Course Introduction
Financial Investigations Practice Exam
Financial Investigations explores the principles and practices involved in examining financial records to detect and prevent fraud, money laundering, embezzlement, and other financial crimes. The course covers investigative techniques such as forensic accounting, auditing procedures, data analysis, and tracing illicit transactions through complex financial systems. Students learn to interpret financial statements, spot red flags, gather and preserve evidence, and navigate relevant legal and regulatory frameworks. Emphasis is placed on case studies and real-world scenarios to develop practical skills in uncovering financial misconduct and supporting litigation or enforcement actions.
Recommended Textbook
Fraud Examination 3rd Edition by W.
Steve Albrecht
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18 Chapters
929 Verified Questions
929 Flashcards
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Page 2
Chapter 1: The Nature of Fraud
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Sample Questions
Q1) Which would most likely be a civil charge?
A) Racketeering
B) Mail fraud
C) Defamation
D) Perjury Answer: C
Q2) Which of the following is not a primary reason why frauds are becoming increasingly frequent?
A) The advent of computers
B) Complex accounting systems
C) Globalization of corporations
D) The Internet Answer: C
Q3) Which of the following does not include one of the six types of fraud classification schemes as described in chapter 1?
A) Employee embezzlement
B) Government fraud
C) Investment scams
D) Customer fraud Answer: B
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Chapter 2: Why People Commit Fraud
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Sample Questions
Q1) Who do criminologists compare fraudsters to in relation to repeat offenses and why?
A) Rapist. They repeat their crimes because they are not severely punished.
B) Shoplifters. They steal goods frequently and in small quantities until they are confronted.
C) Bank Robbers. They steal a lot of money from wealthy sources.
D) Bank Tellers. They have access to a large amount of resources and they are perceived to be trustworthy people.
Answer: A
Q2) Failure to discipline a fraud perpetrator generally leads to all of the following except:
A) Helping the perpetrator build a solid resume
B) An increase of "perceived opportunity" within an organization
C) Frauds of greater magnitude by the same perpetrator
D) All of the above
Answer: D
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4
Chapter 3: Fighting Fraud: An Overview
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Sample Questions
Q1) Many people who suspect that fraud is occurring in an organization won't come forward because:
A) They think someone else will report the fraud
B) They don't want to wrongly accuse someone
C) All of the above
D) None of the above
Answer: B
Q2) Most frauds begin in ________ increments and then he/she becomes greedy; as a result, most frauds will ________ over time.
A) Small, increase slowly
B) Medium, increase slowly
C) Small, increase dramatically
D) Medium, increase dramatically
Answer: C
Q3) What type of evidence does invigilation fall into?
A) Testimonial evidence
B) Documentary evidence
C) Physical evidence
D) Personal observation
Answer: D
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Chapter 4: Preventing Fraud
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Sample Questions
Q1) To discourage collusion, companies should:
A) Send letters to vendors and contractors
B) Require mandatory job transfers
C) Regularly review employees who are responsible for large contracts or accounts
D) All of the above
Q2) Which elements of the fraud triangle need to come together before fraud is likely to occur?
A) Perceived pressure and perceived opportunity
B) Perceived opportunity and rationalization
C) Perceived pressure and rationalization
D) All elements must be present
Q3) Unfortunately, the responsibility for preventing fraud is often seen in many organizations as belonging to:
A) The internal auditors
B) Corporate security
C) The external auditors
D) Managers
E) Someone else
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6
Chapter 5: Recognizing the Symptoms of Fraud
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Sample Questions
Q1) Inaccuracies in ledgers are what type of fraud symptom?
A) Internal control weaknesses
B) Analytical anomalies
C) Accounting anomalies
D) Unusual behavior
Q2) Internal control weaknesses that make fraud easier to commit include:
A) Lack of independent checks
B) Overriding of existing controls
C) Lack of segregation of duties
D) All of the above
Q3) Increased scrap is an example of
A) An accounting anomaly
B) An internal control weakness
C) An analytical anomaly
D) None of the above
Q4) Which of the following is an analytical anomaly?
A) Increases in past due Accounts Receivable
B) Significant increases or decreases in account balances
C) Alterations on documents
D) Excessive voids or credits
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Chapter 6: Data-Driven Fraud Detection
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Sample Questions
Q1) The data-driven method of fraud detection does not include which of the following characteristics:
A) Determining symptoms that the most likely frauds would generate
B) Understanding the business
C) Understanding and using Benford's law to analyze company databases
D) Understanding what kinds of frauds could occur
Q2) Digital analysis refers to:
A) A predicted distribution pattern usually found in a random set of numbers
B) Benton's Law
C) Searching for expected relationships between numbers
D) All of the above
Q3) Which of the following is not a step in the deductive fraud detection approach?
A) Understanding the business or operations to be studied
B) Understanding what kinds of frauds could occur
C) Determining the most likely symptoms
D) Performing digital analysis of company databases
E) Gathering data about symptoms
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8
Chapter 7: Investigating Theft Acts
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Sample Questions
Q1) In considering the fraud triangle plus inquiry approach to investigation, surveillance, invigilation, and physical evidence are all:
A) Theft act investigation methods
B) Conversion investigations methods
C) Inquiry investigation methods
D) Concealment investigations methods
Q2) The following are all part of the process for gathering electronic evidence except:
A) Clone the device
B) Calculate CRC checksum
C) Scan the device for errors
D) Check the device manually
E) All of the above are part of the process for gathering electronic evidence
Q3) Which of the following are not methods of investigations for theft?
A) Surveillance
B) Invigilation
C) Physical Evidence
D) None of the Above
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Chapter 8: Investigating Concealment
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Sample Questions
Q1) Which of the following issues is often disputed in court?
A) Is the signature genuine?
B) Was printing performed before or after a signature?
C) How old is the paper, printing and ink used?
D) All of the above issues are often disputed in court.
Q2) Which of the following is generally not an approach to investigate the concealment aspect of fraud?
A) Document examination
B) Audits
C) Computer searches
D) Polygraph tests
Q3) Concealment is generally accomplished by manipulating any of the following documents except:
A) Bills of laden
B) Sales receipts
C) Titles
D) Insurance policies
E) All of the above can be manipulated to conceal a fraud
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10
Chapter 9: Conversion Investigation Methods
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Sample Questions
Q1) Which of the following is not a good reason for involving postal inspectors in a fraud investigation?
A) Postal inspectors share jurisdiction with other federal, state, and local agencies.
B) Postal inspectors work for the prosecution of offenders who violate postal laws.
C) Postal inspectors have access to an individual's past and current addresses.
D) Postal inspectors work to protect citizens from loss through theft that uses the mail system.
Q2) After 1999, how could you obtain information from a financial institution?
A) Court Subpoena
B) Search warrants
C) False pretenses
D) Both a and b
Q3) A fraud investigator would have the least amount of difficulty obtaining the _________ of a suspect.
A) Tax returns
B) Military records
C) Birth records
D) Social security number
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11
Chapter 10: Inquiry Methods and Fraud Reports
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Sample Questions
Q1) Interviewers who use pacing are employing a form of communication called
A) Kinetic
B) Paralinguistic
C) Chronemic
D) Proxemic
Q2) Which of the following is NOT a technique for refuting an alibi?
A) Display physical evidence,
B) Discuss specific witnesses to the crime by name,
C) Discuss deceptions,
D) Present alternatives.
Q3) Which of the following is not a characteristic of a good interview?
A) The interview is of sufficient length and depth to get relevant facts
B) The interview quickly gets to the focus
C) Interview is conducted as far away from the event as possible
D) Interviewer avoids unnecessary facts
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Chapter 11: Financial Statement Fraud
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Sample
Questions
Q1) Assuming your client has had a long-standing relationship with a law firm that has resulted in much profitable business for the law firm as they have advised the client in all areas of its business. If the law firm should decide it no longer wants to conduct business with your client, this should...
A) not be a cause for concern of potential financial statement fraud.
B) be a minor concern that financial statement fraud may be occurring.
C) be a large cause for concern that financial statement fraud may be occurring.
D) indicate that the client has likely outgrown the law firm.
Q2) Which of the following is an auditor's most important area to search for detecting financial statement fraud?
A) Management and the Directors.
B) The Company's relationships with other entities.
C) The financial results and operating characteristics.
D) None of the above.
Q3) In which of the following situations is fraud most likely to occur?
A) Large companies with democratic leadership
B) Large companies with autocratic leadership
C) Small companies with democratic leadership
D) Small companies with autocratic leadership
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Page 13
Chapter 12: Revenue- and Inventory-Related Financial Statement
Frauds
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Sample Questions
Q1) Which of the following is false concerning "topside" journal entries used to commit financial statement fraud?
A) Upper management usually records the journal entry
B) Entries are recorded directly to the subsidiary ledger
C) The journal entry may be recorded after normal business hours.
D) All of the above are false
Q2) Which fraud is most difficult to perpetrate for multiple years?
A) Overstating inventory - because last year's overstatement must be offset in the current year.
B) Overstating inventory - because physical assets are easily audited making it easy to detect inventory fraud in the long run
C) Overstating revenue - because auditors focus the most attention on revenue recognition
D) Overstating revenue - because it is difficult to create fake cash year after year
Q3) When the sales return ratio becomes unexpectedly ______, it is a signal that fraud or other problems could be occurring.
A) Low
B) High
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Chapter 13: Liability, Asset, and Inadequate Disclosure
Frauds
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Q1) Which of the following is NOT a fraud scheme involving an asset account?
A) Inappropriately capitalizing marketing costs
B) Using market values rather than book values to record assets
C) Not recording depreciation
D) All of the above are schemes involving asset accounts
Q2) You observe that a company's current ratio is dramatically increasing. This may indicate fraud in that:
A) Contingent liabilities are not recorded.
B) Accounts payable is understated.
C) Expenses have been inappropriately capitalized as assets.
D) Fixed assets are overstated.
Q3) Capitalized costs that should be expensed ___________.
A) are often easy to detect.
B) usually occur in one large transaction.
C) overstate net income by the same amount of the capitalized costs.
D) are usually written off shortly after the transaction takes place.
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15
Chapter 14: Fraud Against Organizations
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Sample Questions
Q1) Bribery involves offering, giving, receiving, or soliciting anything of value in order to influence a/an
A) Decision of government agents
B) Official act
C) Decision of employees
D) All of the above
Q2) Thefts of inventory are divided into which of the following two groups:
A) Corruption and bribery
B) Expense scheme and skimming
C) Economic extortion and illegal gratuities
D) Larceny and misuse
Q3) Skimming is easier to detect than larceny because
A) Cash is stolen after it has been recorded in the company's accounting system
B) Cash is stolen before it has been recorded in the company's accounting system
C) Skimming involves fraudulent cash receipts
D) Skimming is not easier to detect than larceny
Q4) True of False: Bribery schemes usually benefit the employee who accepts the vendor bribe, but the company rarely suffers economic loss?
A)True
B)False
Page 16
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Chapter 15: Consumer Fraud
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Sample Questions
Q1) Federal law limits consumers' debit card fraud liability to:
A) $50
B) $100
C) $150
D) $200
E) None of the above
Q2) Common identity theft methods include all of the following, except:
A) Filing for bankruptcy in the victim's name
B) Opening new bank accounts in the victim's name
C) Changing a victim's mailing address
D) Destroying personal property, such as a home or car
Q3) Often, fraudsters contacting potential identity theft victims and act as a representative of a business to verify previously gathered information. This is known as:
A) Phishing
B) Pretexting
C) Mail stuffing
D) Skimming
E) None of the above
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Chapter 16: Bankruptcy, Divorce, and Tax Fraud
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Q1) All of the following are examples of ways to conceal assets in a bankruptcy or divorce fraud except:
A) Not reporting sales on the debtor's books but dispersing them to another entity
B) Damaging or hiding the books and records of the debtor
C) Dispersing cash received from receivables to third party
D) Not disclosing interests held in other partnerships, corporations, or other assets
E) All of the above are ways to conceal assets
Q2) Which of the following is a possible indicator of concealment in a bankruptcy or divorce fraud?
A) Increases in operating losses that are not explained by economic factors
B) The size of orders placed on credit and the credit balances with suppliers suddenly and dramatically decrease
C) A sudden change in management is made without public notice
D) The company sells goods at large discounts
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18
Chapter 17: Fraud in E-Commerce
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Q1) Which of the following is a unique risk for e-commerce?
A) Merger or acquisition activity, which creates pressures to "improve the reported financial results"
B) Unproven or flawed business models, with tremendous cash flow pressures.
C) Borrowing or issuing stock, which adds additional pressures to "cook the books"
D) All of the above
Q2) Using techniques to gain passwords and other personal information directly from victims is known as:
A) Social engineering
B) Spoofing
C) Data theft
D) Customer impersonation
Q3) Which of the following are pressures commonly found in e-business?
A) Dramatic growth, which creates cash flow needs
B) Expensive marketing of new products
C) Unproven business models
D) All of the above
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Chapter 18: Legal Follow-Up
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Sample Questions
Q1) The amendments play important parts in federal court proceedings. The concept of probable cause comes from which amendment?
A) The Fourth Amendment
B) The Fifth Amendment
C) The Seventh Amendment
D) The Ninth Amendment
Q2) What most weakens an expert witness' credibility?
A) Bringing notes, work papers, or other material to the witness stand.
B) Appearing pompous or aggressive.
C) Lack of preparation.
D) Boring the jury with windy explanations and technical jargon.
Q3) Each of the following is a stage in the civil litigation process EXCEPT:
A) Investigation and Pleadings
B) Discovery
C) Grand Jury
D) Motion practice and negotiation
E) Trial and Appeal
Q4) Which type of trial uses pre-trial depositions?
A) Criminal
B) Civil
Page 20
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