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MULTIPLE CHOICE LO #1 & LO #2 Red flags indicating predication include: The individual handling cash is undergoing a divorce The individual disbursing checks is divorced The individual receiving cash is sick None of the above Signs of pressure that would prompt an individual to commit fraud include: A wealthy brother Success at work An change in home value Both “a”.
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In order for a ghost employee scheme to work, the paycheck for the ghost must go to the person involved in the scheme.                                          Falsifying time and attendance data are central to a ghost employee scheme One way to thwart a ghost employee scheme is for someone with no responsibility.
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An employee intercepts a blank check and forges the treasurer’s signature to conceal that the check is payable to the employee. This is an example of a forged maker.              Obtaining blank checks is unnecessary if the fraudster can produce counterfeit checks. Using an accomplice as the payee is one way to hamper.
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Multiple Choice 15-M/C #1.           CPAs may provide consulting services that are concerned with fraud but are not necessarily fraud examination services, auditing, or litigation support services. These might include all EXCEPT: Assessing the risk of fraud and illegal acts Performing bookkeeping services for the client Evaluating the adequacy of internal control systems Preparing company codes.
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Text Review Questions 11-TRQ #1.          Why is sales skimming called an “off-book” fraud? 11-TRQ #2.          What techniques are generally used to conceal a receivables skimming scheme? 11-TRQ #3.          Which is the most effective control to prevent receivables skimming? 11-TRQ #4.          What is the difference between skimming and cash larceny? 11-TRQ #5.          In cash larceny schemes,.
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10-T/F #1.              IDEA can read, display, analyze, manipulate, sample, and extract data from files obtained from many sources in only one format. 10-T/F #2.              ACL and IDEA are examples of commercially available data mining software. 10-T/F #3.              Benford’s Law can be used as an indicator of potential fraud. 10-T/F #4.              An association matrix.
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Text Review Questions 14-TRQ #1.          Why might senior management overstate or understate business performance? 14-TRQ #2.          What are some of the ways in which financial statement fraud is committed? 14-TRQ #3.          What is the conceptual framework for financial reporting? 14-TRQ #4.          What are the four classifications of financial statement fraud? 14-TRQ #5.          How are fictitious.
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Short Answer Essay 10-SAE #1.           List five assertions of management in respect to financial statements. 10-SAE #2.           List two commercial data extraction and analysis software and list four functions of this software. 10-SAE #3.           List and describe three graphical techniques used to support the forensics professional. Critical Thinking Exercise A married couple goes to a.
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Multiple Choice 13-M/C #1.           Which of the following is not a typical corruption scheme: Economic extortion Expropriation Bribery Conflicts of interest 13-M/C #2.           ________ are similar to bribery schemes, except that something of value is given to an employee to reward a decision rather than influence it. Conflicts of interest Economic extortion Illegal gratuities Expropriation 13-M/C #3.           ________ schemes are committed.
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MULTIPLE CHOICE LO#1 & LO#2 A shell company is: A fictitious company Is controlled by a fraudster Is used to conceal fraudulent invoices All of the above A pass through scheme requires: The availability of an accomplice at a legitimate vendor The ability to add vendors to the vendor master file The ability to change purchase order prices after approval All.
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Text Review Questions 9-TRQ #1.              What are the benefits of strong interviewing and interrogation skills? 9-TRQ #2.              Why are interviews in fraudulent financial statements and tax returns handled differently than interviews in other fraud examinations? 9-TRQ #3.              What are some suggested approaches for conducting interviews? 9-TRQ #4.              What are the five types of interview.
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A commission scheme can be detected by: Examining sales return patterns Examining sales over a certain amount Examining sales returns All of the above LO#8 & 9 Mischaracterized expense schemes include: Paying for entertainment of corporate clients Paying for expenses incurred on behalf of your employees Paying for expenses from an account you control All of the above Alteration of expenses.
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15-T/F #1.              Physical and video surveillance by the forensic professional is permitted and electronic audio evidence (capturing spoken words) does not require court permission. 15-T/F #2.              Undercover operations are another tool used primarily by forensic accountants and sometimes by private investigators. 15-T/F #3.              Generally, in order to pursue a claim for legal.
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One way of hiding assets is to: Place them is a trust Place them in a remote bank Place them in a child’s trust All of the above How would an investigator detect off-shore bank account made by a drug dealer: Through testimony of company personnel By tracing money transfers out of the country Through testimony of neighbors Through.
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Long answer questions: Match the following frauds with their appropriate definitiona.check is intercepted and cashed b.blank check is stolen and cashed c.check is stolen and payee added d.fictitious company added to the vendor master file e.goods purchased from a legitimate vendor, then resold to a fictitious company  4 f.terminated employee continues to be paid g.expense amount altered.
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Short Answer Essay 14-SAE #1.           List four steps to reduce the opportunity to commit financial statement fraud. 14-SAE #2.           List four red flags associated with improper disclosure. Critical Thinking Exercise A woman shoots her husband. Then she holds him underwater for over five minutes. Finally, she hangs him. But five minutes later they both.
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9-T/F #1.                  Rationalizations provide a morally unjustifiable reason for the target’s actions. 9-T/F #2.                  Introductory questions serve four primary purposes: providing an introduction, establishing a rapport, between you and the subject, establishing the theme of the interview, and observing the subject’s reactions. 9-T/F #3.                  As a general rule, private employers conducting an.
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14-T/F #1.              The conservatism constraint requires that, when there is any doubt, one should avoid understating assets and income. 14-T/F #2.              Relevance implies that certain information will make a difference in arriving at a decision 14-T/F #3.              Accurate financial statements are the responsibility of company’s external accountants. 14-T/F #4.              Financial statement frauds can.
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11-TRQ #1.          How are noncash assets misappropriated? 11-TRQ #2.          What types of company assets are typically misused? ssets that are misused but not stolen typically include company vehicles, company supplies, computers, and other office equipment. 11-TRQ #3.          How may the larceny of noncash assets be prevented? 11-TRQ #4.          What is meant by inventory “shrinkage”? 11-TRQ.
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13-TRQ #1.          What is a kickback scheme, and how is it committed? Answer:Kickbacks are classified as corruption schemes rather than asset misappropriations because they involve collusion between employees and vendors; in an asset misappropriation, no outsiders know the participants. In a common type of kickback scheme, a vendor submits a fraudulent.
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9-M/C #1.               Which step does NOT improve the quality of the interview during the information-gathering phase? Ask multiple questions at a time Begin by asking questions that are not likely to cause the respondent to become defensive or hostile Give the person an opportunity to qualify his or her answers Ask straightforward and frank.
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Multiple Choice 11-M/C #1.           An employee who would probably not be involved in skimming would be: The president of the company The cashier The accounts receivable manager The petty cash clerk 11-M/C #2.           Which internal control procedure is most effective in preventing skimming? Video cameras Segregation of duties Good records Cash accounts 11-M/C #3.           Which of the following is not typical.
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10-M/C #1.           One of the major functions of data security and privacy tools such as Privacy Suite is to: Copy files Rename files Overwrite files Recycle files 10-M/C #2.           The functions of data extraction and analysis software tools includes all EXCEPT: Sorting Input into payroll system Verifying multiples of a number Correlations analysis 10-M/C #3.           The functions of data extraction.
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Multiple Choice 10-M/C #1.           An information technology (IT) audit consists of all EXCEPT planning, tests of controls, substantive tests, qualitative tests. 10-M/C #2.           The general framework for viewing IT risks and controls include all the following EXCEPT IT Operations Systems Maintenance Human Resource Management Electric Commerce 10-M/C #3.           Which of the following is not considered CAATTs (Computer-Aided Audit Tools and Techniques).
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True/False 11-T/F #1.              Skimming schemes can be subdivided based on whether they target sales or receivables. 11-T/F #2.              When an employee skims money off-book sales of merchandise, the theft can be detected by comparing the register tape to the cash drawer. 11-T/F #3.              In order to conceal their thefts, some employees might ring.
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True/False 13-T/F #1.              Illegal gratuities are similar to bribery schemes, except that something of value is given to an employee to reward a decision rather than influence it. 13-T/F #2.              Corruption schemes are broken down into four classifications: bribery, illegal gratuities, economic extortion and larceny. 13-T/F #3.              Most company ethics policies forbid employees.
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Interrogations are for the purpose of securing a confession. Interviews can become interrogations. Objective #7 A fraudster erases files from his hard drive. This is an example of data alteration. Changing the payee’s name on a check is an example of alteration. Wiping a computer is a form of alteration. Objective #8 Andy Jones creates a shell.
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True/False 14-T/F #1.              The premise of the economic entity assumption is that the activity of a business enterprise should be kept separate and distinct from its owners and other business entities 14-T/F #2.              In valuing a firm’s assets for financial statement purposes, it is assumed that the business is not one that.
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Short Answer Essay 13-SAE #1.           Describe the features of an effective fraud reporting program within a company. Answer:Reporting programs should emphasize at least six points: fraud, waste, and abuse occur at some level in nearly every organization; this conduct costs jobs, raises, and profits; the organization actively encourages employees to come forward with.
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14-M/C #1.           One of the most popular methods of overstating inventory is through: Understating cost of goods sold “Phantom” inventory Overstating sales revenue Overstating inventory obsolescence 14-M/C #2.           Which of the following is NOT a red flag associated with improper disclosures? A strong, independent audit committee Domination of management by a single person or small group Rapid growth.
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11-T/F #1.              Software like IDEA and ACL is generally not suitable to detect skimming of cash. 11-T/F #2.              Most cash larceny occurs at the point of sale. 11-T/F #3.              “Death by a thousand cuts” involves stealing cash one thousand dollars at a time. 11-T/F #4.              Another way to conceal cash larceny is.
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True/False 15-T/F #1.              The SEC has created the “Forensic and Valuation Services Section” to provide support to forensic accounting professionals. 15-T/F #2.              Risk and return are inversely related. 15-T/F #3.              Fraud examination, forensic accounting, and litigation support activities can expose the traditional accountant to more risk than consulting engagements and, possibly, to more.
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TRUE/FALSE: LO#1 & LO#2 Fraudulent disbursements are commonly made to a fictitious payee. A check issued to an employee for duplicate expense receipts is not a fraudulent disbursement since it involves legitimate documentation.                            Shell companies require collusion amongst employees in order to be successful. A pass-through scheme requires the use of a legitimate.
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Text Review Questions 13-TRQ #1.          What are the different types of corruption schemes? orruption schemes in ACFE studies are broken down into four classifications: Bribery Illegal gratuities Economic extortion Conflicts of interest 13-TRQ #2.          How do bribery and illegal gratuities differ? ribery may be defined as the offering, giving, receiving, or soliciting anything of value to influence an.
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ESSAY QUESTIONS Match each description with its correct term a. invigilation#1 b. validity#4 c. evidence#3 d. predication#4 e. indirect evidence#5 Provide an example of the following: Direct evidence A: eyewitness testimony or confession of co-conspirator or fraudster Types of evidence Circumstantial evidence Data mining software Net worth method Bank analysis method: Describe the process by which evidence should be handled. How do electronic versus “paper” evidence.
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Which of the following is a legal form of evidence: A conversation overhead by a fellow employee in the lunchroom A conversation between two parties A document found in the defendant’s possession All of the above The defendant has an account at a local bank. As part of the trial, bank statements showing the defendant.
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11-M/C #1.           Clothing store employees typically get significant (30 – 50%) employee discounts on store purchases for personal clothing purchases. How can management audit employee discounts to insure the clothing discounts are not given to friends and family? Compare adjustments to inventory to the void transactions of the employee Extract sales with.
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14-TRQ #1.          What are the four criteria necessary for a sale to be complete? 14-TRQ #2.          How can understating liabilities and expenses make a company appear more profitable? 14-TRQ #3.          What issues are generally involved in improper disclosures? 14-TRQ #4.          How may improper asset valuation inflate the current ratio? 14-TRQ #5.          How can financial.
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In order to prove invigilation, an attorney must: Show cause Show intent Show a pattern of loss during the defendant’s tenure Show concealment LO #6 An interview that is conducted in order to obtain a confession is called: A confession An interrogation Cross-examination None of the above Sources of information include: Witnesses to an act of fraud Surveillance by private detectives Surveillance.
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9-TRQ #1.              Why shouldn’t an interviewer use closed or leading questions during the information-gathering phase of the interview? 9-TRQ #2.              What is the primary purpose of admission-seeking questions? 9-TRQ #3.              Why is it advisable to obtain a written confession from the subject of an investigation? 9-TRQ #4.              What are some of the verbal.
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13-M/C #1.           A proactive computer audit test to detect when a company has a high incidence of invoice payments below an approval limit that may be reviewable by an audit could include: Stratify vendor payments by approval limits directly under the approval limit Conduct an intensive audit of 100 percent of all.
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Short Answer Essay 11-SAE #1.           List three proactive computer audit steps for detecting skimming (from page 304 – 306). . 11-SAE #2.           List three proactive audit tests to detect noncash misappropriations. . Critical Thinking Exercise Far off in the woods, there is a cabin. The cabin contains three people. Two are in one room; the other.
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Text Review Questions 10-TRQ #1.          What are the two major approaches for testing IT system controls? 10-TRQ #2.          What is meant by the acronym CAATTs and what are they used for? 10-TRQ #3.          What is computer forensics? 10-TRQ #4.          What computer functions can make recovering deleted files more difficult? 10-TRQ #5.          How do e-discovery rules.
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10-TRQ #1.          What functions are used by data extraction and analysis software to highlight red flags of fraud? 10-TRQ #2.          What are the two categories of data mining and knowledge discovery software? 10-TRQ #3.          What role do graphics play in an investigation? 10-TRQ #4.          What is the purpose of timelines in an investigation? 10-TRQ.
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Multiple Choice 9-M/C #1.               All of the following are several benefits of effective interviewing and interrogation skills, EXCEPT: Reduced investigation time Increased probability of investigative success Increased time of a jury trial The elimination of innocent subjects or targets 9-M/C #2.               Considerations for conducting good interviews include all EXCEPT: Keeping questions reasonably short Discouraging the interviewee from getting.
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Chapter 9 Effective Interviewing and Interrogating True/False 9-T/F #1.                  An attorney will often request that the fraud professional or forensic accountant attend the deposition of key witnesses who have knowledge of, or should have knowledge of, the financial transactions and how they are reflected in the books and records. 9-T/F #2.                  In a fraud.
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Short Answer Essay 9-SAE #1.               What are some of the reasons that persons often fail to identify lies? 9-SAE #2.               Provide three of Joe Well’s ten commandments for effective interviewing. Critical Thinking Exercise A murderer is condemned to death. He has to choose between three rooms. The first is full of raging fires, the.
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Multiple Choice 14-M/C #1.           Which of the following is NOT a valid reason for a senior manager to issue fraudulent financial statements? To conceal true business performance To preserve personal status/control To maximize tax liability To maintain personal income/wealth flowing from salary, bonus, stock and stock options. 14-M/C #2.           Which of the following is NOT one.
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True/False 10-T/F #1.              An information technology (IT) audit consists of (1) planning, (2) tests of controls, and (3) substantive tests. 10-T/F #2.              The source documents that support the electronic data systems do not need to be               pre-numbered               and used in sequence. 10-T/F #3.              There are two major ways to test IT.
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