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Forensic Accounting and Fraud Examination, 2nd Edition Test Bank

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    Chapter 01 - Introduction to Forensic Accounting and Fraud Examination 1-1 Chapter 01 Introduction to Forensic Accounting and Fraud Examination Multiple Choice Questions 1. Forensic Accounting is defined as: a. The practice of applying defined financial ratios to investigate a company’s financial health. b. The use of law enforcement to subpoena financial records to determine unlawful actions. C . The application of investigative and analytical skills for the purpose of resolving financial issues in a manner that meets standards required by courts of law. d. The investigatory arm of the Securities and Exchange Commission. Difficulty: Easy 2. If your actions are the result of misleading, intentional actions or inaction (including misleading statements and the omission of relevant information) to gain an advantage, then you have committed: a. Perjury. b. Contempt. c. Treason. D . Fraud. Difficulty: Moderate 3. Which of the following does a forensic accountant investigate? a. Purchases of Businesses. b. Valuation of divorce assets. c. Calculation of lost profits. D . All of the above. Difficulty: Easy

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    Chapter 01 - Introduction to Forensic Accounting and Fraud Examination 1-2 4. Which of the following two are types of auditors? A. External and Internal b. Internal and Forensic c. Forensic and International d. External and Forensic Difficulty: Easy 5. Forensic accounting can be broken into how many categories? A . Two: Investigative and Litigation. b. Two: Internal and External. c. Three: Investigative, External, Preventative. d. Three: Internal, Litigation, Certified. Difficulty: Moderate 6. What is one of the primary differences between a Financial Statement auditor and a Forensic Accountant? a. Financial statement auditors are likely to follow leads suggested by immaterial items whereas Forensic Accountants often must restrict their efforts to searching for material misstatements. B . Forensic Accountants are likely to follow leads suggested by immaterial items whereas financial statement auditors often must restrict their efforts to searching for material misstatements. c. Forensic Accountants must focus on specific legal areas that produce fraud charges under the courts of law whereas financial statement auditors focus their attention on the Generally Accepted Accounting Principles. d. Forensic Accountants are likely to ask individuals to fix discrepancies found in financial statements whereas financial statement auditors will fail a corporations financial statement certification, therefore having repercussions with the SEC. Difficulty: Hard

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    Chapter 01 - Introduction to Forensic Accounting and Fraud Examination 1-3 7. Which of the following is not a skill needed by a Forensic Accountant? a. Auditing Skills. b. Criminology. C . Sociology. d. Information Technology. Difficulty: Moderate 8. Which of the following events have made the Forensic Accounting industry more popular recently? a. Corporate Scandals. b. Sarbanes-Oxley Act of 2002. c. Crime Dramas on Television. D . Both a and b. Difficulty: Easy 9. Which is one of the areas that the Sarbanes-Oxley Act of 2002 has made CEO's rely on forensic accountants heavily? A .CEO ’ s must now certify their financial statements. b. CFO's must become qualified as forensic accountants. c. To become a CEO in a public company, their personal financial records must be certified by a forensic accountant. d. Both a and b. Difficulty: Moderate 10. According to the 2002 Report to the Nation on Occupational Fraud and Abuse, what percentage of corporate revenues were lost in that year to fraud? a. 2%. b. 4%. C . 5%. d. 8%. Difficulty: Moderate

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    Chapter 01 - Introduction to Forensic Accounting and Fraud Examination 1-4 11. Which of the following types of organizations typically use Forensic Accountants? a. Publicly held corporations. b. Private/non-profit corporations. c. Federal/State Agencies. D . All of the above. Difficulty: Easy 12. What is the most recognized fraud credential? A . Certified Fraud Examiner (CFE). b. Certified Public Accountant (CPA). c. American Counsel of Accredited Business Accountants (ACABA). d. Enrolled Agent (EA). Difficulty: Moderate 13. What types of organizations offer credentials to forensic accountants? a. Association of Certified Fraud Examiners. b. American College of Forensic Examiners. c. Institute of Business Appraisers. D . All of the above. Difficulty: Easy 14. Who was the founder of the Association of Certified fraud Examiners? a. The 187th Congress of the United States. b. President Bill Clinton. C . Joseph Wells. d. All of the above worked together to form the ACFE. Difficulty: Moderate

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    Chapter 01 - Introduction to Forensic Accounting and Fraud Examination 1-5 15. Which of the following is NOT a way to become a Certified Fraud Specialist (CFS)? a. Successfully completing a multipart examination that covers the detection, deterrence, investigation, and prosecution of white-collar crime. B . A bachelor's degree in business or ten years of accounting-related experience and pass the two parts of the Certified Fraud Specialist examination. c. Completing the ACFS Academy core courses and taking an examination at the end of each course. d. Being grandfathered in by means of submitting information on the experience and education. Difficulty: Hard 16. What is the mission of the Association of Certified Fraud Specialists (ACFS)? a. To encourage CPAs to report potential areas that a Forensic Accountant should be used within. b. To pre-screen potential Forensic Accountants who would make good FBI agents. C . To encourage its members to offer pro-bono service to the communities in which its members reside. d. All of the above are part of the ACFS's mission. Difficulty: Moderate 17. What is a way to become a CFS? a. Complete a multi-part examination that covers the detection, deterrence, investigation, and prosecution of white-collar crime. b. Complete the ACFS Academy core courses and take an examination at the end of each course. c. Be grandfathered in by means of submitting information on the experience and education of the candidate. D . All of the above are ways to become a CFS. Difficulty: Moderate

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    Chapter 01 - Introduction to Forensic Accounting and Fraud Examination 1-6 18. If you are a CPA and want to become credentialed by the National Association of Certified Valuation Analysts (NACVA), which credential would you be issued? A . Certified Valuation Analyst. b. Accredited Valuation Analyst. c. Certified Forensic Financial Analyst. d. National Valuation Analyst. Difficulty: Moderate 19. If you are experienced in the valuation field and want to become credentialed by the National Association of Certified Valuation Analysts (NACVA), which credential would you be issued? a. Certified Valuation Analyst. B . Accredited Valuation Analyst. c. Certified Forensic Financial Analyst. d. National Valuation Analyst. Difficulty: Moderate 20. If you are a litigation consultants and want to become credentialed by the National Association of Certified Valuation Analysts (NACVA), which credential would you be issued? a. Certified Valuation Analyst. b. Accredited Valuation Analyst. C . Certified Forensic Financial Analyst. d. National Valuation Analyst. Difficulty: Moderate 21. The National Litigation Support Services Association (NLSSA) allows only one CPA firm into its membership: A . In each Metropolitan Statistical Area. b. In each Megalopolis. c. Per million residents in the city it resides. d. Each four year presidential cycle. Difficulty: Moderate

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    Chapter 01 - Introduction to Forensic Accounting and Fraud Examination 1-7 22. The Institute of Business Appraisers (IBA) supports the valuating of which type of businesses? a. Public Corporations. b. Private Corporations. C . Closely-held Businesses. d. Non-Profit Organizations. Difficulty: Moderate 23. The Institute of Business Appraisers offers which certification? a. CPA. B . CBA. c. AICPA. d. EA. Difficulty: Easy 24. In which way does the AICPA support Forensic Accountants? a. Through its Forensic Accountants division. B . Through its Business Valuation and Forensic & Litigation Services section. c. Through its credentialing of Forensic Accountants. d. The AICPA does not support Forensic Accountants. Difficulty: Moderate 25. What credential does the AICPA offer? A . Accredited in Business Valuation. b. Accredited Business Accountant. c. Forensic Accountant Accreditation. d. Accounting for Forensic and Litigation. Difficulty: Moderate

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    Chapter 01 - Introduction to Forensic Accounting and Fraud Examination 1-8 26. How does forensic accounting differs from other types of accounting? a. It is a separate field that has no relation to accounting. b. Forensic Accountants require at least an masters in accounting. C . Forensic Accountants are more likely to be found dissecting these statements and obtaining evidence from other sources. d. General Accountants must hold to subjective evidence whereas forensic accountants must use objective evidence. Difficulty: Moderate 27. What is Defalcation? a. The ruling of a judge to restore the assets wrongfully taken to their rightful owner. b. The act of conspiring to commit perjury. c. The process of finding stolen assets through financial statement analysis. D . The appropriation of assets for the benefit of those who do not rightfully deserve them. Difficulty: Moderate 28. What are litigation services? a. It is another term for a law firm. b. It is a specialized branch of forensic accounting. C . It is the service provided to the courts to determine an equitable judgment. d. It is an out of court settlement service for corporations. Difficulty: Moderate 29. You are attempting to get two parties to compromise on a situation. This means that you are engaged in: a. Litigation. B . Mediation. c. Plea Bargaining. d. Grand Jury testimony. Difficulty: Easy

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    Chapter 01 - Introduction to Forensic Accounting and Fraud Examination 1-9 30. Misrepresentation is the act of presenting oneself in a manner that does not agree with reality. What does "presenting" mean? A . Actions, statements, or omissions. b. Words, court judgments or opinions. c. Appearance, style or function. d. Both a and b. Difficulty: Moderate True / False Questions 31. Forensic Accounting is a part of Fraud investigation. FALSE Difficulty: Moderate 32. Forensic Accounting does not greatly differ from traditional accounting. FALSE Difficulty: Easy 33. Some forensic accountants perform investigations much like financial private investigators. TRUE Difficulty: Moderate 34. Internal Auditors are individuals from outside CPA firms that come into your business to perform an audit. FALSE Difficulty: Easy

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    Chapter 01 - Introduction to Forensic Accounting and Fraud Examination 1-10 35. Investigative services that may or may not lead to courtroom testimony. TRUE Difficulty: Moderate 36. Errors are always an indication of intentional fraud. FALSE Difficulty: Moderate 37. Due to the Sarbanes-Oxley Act of 2002, CEO's no longer have to sign their financial statements. FALSE Difficulty: Easy 38. Governmental agencies never use forensic accountants. FALSE Difficulty: Easy 39. To date, there are only two forensic accounting organizations in the world. FALSE Difficulty: Moderate 40. It is possible to hold credentials as a forensic accountant. TRUE Difficulty: Easy

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    Chapter 01 - Introduction to Forensic Accounting and Fraud Examination 1-11 Essay Questions 41. Describe how a forensic accountant would employ his or her skills? Forensic accounting is the application of investigative and analytical skills for the purpose of resolving financial issues in a manner that meets standards required by courts of law. Notice that forensic accounting is not limited to the use of financial investigations that result in legal prosecution; the investigation and analysis must, however, meet the standards required in the court of law that has jurisdiction. Difficulty: Moderate 42. Compare and contrast the usage of internal versus external auditors. Internal auditing is the process by which a company's operations are verified by employees of the company known as internal auditors. Internal auditors may also be involved in collecting and evaluating information to assist in determining whether operations should be changed. Conversely, External auditors are not employees of the company; they are auditors (licensed by the state in which they practice who have passed the Certified Public Accountant examination or, if a Chartered Accountants, have passed the Chartered Accountant examination and are licensed by the country in which they practice) hired to determine whether the financial statements of the company fairly present, in all material respects, financial position, results of operations, and cash flows in accordance with specified criteria (usually generally accepted accounting principles). Difficulty: Moderate 43. How is defalcation different from misrepresentation? The appropriation of assets for the benefit of those who do not rightfully deserve them, whereas the act of presenting oneself in a manner that does not agree with reality. Difficulty: Hard

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    Chapter 01 - Introduction to Forensic Accounting and Fraud Examination 1-12 44. What are some of the special skills that a forensic accountant might use in their trade? Forensic accountants apply special skills in accounting, auditing, finance, quantitative methods, certain areas of the law, research, and investigative skills to collect, analyze, and evaluate evidential matter and to interpret and communicate findings. Difficulty: Moderate 45. What are some of the areas a forensic accountant should be knowledgeable in? Auditing, Investigative, Criminology, Accounting, Legal, Information technology (IT) and Communication. Difficulty: Moderate 46. In what sectors of our economy can forensic accountants find work? Forensic accountants can be employed in all types of businesses including: Public/private corporations, closely held businesses, non-profits and Federal, State, County and Local governments. Difficulty: Easy 47. Even if a case does not go to court, a forensic accountant might be called upon to assist during what two types of situations (define both)? Mediation and arbitration. Mediation is assisting parties with differing perspectives to arrive at a compromise. Arbitration is a hearing and deciding a case that involves parties that have taken different positions. Difficulty: Hard

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    Chapter 01 - Introduction to Forensic Accounting and Fraud Examination 1-13 48. Name some of the organizations that support forensic accounting: The Association of Certified Fraud Examiners, the American College of Forensic Examiners, the Association of Certified Fraud Specialists, the National Association of Certified Valuation Analysts, the National Litigation Support Services Association, the Institute of Business Appraisers, and the American Institute of Certified Public Accountants. Difficulty: Easy 49. What does credentialing mean? Some of the organizations that support forensic accounting will evaluate the forensic accountant’s knowledge and experience based upon education, time in the field and written examinations. These organizations will then issue a credential based upon these criteria. This is similar to the CPA credential. Difficulty: Moderate 50. What was one of the biggest changes in the SOX of 2002 that increased the usage of forensic accountants? CEO's now had to personally sign the financial statements and could personally be held liable for any fraud within those statements. Difficulty: Easy

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    Chapter 02 - The Forensic Accounting Legal Environment 2-1 Chapter 02 The Forensic Accounting Legal Environment Multiple Choice Questions 1. In most cases, the penalties of monetary damages or equitable relief are awarded in which type of case? A . Civil. b. Criminal. c. Grand Jury. d. Disposition. Difficulty: Easy 2. Whom does the burden of proof fall upon? a. Defense. B . Plaintiff. c. Jury. d. Investigators. Difficulty: Easy 3. The burden of proof must be met to satisfy the judge or jury in which of the following types of trials? a. Civil. B . Criminal. c. Both a and b. d. Trails involving monetary damages. Difficulty: Moderate

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    Chapter 02 - The Forensic Accounting Legal Environment 2-2 4. State Constitutional laws are considered supreme laws unless: a. The burden of proof is not meet. b. There are local laws that are violated. c. The case is a criminal case. D . The State laws are in conflict with the U.S. Constitution. Difficulty: Moderate 5. The Bill of Rights are: A . The first 10 Amendments to the U.S. Constitution. b. The Declaration of Independence. c. The 10 Commandments. d. The rules of conduct for the courtroom. Difficulty: Easy 6. If a decision from a U.S. District Court is to be appealed, it will be heard in the: a. U.S. Supreme Court. b. State Supreme Court. C . U.S. Circuit Courts of Appeal. d. State Circuit Courts of Appeal. Difficulty: Moderate 7. Who has the sole discretion to bring charges in any case? a. Investigator. b. Circuit Court. c. Judge. D . District Attorney. Difficulty: Easy

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    Chapter 02 - The Forensic Accounting Legal Environment 2-3 8. During arraignment, the accused must be presented with a written copy of: A . The charges. b. The evidence against them. c. Bail. d. The jury. Difficulty: Moderate 9. If a motion in limine is made, the judge may: a. Excuse some jury members. B . Exclude some evidence. c. Modify bail conditions. d. Provide a lawyer to the defendant. Difficulty: Moderate 10. Hearsay evidence may be used during: a. If the defendant is pleading guilty. b. During the trail if the defendant waives their right to hearsay evidence. c. During a preliminary hearing. D . None of the above. Difficulty: Moderate 11. If a client turns over evidence to their attorney with the purpose of attempting to make it a privileged communication, a judge may: A . Allow the evidence into the case. b. Never allow the evidence into the case. c. Call a mis-trial. d. Dismiss the attorney. Difficulty: Hard

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    Chapter 02 - The Forensic Accounting Legal Environment 2-4 12. Burglary, Embezzlement, Larceny, Robbery, Fraud and Extortion are which types of crimes? a. Federal Criminal Acts. b. State Criminal Acts. c. Constitutional Violations. D . Common Law Crimes. Difficulty: Moderate 13. The difference between civil and criminal law violations is that criminal cases will involve: A . The violation of a Statute. b. The violation of the U.S. Constitution. c. The use of an attorney. d. Plea agreements. Difficulty: Easy 14. The U.S. Constitution contains how many amendments? a. 12. b. 14. c. 24. D . 27. Difficulty: Hard 15. Where are the Federal statutory laws set forth? a. U.S. Constitution. b. Laws of Government. C . United States Code. d. U.S. Circuit Court. Difficulty: Moderate

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    Chapter 02 - The Forensic Accounting Legal Environment 2-5 16. District Attorneys are also known as: A . Prosecutors. b. Defendants. c. Jury Foremen. d. Court Recorders. Difficulty: Easy 17. If an employee is determined to have been under pressure to commit the crime, had the opportunity to commit the crime and has complete rationalization for committing the crime, then the employee is caught in a(n): a. Evidentiary motion. b. Sworn statement. C . Fraud triangle. d. Fruit of the poisonous tree. Difficulty: Moderate 18. A forensic accountant can become involved in financial crimes investigation by being: a. An in-house accountant. b. External auditor. c. External consultant. D . All of the above. Difficulty: Moderate 19. If you are chosen to serve on a Grand Jury, you will serve: a. For one trial. B . For a specific period of time. c. Until you are released by the judge. d. Until you are selected for a trial jury. Difficulty: Moderate

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    Chapter 02 - The Forensic Accounting Legal Environment 2-6 20. If evidence in a trial is deemed to be gained as a Fruit of a Poisonous Tree, it means that: A . The evidence was gained via a defective search warrant. b. The evidence was provided by someone who wanted the defendant to be found guilty. c. The custody chain for the evidence has been broken. d. The evidence was planted. Difficulty: Moderate 21. To arrest a suspect, law enforcement must have: a. Indisputable evidence that the person is guilty. b. A search warrant. C . Probable cause. d. DNA evidence. Difficulty: Moderate 22. If issued a Citation, a person must: a. Report for incarceration. B . Submit to the booking procedure within several days after the citation. c. Sign a confession. d. Provide evidence that they are not guilty. Difficulty: Easy 23. The RICO provides a basis for which of the following: a. Control over organized gambling. b. Federal Witness Security Program. c. Forfeiture of assets used to commit crimes. D . All of the above. Difficulty: Moderate

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    Chapter 02 - The Forensic Accounting Legal Environment 2-7 24. The Foreign Corrupt Practices Act is applicable to whom? a. United States Congressmen. b. U.S. Corporations who do businesses in other country. C . Any corporation. d. All of the above. Difficulty: Hard 25. The Sarbanes-Oxley (SOX) Act of 2002 provides detailed updates to and modernization of: a. The United States Code. b. The United States Constitution. c. The Federal Communications Commission. D . The Securities and Exchange Act of 1934. Difficulty: Moderate 26. The first major computer crimes act was: a. The Sarbanes-Oxley (SOX) Act of 2002. B . Computer Fraud and Abuse Act. c. The Cyber Intrusion Detection Act of 1996. d. Computer Detection Infiltration Act. Difficulty: Hard 27. If two or more people agree to commit a crime, with even the smallest amount of coordination, they have committed a: A . Conspiracy. b. Robbery. c. Burglary. d. Fraud. Difficulty: Easy

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    Chapter 02 - The Forensic Accounting Legal Environment 2-8 28. Attorney's may ask leading questions: a. On direct examination but not cross examination. B . On cross examination but not direct examination. c. On both direct and cross examination. d. On neither direct nor cross examination. Difficulty: Hard 29. If a prosecutor and defense attorney are exchanging witness statements and other evidence, they are participating in: a. Fraud. b. Conspiracy. c. Voir dire. D . Discovery. Difficulty: Moderate 30. Double Jeopardy is when: a. You can be tried for the same crime in both Federal and State courts. b. You cannot be tried in the same court for the same crime once the trial begins. c. You cannot be tried for the same crime in the same court if the judge dismisses the case. D . All of the above are true. Difficulty: Moderate True / False Questions 31. Civil crimes always involve police, prosecutors and courts. FALSE Difficulty: Moderate

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    Chapter 02 - The Forensic Accounting Legal Environment 2-9 32. The first 10 Amendments are the primary foundation to the United States Code. FALSE Difficulty: Easy 33. The most important U.S. Code to Forensic Accountants is Title 18. TRUE Difficulty: Moderate 34. The Supreme Court must hear every case of appeal sent from the Circuit Courts. FALSE Difficulty: Moderate 35. There are many ways for a forensic accountant to become involved in a financial-crimes investigation, such as in the capacity of in-house accountant, as an external auditor, or as an outside consultant. TRUE Difficulty: Easy 36. The three elements of the Fraud Triangle are Pressure, Opportunity, and Rationalization. TRUE Difficulty: Easy 37. Search Warrants are the same as Affidavits. FALSE Difficulty: Easy

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    Chapter 02 - The Forensic Accounting Legal Environment 2-10 38. Plea Bargains may only take place prior to a trial beginning. FALSE Difficulty: Easy 39. A Motions in Limine a request from the defendant to exclude some evidence that may be introduced during the trial. TRUE Difficulty: Moderate 40. If a witness’s testimony is damaged upon cross examination, the defense may ask for a re - direct examination. TRUE Difficulty: Moderate Essay Questions 41. Describe the differences between a bench trial and a trial by jury? A bench trial is a trial where the judge decided guilt or innocence. A trial by jury is where 12 members of the jury decide guilt or innocence. Difficulty: Easy

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    Chapter 02 - The Forensic Accounting Legal Environment 2-11 42. Explain the construction of the United States Constitution and specifically describe the fourth article and the concepts it recognizes? The U.S. Constitution is consists of 7 articles and 27 amendments. The first 3 articles define the 3 major branches of government: the executive, judicial, and legislative branches. The fourth article defines the concepts of "full faith and credit" and "privileges and immunities". The full faith and credit concept requires that states "recognize" the public acts, records, and judicial proceedings of other states. The privileges and immunities concept more or less requires states to treat the citizens from other states the same as their own. For example, it would be unconstitutional for California to forbid citizens of New York from using its public beaches. Difficulty: Hard 43. If a trial will be held in the federal court system, and subsequently appealed, explain the types and names of the courts your case will be heard in. U.S. District Courts, of which there are 100 districts, some with multiple court houses, then the case would be appealed to a U.S. Circuit Court of Appeal, of which there are 11 and two D.C District Courts, then the case would go to the U.S. Supreme Court, which only hears cases that it agrees to review. Difficulty: Moderate 44. Who are District Attorneys and what is their function within the court system? District Attorneys are also referred to as Prosecutors. They are the plaintiff in the cases and have sole discression as to charges being made against a defendant or not. Difficulty: Easy

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    Chapter 02 - The Forensic Accounting Legal Environment 2-12 45. Describe how working papers can be an aid to the forensic accountant? Forensic accountants can use working papers to help ‘lock in' the stories of bookkeepers and accountants within a company that is being investigated and keep a record of what has occurred in the financial systems of that company. Difficulty: Moderate 46. Prior to a trial, the prosecution and defense may be involved in plea bargains. Explain how this process works? Prosecution will typically offer a defendant a reduced sentence for pleading guilty or providing evidence toward implicating others in this or other crimes. It is estimated that 90% of all cases are ‘pleaded out’ . Difficulty: Moderate 47. Explain the Personal Knowledge Rule and how expert witnesses are exempt from it. The personal knowledge rule is that witnesses can only testify to things that they personally observe with one or more of their own senses. Expert witnesses are exempt from the personal knowledge rule and are allowed to draw conclusions based upon evidence and facts presented to them. Difficulty: Moderate 48. When are communications considered privileged? Privileged communications are typically between professionals and their clients such as attorney-client, spouse-spouse, doctor-patient, psychoanalysts-patient, clergy-congregation, and accountant-client in certain tax matters. Difficulty: Easy

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    Chapter 02 - The Forensic Accounting Legal Environment 2-13 49. Describe some common law crimes. Larceny, Burglary, Conspiracy, Embezzlement, Fraud (False Pretenses), Robbery, Extortion, Arson, Solicitation, Aiding and Abetting (and the proper definitions of each of these) Difficulty: Moderate 50. Compare and contrast 18 USC 96: Racketeer Influenced Corrupt Organizations (RICO), 15 USC 78dd: Foreign Corrupt Practices Act (FCPA) of 1977 and The Sarbanes-Oxley (SOX) Act of 2002. The answer will contain some basic parameters that the codes/acts contain and describe how each of them is designed to cover illegal activities that occur in differing circumstances or industries. Difficulty: Hard

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    Chapter 09 - Fraud Examination Evidence I: Physical, Documentary, and Observational Evidence 9-1 Chapter 09 Fraud Examination Evidence I: Physical, Documentary, and Observational Evidence Multiple Choice Questions 1. Evidence includes: a. Physical objects b. Documents c. Observations D . All of the above Difficulty: Easy 2. If evidence is tangible, it is said to be _______ evidence. a. Documented b. Heresy C . Physical d. Forged Difficulty: Moderate 3. Which of the following would be a violation of the chain of custody? a. Locking documents in a safe that only the investigator has the combination to. B . Mailing original documents to another party without proof of receipt. c. Signing over original documents to legal counsel. d. Documenting the placing of items in a case file for storage. Difficulty: Moderate 4. How many ways is documentary evidence collected? A . 4 b. 3 c. 2 d. 1 Difficulty: Easy

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    Chapter 09 - Fraud Examination Evidence I: Physical, Documentary, and Observational Evidence 9-2 5. Two common approaches to using ratio analysis are: a. Internal and external. B . Horizontal and vertical. c. Formal and informal. d. Industry and general. Difficulty: Moderate 6. The general principle of Benford's Law is that: a. If fraud exists, the difference between horizontal analysis figures will be divisible by 9. b. Ratios will be increased or decreased by one digit if fraud exists. C . The likelihood that numbers 1, 2, 3, 4, 5, 6, 7, 8, and 9 will appear as the first digit in numbers occurring in a random data set conforms to a predictable pattern. d. The likelihood that numbers 2, 4, 6, 8 and 10 will appear as the first digit in numbers occurring in a random data sets conforms to a predictable pattern. Difficulty: Easy 7. Once financial statement fraud is suspected, how should the fraud investigator proceed? a. Call the district attorney to begin criminal proceedings. B . Determine whether the financial statements agree with the general ledger balances. c. Perform a Benford's Law test. d. Interview the accounting department staff. Difficulty: Moderate

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    Chapter 09 - Fraud Examination Evidence I: Physical, Documentary, and Observational Evidence 9-3 8. If documents are contested because one or more persons do not believe they are authentic, they are referred to as: a. Forensic Evidence. B . Questioned Documents. c. Altered Documents. d. Fraud trigger points. Difficulty: Easy 9. Alterations of documents might include: a. Added signatures after the document was created. b. Removal of letters or numbers on a document. c. Symbols that have been added or removed. D . All of the above. Difficulty: Easy 10. When businesses or persons obtain mortgages for things other than real estate, these are called: a. Leins B . Chattel Mortgages c. Collateral Loans d. Uncollateralized Loans Difficulty: Easy 11. Which of the following type of records can typically only be access by law enforcement? a. Commercial Databases b. Motor Vehicle Identification Number C . Dealership vehicle records d. UCC Filings Difficulty: Moderate

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    Chapter 09 - Fraud Examination Evidence I: Physical, Documentary, and Observational Evidence 9-4 12. If the fraud investigator is not an employee of the IRS, or a member of a federal agency that can obtain tax records via subpoena, how much he obtain the information? a. Through a bench warrant. B . Through discovery or voluntary consent of the tax payer. c. Through a subpoena issued by a Grand Jury. d. All of the above Difficulty: Moderate 13. When did the Social Security Administration begin tracking the SSDI? a. 1984 B . 1962 c. 1944 d. 1876 Difficulty: Easy 14. Databases, court records and real estate records are all considered: A . Sources of information for an investigation. b. Worthless in an investigation. c. Forensic data collections. d. Areas of hiding for individuals who wish to commit fraud. Difficulty: Moderate 15. How can UCC filings assist an investigator? a. They can see what real estate a company purchased. b. UCC filings will show when financial statements were submitted to the SEC. c. UCC filings will only show international real estate transaction filings. D . To determine whether mortgages on items other than real estate exist. Difficulty: Moderate 16. Where are most restricted databases maintained in each state? a. At the public safety headquarters. B . At the secretary of state's office. c. At the state information management computer backup location. d. Within the department of vital statistics office. Difficulty: Easy

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