Advanced Accounting Exam Materials
Course Introduction
Advanced Accounting explores complex financial accounting topics beyond the introductory level, including business combinations, consolidations, partnership accounting, foreign currency transactions, segment reporting, and accounting for governmental and not-for-profit entities. The course emphasizes the application of accounting standards, ethical considerations, and analytical skills necessary to address real-world scenarios encountered by accountants in practice. Through comprehensive case studies and practical exercises, students gain a deeper understanding of the regulatory environment, advanced financial reporting techniques, and the interpretation of consolidated financial statements, preparing them for professional challenges in diverse accounting roles.
Recommended Textbook
Forensic Accounting and Fraud Examination 1st Edition by
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Page 2
Mary Jo Kranacher
Chapter 1: Core Foundation Related to Fraud Examination and Financial
Forensics
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Sample Questions
Q1) One of the best ways to ruin an investigation, fail to gain a conviction, or lose a civil case is to base investigative conclusions on logic and conjecture.
A)True
B)False
Answer: True
Q2) Which of the following is not part of or one of the three elements of professional skepticism for a fraud investigation?
A) An attitude that includes a questioning mind and a critical assessment of the evidence.
B) A commitment to persuasive evidence.
C) That the plaintiff and/or the defendant may be masking the true underlying story.
D) The investigation must reveal a benefit to the plaintiff.
Answer: D
Q3) An immaterial false statement is a legal element of fraud.
A)True
B)False
Answer: False
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Chapter 2: Careers in Fraud Examination and Financial
Forensics
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Q1) The Forensic and Valuation Services FVS Center is part of the American Institute of Certified Public Accountants.
A)True
B)False
Answer: True
Q2) According to Mr. Sam E. Antar former Crazy Eddie CFO and a convicted felon, too many audit committee members have no formal educational background in accounting and auditing, and no specialized training in fraud detection.
A)True
B)False
Answer: True
Q3) An operating style that shows excessive risk-taking to strengthen the balance sheet, for example, is generally a red flag for fraud.
A)True
B)False
Answer: True
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Chapter 3: Who Commits Fraud and Why: Criminology and Ethics
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Q1) Describe occupational fraud and abuse.
Answer: Occupational fraud and abuse is defined as "the use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization's resources or assets." Occupational fraud and abuse involves a wide variety of conduct by executives, employees, managers, and principals of organizations, ranging from sophisticated investment swindles to petty theft. Common violations include asset misappropriation, fraudulent statements, corruption, pilferage, petty theft, False overtime, using company property for personal benefit, fictitious payroll, and sick time abuses.
Q2) Hollinger and Clark found that the same kinds of employees who engage in workplace deviance also engage in employee theft. According to their research, which of the following is not a characteristic evidence of the employee-thief?
A) arrives early at work.
B) takes long coffee breaks.
C) abuses sick leave policy.
D) has slow workmanship.
Answer: A
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Chapter 4: Complex Frauds and Financial Crimes
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Q1) Under RICO, which of the following is an illegal activity:
A) Purchasing a bank to deposit gambling receipts generated from illegal betting parlors
B) Investing in a bank that provides services to foreign nationals
C) Purchasing a bank formerly used to reinitiate money into the financial system from a bankruptcy trustee
D) All of the above
Q2) "Accidental" fraudsters are usually poor members of minority groups.
A)True
B)False
Q3) The conversion of illegal funds to assets is which step in the money laundering process:
A) Layering
B) Placement
C) Reinitiation
D) None of the above
Q4) Complex fraud rarely involves collusion.
A)True
B)False
Q5) Describe the stages of money laundering and for each stage, provide an example.
Page 6
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Chapter 5: Cybercrime: Computer and Internet Fraud
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Q1) The "computer as a symbol" involves using a computer to intercept data transmission.
A)True
B)False
Q2) Computers offer cyber criminals efficient ways to hide fraudulent activities.
A)True
B)False
Q3) Computer crime and computer fraud are synonyms.
A)True
B)False
Q4) An employee, having authorized access to a work computer, commits fraud while using the computer. This is an example of a computer crime.
A)True
B)False
Q5) Cyber-crime involves the use of cell phones.
A)True
B)False
Q6) Computer crime involves the attempt to access data illegally.
A)True
B)False
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Chapter 6: Legal, Regulatory, and Professional Environment
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Q1) What are the three major types of negotiated remedies and how do they differ?
Q2) Which of the following is not a major form of negotiated settlements in a civil trial?
A) out-of-court settlements
B) majority jury vote
C) arbitration
D) mediation
Q3) The Sarbanes-Oxley Act mandates that each member of a company's audit committee must be a member of its board of directors and must otherwise be independent.
A)True
B)False
Q4) What remedies are available through the civil and criminal justice systems?
Q5) What is the discovery process and how does it work?
Q6) Because employers do not have the right to place employees in a custodial setting, an employee has limited Fifth Amendment rights.
A)True
B)False
Q7) What is meant by demonstrative evidence? Give examples.
Q8) What common law protections do individuals have during interviews?
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Chapter 7: Fraud Detection: Red Flags and Targeted Risk Assessment
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Q1) The public perception of independent auditors, particularly with regard to asset misappropriation, corruption, and misstated financial statements, is that:
A) independent auditors have overcome the "expectations gap."
B) an independent auditor's responsibility is to provide reasonable assurance that the financial statements are free from material misstatement whether by error or fraud.
C) independent auditors are responsible for fraud detection.
D) audited financial statements are free of estimates and misstatements.
Q2) What are the main components of the fraud risk assessment process?
Q3) Some of the analytical anomalies include all of the following except:
A) transactions too small or too large for normal activity.
B) explained cash shortages.
C) excessive purchases.
D) excessive debit and credit memos.
Q4) Management must design, implement, and maintain internal controls and nancial reporting processes to produce timely nancial and non nancial information that re ects the underlying economics of the business.
A)True
B)False
Page 9
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Chapter 8: Detection and Investigations
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Q1) In determining validity, which of the following carries the most weight:
A) Probable
B) Confirmed
C) Doubtful
D) None of the above
Q2) An example of an indirect method of income determination is:
A) Bank analysis method
B) Net worth method
C) Title companies
D) All of the above
Q3) Describe the process by which evidence should be handled.
Q4) A fraudster erases files from his hard drive. This is an example of data alteration.
A)True
B)False
Q5) Interviews can become interrogations.
A)True
B)False
Q6) Types of evidence
Q7) Direct evidence
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Chapter 9: Effective Interviewing and Interrogation
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Q1) All of the following are several benefits of effective interviewing and interrogation skills, EXCEPT:
A) Reduced investigation time
B) Increased probability of investigative success
C) Increased time of a jury trial
D) The elimination of innocent subjects or targets
Q2) Why are interviews in fraudulent financial statements and tax returns handled differently than interviews in other fraud examinations?
Q3) What is the primary purpose of admission-seeking questions?
Q4) Which of the following is NOT a typical closing question in an interview?
A) "You knew Ms. Jones had some financial problems, is that right?"
B) "If you were trying to resolve this issue, what would you do?"
C) "Ms. Collins, this is just a standard question. Do you feel that I have treated you fairly in this interview?"
D) "What is your position in the company?"
Q5) Provide three of Joe Well's ten commandments for effective interviewing.
Q6) What are some of the reasons that persons often fail to identify lies?
Q7) Why are introductory questions so important to an interview's success?
Q8) What are some of the verbal clues to deception?
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Chapter 10: Using Information Technology for Fraud
Examination and Financial Forensics
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Q1) One of the major functions of data security and privacy tools such as Privacy Suite is to:
A) Copy files
B) Rename files
C) Overwrite files
D) Recycle files
Q2) Which of the following is NOT a tool to collect digital evidence?
A) Road MASSter
B) Encase
C) HDD Regenerator
D) Microsoft Dynamics GP
Q3) The graphic 10-4 is called an:
A) Association matrix
B) Link chart
C) Familial chart
D) Grouping chart
Q4) How do e-discovery rules have an impact on the storage of e-mail and other electronic files?
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Q5) What are the two categories of data mining and knowledge discovery software?
Q6) What is meant by the acronym CAATTs and what are they used for?
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Chapter 11: Cash Receipt Schemes and Other Asset
Misappropriations
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Q1) Skimming schemes can be subdivided based on whether they target sales or receivables.
A)True
B)False
Q2) Most cash larceny occurs at the point of sale.
A)True
B)False
Q3) What types of company assets are typically misused?
Q4) What steps should an organization take to prevent fraudulent shipments of merchandise?
Q5) User access to systems may identify segregation of duties issues. Review of which files can detect problems?
A) System user access master file
B) Accounts Receivable master file
C) General ledge master file
D) Accounts payable master file
Q6) What techniques are generally used to conceal a receivables skimming scheme?
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Q7) In cash larceny schemes, what methods may be used to conceal these schemes at the point of sale?
Q8) How may the larceny of noncash assets be prevented?
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Chapter 12: Cash Disbursement Schemes
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Q1) A check issued to an employee for duplicate expense receipts is not a fraudulent disbursement since it involves legitimate documentation.
A)True
B)False
Q2) Ghost employees are usually paid in cash.
A)True
B)False
Q3) A pass through scheme requires:
A) The availability of an accomplice at a legitimate vendor
B) The ability to add vendors to the vendor master file
C) The ability to change purchase order prices after approval
D) All of the above
Q4) Fictitious revenue schemes are frequently designed around commission plans.
A)True
B)False
Q5) An employee intercepts a legitimate check made payable to a vendor and changes the payee name to his name. This is an example of a forged maker.
A)True
B)False
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Chapter 13: Corruption and the Human Factor
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Q1) How do bribery and illegal gratuities differ?
Q2) ________ may be defined as the offering, giving, receiving, or soliciting anything of value to influence an official act.
A) Bribery
B) Conflicts of interest
C) Economic extortion
D) Illegal gratuities
Q3) Describe the features of an effective fraud reporting program within a company.
Q4) Most company ethics policies forbid employees from accepting unreported gifts from vendors.
A)True
B)False
Q5) A fraud hotline is considered by most professionals to be the cornerstone of an employee reporting program.
A)True
B)False
Q6) A woman had two sons who were born on the same hour of the same day of the same year, but they were not twins. How could this be?
Q7) How does the "perception of detection" impact fraud deterrence?
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Chapter 14: Financial Statement Fraud
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Q1) Events occurring or becoming known after the close of the period may have a significant effect on the financial statements and should be disclosed are called:
A) Reportable events
B) Subsequent events
C) Proximate events
D) Known events
Q2) Financial statement analysis includes all of the following EXCEPT:
A) Stratified analysis
B) Vertical analysis
C) Horizontal analysis
D) Ration analysis
Q3) Which of the following is NOT a red flag associated with improper disclosures?
A) A strong, independent audit committee
B) Domination of management by a single person or small group
C) Rapid growth or unusual profitability, especially compared to other companies in the same industry
D) Significant related-party transactions not in the ordinary course of business
Q4) What is the conceptual framework for financial reporting?
Q5) What are some of the ways in which financial statement fraud is committed?
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Chapter 15: Consulting, Litigation Support, and Expert
Witnesses: Damages, Valuations, and Other Engagements
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Q1) Physical and video surveillance by the forensic professional is permitted and electronic audio evidence capturing spoken words does not require court permission.
A)True
B)False
Q2) The accepted concept for measuring lost revenues or excess expenses over a loss period:
A) Project incremental lost sales or increased expenses
B) Validate opportunity costs
C) Validate sunk costs
D) Validate the fair value of assets
Q3) ________ value represents the amount of cash likely to be received by owners of an asset, assuming that pressure exists that will require the sales transaction to be completed quickly.
A) Book
B) Liquidation
C) Market
D) Investment
Q4) What is included as an expert's work product?
Q5) How may lost profits be calculated using typical benchmarks?
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Chapter 16: Remediation and Litigation Advisory Services
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Q1) What three attributes must the plaintiff demonstrate in a civil framework?
Q2) Presenting a positive appearance can bolster credibility. Aspects of a positive appearance EXCLUDE:
A) Body language, including attentiveness and sitting up straight
B) Eye contact
C) Business attire
D) Abrupt or argumentative responses
Q3) The first goal of the opposing attorney during cross examination is to destroy the expert's credibility, if possible.
A)True
B)False
Q4) What legal mechanisms may be used to recover assets in the civil and criminal justice systems?
Q5) At a minimum, corporate governance should address this issue:
A) Creating and maintaining a culture of honesty and high ethics
B) Evaluating fraud risks and implementing programs and controls to mitigate them
C) Developing an appropriate anti-fraud oversight process
D) All of the above
Q6) What are the types of losses available for recovery?
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