Investigative Accounting Test Preparation
Course Introduction
Investigative Accounting explores the role of accountants in detecting, investigating, and preventing financial fraud and misconduct. The course covers essential techniques such as forensic analysis, evidence gathering, and financial statement examination, all within the framework of relevant legal principles and ethical standards. Students will learn how to recognize signs of fraudulent activity, conduct interviews, perform data analysis, and prepare reports for legal proceedings. Through case studies and practical exercises, participants develop the skills necessary to support litigation, resolve disputes, and provide expert testimony in legal and regulatory contexts.
Recommended Textbook Fraud Examination 5th Edition by W. Steve Albrecht
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18 Chapters
886 Verified Questions
886 Flashcards
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Page 2
Chapter 1: The Nature of Fraud
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Sample Questions
Q1) Which of the following is NOT an example of a fraud-fighting career?
A)Working for the criminal investigation division of the IRS.
B)Serving as an expert witness.
C)Maintaining the security of public records.
D)Defending an organization being sued in a civil case.
Answer: C
Q2) How is the confidence element established in a Ponzi scheme?
A)By investing in prime bonds.
B)By issuing notarized certificates.
C)By paying returns to investors initially.
D)By returning money to all investors.
Answer: C
Q3) Which of the following frauds is usually the most expensive?
A)Vendor fraud
B)Customer fraud
C)Occupational fraud
D)Financial statement fraud
Answer: D
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3
Chapter 2: Who Commits Fraud and Why
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57 Flashcards
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Sample Questions
Q1) Which of the following about rationalization is NOT true?
A)Rationalization is a form of self-justification.
B)Rationalization is a way to lie to one's self.
C)People who rationalize feel they are basically honest people.
D)Rationalizing is unnecessary when there are multiple opportunities present to commit fraud.
Answer: D
Q2) When fraud occurs,the most common reaction to those affected by the fraud is:
A)Anger
B)Acceptance
C)Denial
D)Retribution
Answer: C
Q3) Documents and records are an important control activity.Which of the following statements concerning this activity is true?
A)They serve as excellent preventive controls.
B)Adequate accountability can exist even in their absence.
C)The entire accounting system serves as a documentary control.
D)They are poor detective controls.
Answer: C
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Chapter 3: Fighting Fraud: an Overview
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56 Verified Questions
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Sample Questions
Q1) Which of the following elements listed is one of the three basic elements of the fraud motivation triangle?
A)Concealment
B)Theft Act
C)Opportunity
D)Conversion
Answer: C
Q2) The most effective way to involve employees in the monitoring process is to provide a protocol for which of the following?
A)communication
B)office etiquette
C)administrative action
D)management oversight
Answer: A
Q3) All of the following are part of the fraud element triangle EXCEPT:
A)Theft act
B)Concealment
C)Conversion
D)Rationalization
Answer: D
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Chapter 4: Preventing Fraud
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Sample Questions
Q1) Which of the following describes the overall tone of the organization that management establishes through its modeling and labeling,organization,communication,and other activities?
A)detection framework
B)risk mitigation channel
C)support network
D)control environment
Q2) An organization requires that employees in its accounting department take mandatory two-week long continuous vacations once a year.It allows no exceptions to this rule.Which control activity is the company using?
A)Segregation of duties
B)Proper authorizations
C)Physical safeguards
D)Independent checks
Q3) Which of the following explains the Pygmalion effect?
A)Employees who commit fraud are likely to do so more than once.
B)The probability of fraud detection increases with the number of people involved.
C)People generally perform according to a leader's expectations.
D)Absence of controls leads to increased incidents of dishonesty.
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Page 6
Chapter 5: Recognizing the Symptoms of Fraud
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45 Verified Questions
45 Flashcards
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Sample Questions
Q1) What does the following journal entry indicate? Legal Expense..................2,900
Cash...............................2,900
A)$2,900 cash is due to an attorney.
B)A sum of $2,900 was received from attorney in advance.
C)$2,900 cash is due from an attorney.
D)An attorney was paid $2,900 in cash.
Q2) Increased scrap,excessive purchases,physical abnormalities,etc.are all examples of:
A)accounting anomalies.
B)external control weaknesses.
C)analytical anomalies.
D)unusual behavior.
Q3) Which of the following is a highly suspicious financial statement relationship?
A)Increased revenues with decreased inventory.
B)Decreased production with decreased scrap.
C)Increased revenues with increased receivables
D)Decreased cost per unit with increased level of output
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Chapter 6: Data-Driven Fraud Detection
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Sample Questions
Q1) An appropriate red flag search to detect kickbacks or other fraud being committed by vendors would include:
A)invoices without valid purchase order.
B)employee and vendor telephone numbers are the same.
C)purchase orders with zero dollar amounts by buyer.
D)price increases greater than 20% for several consecutive years.
Q2) Which of the following is similar to ACL and its primary competitor?
A)Picalo
B)IDEA
C)Microsoft Office + ActiveData
D)Z-score
Q3) 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
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8
Chapter 7: Investigating Theft Acts
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Sample Questions
Q1) Undercover operations are costly and time-consuming and should be used with extreme care.In which of the following situations would it be ineffective to conduct an undercover operation?
A)When law enforcement authorities are informed
B)When the investigation can be closely monitored
C)When other investigation methods are available
D)When the investigation can remain secretive
Q2) Which step in the electronic evidence collection process is important to ensure that the original disk is kept in its seized state?
A)Evidence mapping
B)Search
C)Seizure
D)Cloning
Q3) Which of the following is an increasingly popular form of gathering physical evidence of fraud?
A)reviewing spending habits of the those possibly involved
B)confiscating and searching computers
C)tracking missing inventory through bar codes
D)creating and viewing surveillance tapes
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Page 9
Chapter 8: Investigating Concealment
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Sample Questions
Q1) Which aspect of documentary evidence should be kept in mind to ensure that the documents can be identified later and accessible for trial?
A)Organization of evidence
B)Coordination of evidence
C)Marking of evidence
D)Chain of custody of documents
Q2) Computer-based queries of accounting and other data bases are utilized in which of the following investigation methods?
A)theft
B)conversion
C)concealment
D)inquiry
Q3) The risk that an auditor will examine a fraudulent check and not recognize it as being fraudulent is called _________ .
A)sampling risk
B)non-sampling risk
C)systematic risk
D)systemic risk
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10
Chapter 9: Conversion Investigation Methods
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Sample Questions
Q1) Mandy calls a local newspaper and pretends to be a neighbor who is away for the winter.She obtains account history and orders the newspaper for six months.Has Mandy committed a fraud? If yes,under which act?
A)No, the newspaper has not yet been delivered or paid.
B)Yes, she is in violation of the Gramm-Leach Bliley Act of 1999.
C)No, as the neighbor has not served any written notice to keep the information private.
D)Yes, she is in violation of Fair and Accurate Credit Transactions Act of 2003.
Q2) Which of the following does NOT constitute a federal source of information?
A)County clerk
B)CIA
C)Secret service
D)FBI
Q3) What is the main objective of the net worth method?
A)To determine the income and expenditure of an individual.
B)To determine the extent of the stolen funds.
C)To determine the financial position of the organization.
D)To determine the change in the net worth.
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Chapter 10: Inquiry Methods and Fraud Reports
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60 Verified Questions
60 Flashcards
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Sample Questions
Q1) Which of the following is the correct sequence of reaction to a crisis?
A)Denial, anger, rationalization, depression, acceptance
B)Rationalization, anger, depression, acceptance, denial
C)Denial, depression, anger, rationalization, acceptance
D)Rationalization, depression, anger, denial, acceptance
Q2) Which of the following is true concerning signed statements?
A)Allow the confessor to draft the statement.
B)The statement's wording should be general.
C)Declarants should read and sign the statement without undue delay.
D)Two people are legally required to witness the signing of the statement.
Q3) Which of the following is something that an interviewee might do or feel while in the denial phase?
A)Insult, harm, or slander the interviewer
B)Attempt to justify the act of the fraud
C)Become sad, withdrawn, or lose interest in the environment
D)Failure to comprehend what has been said
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Chapter 11: Financial Statement Fraud
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Sample Questions
Q1) Which of the following refers to when the auditor considers conditions that directly affect the auditee?
A)Low-order reasoning
B)Zero-order reasoning
C)Deductive reasoning
D)First-order reasoning
Q2) Which of the following are considered the backbone of capitalism and allow investors,lenders,and regulators to measure the performance of a business?
A)Government policies
B)Financial statements
C)Stock prices
D)Credit reports
Q3) Which of the following is NOT an activity specifically listed in the text as prohibited by the Sarbanes-Oxley Act for an auditor of a company to perform contemporaneously?
A)Appraisal or valuations services
B)Actuarial services
C)Income tax preparation services
D)Bookkeeping services
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13
Chapter 12: Revenue- and Inventory-Related Financial
Statement Frauds
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Sample Questions
Q1) One of the first tasks to understand the various revenue transactions in the company to uncover the revenue frauds is to:
A)determine how each transaction could be misstated.
B)evaluate the efficiency of the management.
C)analyze and diagram the various transactions between an organization and its customers.
D)identify scheme-specific symptoms and proactively search for more fraud.
Q2) In related-party transactions,fraud occurs when:
A)the transactions are not properly disclosed.
B)assets are transferred between related parties at fair value.
C)arrangements are made between two parties that create a conflict of interest in a business setting.
D)the arrangement creates operating revenues.
Q3) Inventory fraud often involves overstating inventory and/or understating cost of goods sold.The result is a decrease in the:
A)gross profit ratio.
B)inventory turnover ratio.
C)number of days sales in inventory.
D)accounts receivable turnover ratio.
Page 14
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Chapter 13: Liability, asset, and Inadequate Disclosure
Frauds
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Sample Questions
Q1) Which ratio will increase when accounts payable is not recorded?
A)Accounts payable/Inventory
B)Quick assets/Current liabilities
C)Accounts payable/COGS
D)Accounts payable/Total liabilities
Q2) When examining whether a company has underrecorded accounts payable,all of the following ratios are helpful EXCEPT:
A)Quick assets ÷ Current liabilities
B)Accounts payable ÷ Purchases
C)Accounts payable ÷ Cost of goods sold
D)Unearned revenue ÷ Accounts payable
Q3) Inadequate disclosure generally occurs through misrepresentations about the nature and products of the company through which means?
A)Board of Directors discussion
B)top management conferences
C)disclosures during employee recruitment
D)news reports
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Page 15
Chapter 14: Fraud Against Organizations
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Sample Questions
Q1) Identify the two basic bribery schemes.
A)Larceny and skimming
B)Kickbacks and bid-rigging
C)Economic extortion and illegal gratuity
D)Lapping and extortion
Q2) Which of the following statements with reference to extortion is true?
A)It is a crime even if the extortion message is only sent but not received.
B)The words "pay up or else" are insufficient to constitute extortion.
C)It is a crime even if the extortion message is sent either unwillingly or without the knowledge of the sender.
D)An extortionate threat made to another in jest is not extortion.
Q3) Thefts of inventory are divided into two groups.Identify them.
A)Corruption and bribery
B)Expense scheme and skimming
C)Economic extortion and illegal gratuities
D)Larceny and misuse
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16
Chapter 15: Consumer Fraud
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Sample Questions
Q1) Which of the following is NOT a common identity theft method?
A)filing for bankruptcy under the victim's name.
B)opening new bank accounts in the victim's name.
C)changing a victim's mailing address.
D)destroying personal property, such as a home or car.
Q2) Which of the following is the limit set on consumers' credit card fraud liability by Federal law?
A)$50
B)$100
C)$150
D)$200
Q3) Which of the following identity theft actions listed is considered to be part of the first dimensional actions?
A)efforts to gain victim's personal information.
B)larger thefts, often involving personal interaction, without much chance of getting caught.
C)largest thefts committed after perpetrators have confidence that their schemes are working.
D)small thefts to test the stolen information.
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Page 17
Chapter 16: Bankruptcy, divorce, and Tax Fraud
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Sample Questions
Q1) Which of the following is NOT a duty/function that bankruptcy judges perform?
A)Approve reorganization plans
B)Conduct hearings and trials to resolve disputes
C)Appoint fraud examination firms to conduct audits
D)Award professional fees
E)Bankruptcy judges perform all of the above functions
Q2) All of the following are examples of ways to conceal assets in a bankruptcy or divorce fraud except which one?
A)Not reporting sales on the debtor's books but dispersing them to another entity
B)Damaging or hiding the books and records of the debtor
C)Dispersing cash received from receivables to third party
D)Not disclosing interests held in other partnerships, corporations, or other assets
E)All of the above are ways to conceal assets
Q3) Bankruptcy and divorce can be which of the following categories?
A)Criminal matters
B)Civil matters
C)Either of the above
D)Neither of the above
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Chapter 17: E-Commerce Fraud
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Sample Questions
Q1) A hacker sends an e-mail impersonating technical support to two hundred employees of a company.Four employees respond with their password,thereby allowing the hacker to access the company's internal networks.Which technique is being discussed here?
A)Sniffing
B)Crawling
C)Phishing
D)Wartrapping
Q2) Which of the following can be defined as the use of unique features of the human body to create secure access controls?
A)Digital Signatures
B)Passwords
C)Biometrics
D)Firewalls
Q3) Which of the following is NOT an act of vandalism?
A)deleting a customer data file
B)pouring hot coffee on a company keyboard
C)stealing company data lists
D)throwing a computer monitor
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Page 19
Chapter 18: Legal Follow-Up
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Sample Questions
Q1) The term "voir dire" refers to:
A)the requirement to prove a case beyond reasonable doubt.
B)the need for the recipient to produce documents pertinent to the case.
C)the process of qualifying an expert witness to testify.
D)a situation when a defendant does not contest the charges but does not admit guilt.
Q2) The filing of motions for documents,filing of interrogatories,filing of requests for admissions,and obtaining subpoenas are all part of which phase of the civil litigation process?
A)Investigation and pleadings
B)Discovery
C)Motion practice and negotiation
D)Trial and appeal
Q3) What is the term for the motion when counsel requests the court to rule that all or a part of the claim should be dismissed because no genuine issue of a material fact is present?
A)motion for summary judgment
B)motion for settlement
C)motion for trial and appeal
D)motion for evidence suppression
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Page 20