

suspicino f fraud probably affects what

audit procedures selected by the auditor and amount of testing

audit trail permits auditors to

balance and reconcile acounts because it is documentation and records that allow the auditor to trace back the account balances to the original sources

an objective of the review of physical and document evidence is to

become as familiar with the business processes as possible

when is the assessment of inherent risk made?

before considering the effects of internal controls

The burden of proof in a criminal case is

beyond a reasonable doubt

physical evidence is what?

broad category of collected evidence, includes documentary evidence

best way to optimize loss management system is to first do what

budget fraud risk and maximize prevention effectiveness

one assessment of acceptable audit risk is made for which of these

entire audit

hypothesis testing involves what

examination of a piece of evidence to decide whether it is consistent with the fraud theory under consideration

what describes auditors

facilitators of the movement of capital between investorsa and companies issuing stock or between lenders and borrowers

those auditing the financial statements are most concerned about which of the following

flow of transactions through the accounts

two types of transactions processing controls are

general controls and application controls

SAS no. 99 requires auditors design financial audits in such a way to have a reasonable chance to what

have a reasonable chance of detecting misstatements in the financial reports

primary control in the purchasing side of the financial cycle is

having the treasury function make payments based on documentation from other departments

what general source of data does not apply to data driven fraud detection

reconciliation figures, batch control totals, missing invoices

what does fraud detection involve

identify fraud indicators

the engagement process includes what steps

incident report, make notifications, consider legal issues, consider loss mitigation, define scope, objectives and cost, engagement letter

acceptalbe detection risk depends on what?

inherrent risk, control risk and acceptable audit risk

sas 99 requires that auditors report any evidence found that fraud may exist to what?

inventory accounts, cash accounts, financial reports

after an initial assessment...

investigate some suspected frauds

describe the licensing of CPA's

issued at state level, and must pass uniform cpa exam

what is true of having a centralized case file in fraud investigation

it is advisable because doing so can be helpful in optimizing a fraud management system

crime intentionally and permanently converting another's property to one's own.

larceny

when should the primary suspect be interviewed?

last

the turnkey approach to systems developement is

less expensive than the classical approach

risk in the context of financial information is defined as..

likelihood that a material misstatement will influence the decision of a reasonable user of the financial statements

try to catch the fraudster in the act can...

lower investigation cost and provide good evidence in court

define tolerable misstatement

maximum amount of misstatement the auditor is willing to tolerate in a segment

an incident report is important because...

may serve as probable cause needed to subpoena records

The turnkey approach of systems development is

ready made prefabricated systems that include all needed software, documentation, training materials and vendor support are used without any design or programming work

when properly implemented, internal controls

minimize loss exposures

which way do companies tend to develop their information systems

modular

what is the process where the judge can rule out ceratin evidence.

motion in liminy

when fully operating, control processes

must be continuously monitored

risks affect what

nature, timing and extent of testing

when should CFE's include an opinion of guilt in their fraud reports

never

worldcom is an example of

none of the above

good general rule is that individual fraudsters are...

not deterred by prosecution

ideal control over cash registers, there should be

one employee assigned to each cash register

what function is not compatible with managing the AR ledger?

opening the mail, approving writeoff of bad debt, depositing customer payments to the company bank account

what is fraud theory

organized set of answers to questions: who, what, when, where, how and why

which of the following types of data would be useful for social networking analysis

phone records, membership records for boards of diretors for various companies, exmployment records containing lists of past employers

what are the major types of evidence

physical evidence, documentary evidence, observational evidence, interview evidence

fraud theory approach is...

posits a hypothesis, tests the hypothesis against evidence, then accepts, modifies or discards the hypothesis as warranted by the evidence

what is fraud scheme

predefined set of answers to who what how when where

three conditions that auditors consider when making judgments on materiality

presence of fraud, consequences arising from contractional obligations, and misstatements that affect earnings trends

what is the principle of reverse proof

principle that requires investigator to consider the evidence for both sides. investigator must consider and rule out all evidence that would support defense agruments

Define Auditing

process of gathering and evaluating evidence about information to determine the degree of correspondence between the information and the standards used to prepare the information

fraud reporting process can be defined as

process that involves documenting and summarizing the results of the fraud investigation

on which of these does internal control focus

processes

the classical approach to systems development, the developer

produces a custom blueprint for the desired system

what best describes how the principle of predication can affect private fraud investigators compared to law enforcement officials

provides less restraint

discovery sampling does what?

sometimes detect errors

in absence of a confession, which of the following is true about the fraud investigation?

sometimes points to a guilty person

what are the list of types of opinions expressed in audit reports

standard unqualified, unqualified with modified wording, qualified, adverse, disclaimer

primary objective in a fraud investigation is to

stop the fraud from continuing, make an example of the fraudster, punish the fraudster

what techniques would likely be most useful in determine whether a particular invoice is fraudulent?

text analysis

whose is responsible for the fraud theory in court

the attorney

fraud theory approach to fraud investigation involves using a fraud theory to structure which of the following?

the evidence collection process

GAAP dictate which of the following

the four basic transaction cycles

In many frauds, such as embezzlement, the cover-up is

the most difficult part of the fraud

define extortion

the threat of future force to gain some type of benefit from the victim

how are frauds most likely discovered in large companies

through hotlines

an attorney pursuing a court case against a fraudster generally

uses the same or different theory as the fraud investigator

an accountant opens the mail and posts check to AR, what is the best way to describe this internal control

weak

first question asked in a fraud investigation

what


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