Forensic Accounting
Final Exam
Ryan
Date:
11/29/2010
Class:
Forensic Accounting
Instructor: Daniel Ryan
Test Name: Final - Fall 2010
Name _____________________________________________
1. Multiple Choice:
Forensic auditing is most commonly associated with which of the following actions?
a. Crime deterrence.
b. Investigating criminals.
c. Weak controls.
d. Gathering evidence.
e. Both c and d.
2. Multiple Choice:
Which would not be included in the AICPA's definition of forensic accounting?
a. Auditing.
b. Investigative skills.
c. Quantitative methods.
d. Accounting.
e. None of the above.
3. Multiple Choice:
Which would not be useful in searching for hidden assets?
a. Looking at lifestyles of major players.
b. Computing industry ratios.
c. Comparing cash flow with income.
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d. Using the net worth method.
e. None of the above.
4. Multiple Choice:
Which of the following is not included in a forensic accountant's knowledge base?
a. Computer science.
b. Criminology.
c. Accounting.
d. Law.
e. All of the above are included.
5. Multiple Choice:
Which is not one of the three types of controls?
a. Minimizing.
b. Corrective.
c. Preventive.
d. Detective.
e. Both a and b.
6. Multiple Choice:
Which would be a good name for the scheme of listing investment income as operating revenue?
a. Period shift.
b. Expense manipulation.
c. Liability trap.
d. Revenue trick.
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e. Asset scam.
7. Multiple Choice:
Horizontal analysis typically involves what?
a. Comparison of companies by market share in the industry.
b. Comparison of cash value at a predictable moment in liquidity.
c. Comparison of year-to-year changes in financial statements.
d. Comparison of organizational structure best suited for a planned business venture.
e. Both a and b.
8. Multiple Choice:
SAS No. 99 states that the auditor has the responsibility to plan and perform the audit to obtain reasonable
assurance about whether financial statements are free of material misstatement, whether caused by error or
fraud. SAS No. 99 also requires all of the following except:
a. Obtaining the information needed to identify risks of material misstatement due to fraud.
b. Preparation of a fraud prevention plan.
c. Description and characteristics of fraud.
d. Importance of exercising professional skepticism.
e. None of the above.
9. Multiple Choice:
A fraud investigation should not be commenced without proper ____________.
a. Conviction.
b. Predication.
c. Timing.
d. Motivation.
e. Some other event.
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10. Multiple Choice:
What information is not needed to perform a check spread?
a. Date.
b. Payee.
c. Check number.
d. Amount.
e. All are needed.
11. Multiple Choice:
Which probably would not help prevent procurement fraud through phantom vendors?
a. Doing a parking-lot test.
b. Reviewing cliques within the sales department.
c. Having an anonymous hot-line.
d. Having an approved vendors list.
e. All of the above would help prevent procurement fraud.
12. Multiple Choice:
Which would be a red flag of phantom vendors?
a. Unfamiliar vendor.
b. Vendor's name consists of initials.
c. Vendor has post office box address.
d. Rapidly increasing purchases from one vendor.
e. All of the above.
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13. Multiple Choice:
In what year was money laundering recognized as a separate criminal act by federal law in the United States?
a. 1950.
b. 1975.
c. 1986.
d. It is not recognized as a separate criminal act by the United States.
e. None of the above.
14. Multiple Choice:
Many times auditors do not believe they should report possible money laundering activities that they find in
their audits because:
a. Money laundering, per se, does not materially affect the company's financial reports.
b. Client confidentiality should be maintained.
c. There is no auditing requirement for the reporting of money laundering.
d. All of the above.
15. Multiple Choice:
Evidence that directly proves a fact at issue, without the need for any influence or presumption, is what kind of
evidence?
a. Direct.
b. Circumstantial.
c. Factual.
d. Indiscriminate.
e. None of the above.
16. Multiple Choice:
Which of the following statements is false?
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a. Some hearsay exceptions apply if the declarant cannot testify at trial.
b. Evidence that otherwise would be hearsay can be used to support an expert opinion if it is of the sort
reasonably relied on by experts in the same field.
c. If a statement that appears to be hearsay is offered for a nonhearsay purpose (to prove a fact), it may be
allowed as evidence.
d. Some types of hearsay are considered sufficiently trustworthy to merit admission into evidence.
e. All of the above are true statements.
17. Multiple Choice:
Which one of the four phases of interrogation at trial is not required?
a. Direct examination.
b. Re-cross examination.
c. Redirect examination.
d. Cross examination.
e. All of the above are required.
18. Multiple Choice:
Which of these is considered a complex Daubert challenge?
a. Motion of limine.
b. Motion of summary judgment.
c. Hearing with a judge and lawyers.
d. Live witnesses.
e. Documents filed.
19. Multiple Choice:
Which of these does not have privilege?
a. Attorney-client.
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b. Expert witness-client.
c. Physician-patient.
d. Husband-wife.
e. Clergyman-parishioner.
20. Multiple Choice:
Per curium refers to:
a. Decision rendered by full court.
b. Decision of the whole court.
c. Opinion that agrees with, but...
d. Opinion that disagrees with majority.
e. Decision by only half the court.
21. Multiple Choice:
Typically the first step in the economic framework of estimating damages is:
a. Company-specific analysis.
b. Industry analysis.
c. Financial analysis conclusions.
d. Macroeconomic analysis.
e. None of the above.
22. Multiple Choice:
The lost profits method that is based upon a market model of sales projection created to compute lost profits is:
a. The "before and after" method.
b. The "yardstick" method.
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c. The "but-for" method.
d. All of the above.
e. None of the above.
23. Multiple Choice:
The lost profits method that best measures what a plaintiff would have done or accomplished without
interference from the defendant is:
a. The "before and after" method.
b. The "yardstick" method.
c. The "but-for" method.
d. All of the above.
e. None of the above.
24. Multiple Choice:
The primary determinants of the damage model used in a case are:
a. The guidelines provided by the Association of Certified Fraud Examiners (ACFE).
b. The American Institute of Certified Public Accountant (AICPA) guidelines.
c. The American Bar Association (ABA) rules.
d. State laws in the state the case is being tried.
e. None of the above.
25. Multiple Choice:
The concept of mitigation of damages in a wrongful discharge case means that:
a. The employer must find similar employment for the wrongfully discharged employee.
b. The employer must hire the wrongfully discharged person back.
c. The employer must mitigate the damages incurred by the plaintiff in the case.
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d. The plaintiff in the case must attempt to find similar employment to mitigate the amount of damages
claimed from the wrongful discharge.
e. None of the above.
26. Multiple Choice:
You are a financial expert witness working for the defense in a case. The plaintiff claims lost profits from
various business activities that you believe are exaggerated amounts. What would be your best source of
evidence to evaluate the lost profits amount?
a. The plaintiff's tax returns.
b. The plaintiff's expert's report.
c. The U.S. Government's report on average earnings in this field of endeavor.
d. Deposition testimony from the plaintiff.
e. None of the above.
27. Multiple Choice:
In a typical lost job case, the primary source of damages is:
a. Lost household services.
b. Lost fringe benefits.
c. Lost health insurance.
d. Lost wages/salary.
e. None of the above.
28. Multiple Choice:
If an expert expects to include a component for lost household services, the expert:
a. Must be ready to express a medical opinion as to the medical basis for the lost ability to perform the
household services.
b. Must reduce the amount in some other part of the damage calculation.
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c. Should base the lost household services amount on some supportable medical opinion about lost
household services that is in the record.
d. Must use national averages about percentage of lost household services.
e. None of the above.
29. Multiple Choice:
In litigating bankruptcies:
a. Business valuations make no sense.
b. The court might direct the valuation expert to ignore the company's excessive debt and value the company
as if it had a normal debt level.
c. The court prohibits many types of business valuation methods.
d. The valuation expert must be very conservative in his/her valuation amounts.
e. None of the above.
30. Multiple Choice:
One/some of the most important IRS guidelines for gift and estate tax purposes:
a. Are the regulations for research and experimentation tax credits.
b. Is the 2006 Tax Simplification Act.
c. Is the IRS publication on the Sale of Closely Held Businesses.
d. Is IRS Rev. Rul. 59-60.
e. None of the above.
31. Multiple Choice:
A 100-percent controlling interest in a business:
a. Seldom happens.
b. Often includes a valuation premium for control.
c. May be investigated by the Securities and Exchange Commission (SEC).
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d. Has the same valuation impact as having a minority interest in the business.
e. None of the above.
32. Multiple Choice:
"Fair market value" is the amount at which property would change hands between a willing seller and a willing
buyer when neither is acting under compulsion and when both have knowledge of the relevant facts. This is the
definition provided by:
a. The American Institute of Certified Public Accountants (AICPA).
b. The Association of Certified Fraud Examiners (ACFE).
c. The Institute of Management Accounting (IMA).
d. The Risk Management Association (RMA).
e. None of the above.
33. Essay
What are the three phases of money laundering and what is the most difficult to implement?
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