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Test Bank for Forensic Accounting and Fraud Examination, 2nd Edition: William Hopwood

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Test Bank for Forensic Accounting and Fraud Examination, 2nd Edition: William Hopwood . Note : this is not a text book. Description: ISBN-10: 0078136660. ISBN-13: 9780078136665

 

Description

Chapter 01
Introduction To Forensic Accounting And Fraud Examination
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.
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.
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.
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
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.
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.
7. which of the following is not a skill needed by a forensic accountant?
a. auditing skills.
b. criminology.
c. sociology.
d. information technology.
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.
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.
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%.

Chapter 02
The Forensic Accounting Legal Environment
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.
2. whom does the burden of proof fall upon?
a. defense.
b. plaintiff.
c. jury.
d. investigators.
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.
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.
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.
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.
7. who has the sole discretion to bring charges in any case?
a. investigator.
b. circuit court.
c. judge.
d. district attorney.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.
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.
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.

Chapter 03
Fundamentals I: Accounting Information Systems

1. your organizations coordinated activities and tasks that accomplish some organizational goal are called:
a. an internal control.
b. a business practice.
c. a business sale.
d. a business process.
2. one traditional approach for designing an ais is to divide the major operational activities into:
a. business units.
b. four transaction cycles.
c. audit groups.
d. all of the above.
3. an example of a repetitious transaction cycle that an ais could be developed for is:
a. expenditure.
b. production.
c. revenue.
d. all of the above.
4. the four transaction cycles financial supply chain management, procurement and inbound/outbound logistics, product manufacturing and deployment and sales and service are a part of:
a. the principles of internal control.
b. the sap modules.
c. the just in time inventory model.
d. total quality management.
5. the foreign corrupt practices act and the sarbanes-oxley act hold whom criminally liable for weak internal control processes?
a. cfo.
b. coo
c. ceo
d. both a and c
6. who has effect over the internal control of a business?
a. management.
b. board of directors.
c. key personnel within the business.
d. all of the above.
7. events that can adversely affect the company, such as asset losses due to theft or spoilage, accounting errors and their consequences, revenue losses, expense overruns, business interruptions, fraud and embezzlement, fines and penalties, civil liabilities, and losses of competitive advantage are called:
a. risk exposures.
b. loss exposures.
c. internal control areas.
d. audit exposures.

Chapter 04
Fundamentals II: The Auditing Environment

1. auditing is the process of:
a. developing internal controls.
b. testing internal controls.
c. gathering and evaluating evidence.
d. proving standards of sox 2002 are upheld.
2. investors in a company often want assurance that the financial statements are true and accurate. they can achieve this assurance by using:
a. auditors.
b. internal controls.
c. forensic accountants.
d. ratio analysis.
3. after individuals become licensed in accounting, such as earning their cpa status, they typically must do what?
a. work for an auditing firm for 120 hours.
b. continue their education by acquiring cpe’s.
c. become an enrolled agent with the irs.
d. open a public practice in accounting.
4. who makes rules effecting the auditing profession?
a. public company accounting oversight board.
b. governmental standards accounting board.
c. financial accounting standards board.
d. all of the above.
5. the public company accounting oversight board was created by the ________?
a. sarbanes-oxley act of 2002.
b. securities and exchange commission.
c. financial accounting standards board.
d. united states congress.
6. the public company accounting oversight board has the power to do what?
a. enforce internal controls within auditing firms.
b. audit the firms who perform audits.
c. impose sanctions against auditing firms that fail to fulfill their professional responsibilities when auditing public companies.
d. challenge audit findings of internal auditing committees.
7. in what year was the securities and exchange commission formed?
a. 1928.
b. 1933.
c. 1942.
d. 2002.
8. the fasb issues financial standards that are collectively known as:
a. financial accounting standards.
b. internal revenue code.
c. audit review standards.
d. generally accepted accounting principles.
9. the board that is similar to the fasb but provides rules for governmental entities is called:
a. securities and exchange commission.
b. house ethics committee.
c. governmental accounting standards board.
d. governmental board for accounting reporting.
10. in 2003, what board replaced the aicpa as the auditing standard-setter for companies that are publicly held?
a. sox.
b. sec.
c. fasb.
d. pcaob.

Chapter 05
Fraud Prevention And Risk Management

1. which of the following is an information security deliverable?
a. information-security-related processes.
b. software and hardware products.
c. security-related personnel.
d. all of the above.
2. an organizational internal control process that ensures confidentiality, integrity, and availability within the company is called:
a. an information security deliverable.
b. an information security management system.
c. enterprise risk management.
d. planning-doing-checking-acting.
3. an information security deliverable, information security management system and enterprise risk management are generally a part of a companies:
a. internal controls.
b. external controls.
c. detective controls.
d. preventative controls.
4. what are the 3 isms security objectives?
a. assess, modify, implement.
b. integrate, evaluate, modify.
c. confidentiality, integrity, availability.
d. integrity, evaluation, implementation.
5. when developing an isms, how many phases are there?
a. 3.
b. 4.
c. 5.
d. 6.
6. ____________ are systems-related individuals or events that can result in losses to the organization.
a. threats.
b. vulnerabilities.
c. risks.
d. any of the above.
7. which of the following best describes and active threat?
a. a flood destroying the accounts payable files.
b. a hacker destroying the accounts payable files.
c. a fire destroys the accounts payable files.
d. a computer malfunction destroying the accounts payable files.
8. which of the following best describes a passive threat?
a. a hacker destroying the accounts payable files.
b. a disgruntled employee destroying the accounts payable files.
c. a vendor destroying the accounts payables files.
d. a flood destroying the accounts payable files.
9. who is/are the international standard organization (iso)?
a. a group of forensic accountants who develop internal control standards.
b. a membership organization for information security managers.
c. an international group that promulgates standards relating to business processes.
d. a u.s. governmental organization similar to the sec that regulates computer fraud and information security.
10. the iso “family” that promulgates information security standards are:
a. 9000.
b. 15000.
c. 17000.
d. 27000.

Chapter 06
Fraud Detection
1. in many cases fraud indicators lead to:
a. the need for additional auditors to be present for the audit.
b. criminal or civil actions against the ceo or cfo of the corporation.
c. the discovery of errors or unusual events that can reasonably be explained upon further examination.
d. .the discovery of loop holed in the irs tax code that are left up to interpretation.
2. the fraud detection process involves:
a. determining the level of crime involved as criminal or civil.
b. identifying indicators of fraud that suggest a need for further investigation.
c. identifying the gaap that have been violated.
d. assessing a loss value to the fraud.3. the objectives of fraud detection include:
a. detect fraud.
b. prevent fraud.
c. comply with sox.
d. .both a and b.
4. which of the following is not a way that fraud is usually detected?
a. tips and hotlines.
b. admission by the guilty party.
c. financial statement audits.
d. by accident.
5. why are tip hotlines or other tip reporting mechanisms important to formally have in place in a business?
a. nearly 50% of all fraud detection occurs through tip hotlines.
b. forensic accounting methods lack the ability to detect most fraud.
c. civil court rules of evidence do not allow charges to be brought against someone unless it is reported first.
d. .over 75% of all fraud detection occurs through tip hotlines.
6. if an investigator cannot contact the tipster for more information, then this information was gathered:
a. with confidentially and anonymity not requested.
b. confidentially.
c. publicly.
d. anonymously
7. a tip hotline should include:
a. the securities and exchange commission’s toll free number.
b. a hotline disclosure policy to protect the tipster as well as the accused.
c. caller id so the receiving agency can call the tipster back.
d. a minimum of three language options.
8. in order for a hotline to be sufficient, it should be combined with:
a. an ethics code.
b. proper monitoring.
c. the right tone from the top of the company.
d. all of the above.
9. accidental discovery of fraud is typically found:
a. while business owners are attempting to figure out why they don’t have enough cash.
b. during a financial statement audit.
c. during the sale of a business.
d. by other employees through rumors.
10. which of the following is not a step for financial statement auditing concerning fraud?
a. gather information relevant to risks of misstatements in the financial reports.
b. compare the financial statements to the owners personal assets.
c. analyze and assess risks of misstatement in light of the entity’s programs and controls.
d. apply the information gathered to the structure and application of the audit.

Chapter 07
The Fraud Investigation And Engagement Processes
1. the fraud investigation process involves:
a. quarterly gathering and reviewing evidence for the purpose of documenting the presence or absence of fraud.
b. annually gathering and reviewing evidence for the purpose of documenting the presence or absence of fraud.
c. periodically gathering and reviewing evidence for the purpose of documenting the presence or absence of fraud.
d. systematically gathering and reviewing evidence for the purpose of documenting the presence or absence of fraud.
2. how many steps are there in the fraud investigation process?
a. 1
b. 2
c. 3
d. 4
3. which of the following is not a step in the fraud investigation process?
a. the in briefing process
b. the engagement process
c. the evidence collection process
d. the reporting process
4. when does the fraud investigation engagement process end?
a. with first contact to an organization.
b. after a 12-month follow-up audit
c. with a complete agreement regarding the fraud-investigation services to be provided by the investigator.
d. upon conviction of a criminal.
5. when does the fraud investigation engagement process begin?
a. with first contact to an organization.
b. after a 12-month follow-up audit
c. with a complete agreement regarding the fraud-investigation services to be provided by the investigator.
d. upon conviction of a criminal.
6. which of the following is a step in the fraud-theory approach?
a. prove the hypotheses invalid.
b. refine and amend the hypotheses.
c. link the hypotheses to a gaap.
d. none of the above are a step in the fraud-theory approach.
7. what are the four types of evidence collected in the evidence collection process?
a. physical evidence, financial statement evidence, observational evidence, and interview evidence.
b. physical evidence, documentary evidence, tip hotline evidence, and interview evidence.
c. physical evidence, documentary evidence, observational evidence, and witness evidence.
d. physical evidence, documentary evidence, observational evidence, and interview evidence.
8. the reporting process involves:
a. video recording and summarizing the results of the fraud investigation.
b. documenting and summarizing the results of the civil litigation.
c. documenting and summarizing the results of the fraud investigation.
d. a formal out brief to the executives of the corporation outlining the fraud discovered.
9. if law enforcement is called during an investigation, then:
a. law enforcement will take over the investigation and the business will be forced to comply with whatever demands they have.
b. there may still be some give and take as to what the process will be.
c. the fraud investigator will serve as the liaison between law enforcement and the business.
d. law enforcement will not be called during a fraud investigation because district attorneys are the sole legal enforcement agent for any fraud crime.
10. how many steps does the fraud engagement process involve?
a. 6
b. 8
c. 10
d. 6 to 12, depending upon law enforcements involvement

Chapter 08
The Evidence Collection Process
1. evidence can be:
a. only tangible objects
b. anything
c. documents
d. testimony
2. fraud theory is:
a. fraudster, circumstances, motive and opportunity
b. the details surrounding crime and punishment
c. where, why, with whom, opportunity and fraud
d. who, what, when, where, why, how
3. a complete court case typically includes:
a. all of these
b. a fraud theory
c. collected evidence
d. expert testimony
4. an experts opinion can be combined with evidence to provide a(n):
a. conviction
b. arrest warrant
c. loss claim
d. picture of fraud
5. what is the fraud investigators primary responsibility?
a. collecting basic evidence
b. proving that fraud exists
c. providing reverse proof
d. liaising with law enforcement
6. when declaring guilt or innocence, the certified fraud examiner code of ethics states:
a. a fraud examiner must conclusively prove guilt or innocence in all cases of alleged fraud.
b. no opinion shall be expressed regarding the guilt or innocence of any person or party.
c. guilt or innocence will be determined in conjunction with the wishes of the corporation investigating the fraud.
d. the certified fraud examiner code of ethics are intentionally silent on this topic.
7. to whom does the theory of fraud development lie?
a. the fraud investigator
b. law enforcement
c. the corporation
d. the attorney
8. document evidence may include:
a. working papers
b. computer files
c. charts and graphs
d. all of the above
9. which of the following is an example of observation evidence?
a. printed cash receipts
b. surveillance tape of an employee putting money in their pockets.
c. expert testimony regarding financial statements.
d. all of the above
10. the evidence collection process begins with:
a. routine observations of accounting processes.
b. interviews with those furthest away from the fraud.
c. a review of the physical and document evidence.
d. wherever the investigator feels is most important.

Chapter 09
Fraud Examination Evidence I: Physical, Documentary, And Observational Evidence
1. evidence includes:
a. physical objects
b. documents
c. observations
d. all of the above
2. if evidence is tangible, it is said to be _______ evidence.
a. documented
b. heresy
c. physical
d. forged
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.
4. how many ways is documentary evidence collected?
a. 4
b. 3
c. 2
d. 1
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.
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.
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.
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.
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.
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

Chapter 10
Fraud Examination Evidence Ii: Interview And Interrogation Methods
1. which of the following can be the most important part of most investigations?
a. interviews
b. interrogations
c. financial statement ratio analysis
d. both a and b
2. interrogations are typically conducted by:
a. the forensic investigator
b. the district attorney
c. law enforcement
d. the ceo or cfo of the company.
3. which of the following would not be a part of the forensic accountants’ profile of a suspect?
a. length of time suspect has been with the firm.
b. suspect’s assets.
c. suspect’s outstanding bills, including recent purchases such as cars and real estate.
d. suspects children’s school grades.
4. whom should the investigator interview first?
a. the persons farthest away from the fraud.
b. the person(s) suspected of the fraud.
c. as schedules permit.
d. in alphabetical order.
5. which of the following is not a kind of question asked during an interview?
a. introductory
b. informational
c. leading
d. admission-seeking
6. which of the following is not a type of final question that would be asked to non-suspects?
a. confirm information received by the interviewer during the interview.
b. obtain information that has not yet been gathered.
c. ask for assistance in confronting the fraudster.
d. seek the subject’s agreement that he will continue to cooperate.
7. __________ are asked to determine whether the interviewee is a suspect and are only asked when the interviewer believes that the interviewee is a suspect.
a. leading questions
b. assessment questions
c. statements of fact
d. accusing questions
8. both verbal and non-verbal responses to questions can be:
a. indications of guilt
b. admissions of guilt
c. used to convict for fraud
d. left up to interpretation by forensic psychologists.
9. an example of a verbal cue might be:
a. refusing to answer questions.
b. shifting uncomfortably in a chair after a question is asked.
c. clearing the throat when asked questions of guilt.
d. yelling or verbally attacking the interviewer.
10. which of the following is a qualifier?
a. every
b. never
c. almost
d. all of the above.
8. internal controls can be viewed as:
a. a means to limit the amount of money paid in a fraud suit.
b. a hindrance to productive business practices.
c. loss prevention tools.
d. loss detection tools.
9. internal controls must provide a __________assurance that they achieve their objectives.
a. perfect.
b. reasonable.
c. guaranteed.
d. limited.
10. which of the following is an objective of internal control?
a. promoting strategic, tactical, and operational efficiency and effectiveness.
b. the control environment.
c. risk assessment and management.
d. all of the above are objectives of internal control.

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