Investigative Accounting Question
Bank
Course Introduction
Investigative Accounting is a specialized course designed to equip students with the skills and knowledge required to detect, investigate, and prevent financial fraud and irregularities. The course covers essential topics such as forensic accounting techniques, the legal and ethical framework surrounding investigations, methods for gathering and analyzing evidence, and the reporting of findings to stakeholders. Through case studies and practical exercises, students learn to scrutinize financial statements, recognize fraudulent schemes, and support legal proceedings with effective documentation and testimony. This course is ideal for those aspiring to careers in forensic accounting, auditing, or related fields within financial security and compliance.
Recommended Textbook Fraud Examination 5th Edition by W. Steve Albrecht
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Chapter 1: The Nature of Fraud
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Q1) The ACFE does NOT include which of the major categories of occupational fraud listed below?
A)asset misappropriations.
B)corruption.
C)fraudulent statements.
D)pension fraud.
Answer: D
Q2) Which of the following frauds is usually the most expensive?
A)Vendor fraud
B)Customer fraud
C)Occupational fraud
D)Financial statement fraud
Answer: D
Q3) One way that criminal law differs from civil law is that it:
A)provides remedies for violations of private rights.
B)must yield a unanimous verdict.
C)can have a jury of fewer than 12 persons.
D)allows for various claims in one action.
Answer: B
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Page 3
Chapter 2: Who Commits Fraud and Why
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Q1) Studies show that in advanced countries,levels of honesty are:
A)Generally stable
B)Increasing
C)Decreasing
Answer: C
Q2) According to the study mentioned in the text,which of the following is true about fraud perpetrators compared to property offenders?
A)Fraud perpetrators are more likely to be caught than property offenders
B)Fraud perpetrators are more educated than property offenders
C)Fraud perpetrators are more likely to be men than property offenders
D)Fraud perpetrators are much younger than property offenders
Answer: B
Q3) Most fraud perpetrators have profiles that look like:
A)Those of other honest people
B)Those with criminal records
C)Those who are uneducated
D)Those who use alcohol and drugs
Answer: A
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4
Chapter 3: Fighting Fraud: an Overview
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Q1) A person may have very strong ethics in the way he or she treats family and friends,but not understand how failure to submit tax withholdings to the government affects peoples' lives or constitutes unethical or fraudulent behavior.This is an ethical issue encountered in which level of the ethical maturity model?
A)Personal ethical understanding
B)Ethical courage
C)Ethical leadership
D)Application of ethics to business situations
Answer: D
Q2) All of the following factors can be associated with high levels of fraud and detract from a positive work environment EXCEPT:
A)top management that does not pay attention to behavior of employees.
B)lack of recognition of job performance.
C)unrealistically low pay.
D)low turnover.
Answer: D
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Chapter 4: Preventing Fraud
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Q1) What is the most widely recognized way to deter fraud?
A)Encourage employees to report suspicious activity.
B)Implement a good system of controls.
C)Keep management involved in company procedures.
D)Quickly punish employees found committing fraud.
Q2) Which of these help employees deal with substance abuse (alcohol and drugs),gambling,money management,and health,family,and personal problems?
A)Employee Assistance Programs
B)Equal Employment Opportunity Programs
C)Employees Anonymous Programs
D)Whistle-Blowing Programs
Q3) Which method will result in biggest savings?
A)Fraud prevention--including EAP plans.
B)Fraud detection--including audit proactively, monitoring.
C)Investigation--including criminal prosecution.
D)Promotion--including raising rank or position.
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Chapter 5: Recognizing the Symptoms of Fraud
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Q1) An employee decides to steal cash from his/her employer.What would be the best way to conceal such a fraud?
A)Record the stolen cash as an expense.
B)Writing down accounts payable for a supplier.
C)Increasing accounts receivable from a customer.
D)Writing down as dividend paid to shareholders.
Q2) Which of the following scenarios is least conducive to fraud?
A)Outstanding bills at home
B)Mandatory vacation time
C)Economic downturns
D)Moral decay in upper management
Q3) In which stage do auditors have a good chance of detecting fraud,if the audit samples include altered documents and miscounts?
A)Theft act
B)Concealment
C)Conversion
D)Layering
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Chapter 6: Data-Driven Fraud Detection
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Q1) According to Benford's law,5 will be the first digit of a random number set:
A)more often than 1.
B)less often than 4.
C)about the same as 6.
D)more often than 3.
Q2) Which of the following is similar to ACL and its primary competitor?
A)Picalo
B)IDEA
C)Microsoft Office + ActiveData
D)Z-score
Q3) According to Benford's law,the first digit of random data sets will most often begin with which number?
A)7
B)1
C)3
D)4
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8
Chapter 7: Investigating Theft Acts
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Q1) What is the term for gathering and analyzing electronic evidence?
A)confiscating computers
B)computer forensics
C)electronic surveillance
D)electronic investigation
Q2) Which of the following is true about invigilation?
A)The strict controls imposed are temporary in nature.
B)During the period of invigilation, evidence is presented to suspects with the hopes of getting a confession.
C)When invigilation is conducted, it is best to cover all aspects of the business.
D)Invigilation should be accomplished in 5-7 days.
Q3) Which checksum method is considered more advanced and secure than the method it replaced?
A)MD5
B)CRC-1
C)SHA-1
D)CRC-2
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Page 9
Chapter 8: Investigating Concealment
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Q1) Which of the following statements is NOT included in a subpoena?
A)the location of the documents being requested
B)the identity of who is making the request for the documents
C)the exact information being requested
D)the signature of a judge or court commissioner
Q2) The best way to obtain documentary evidence is:
A)by chance, accident or tip discovery.
B)through computer-based queries of full-population accounting and other databases.
C)through interviews and interrogations.
D)through traditional audits like discovery sampling.
Q3) What is the term for the risk that the sample was not representative of the population.
A)Systematic risk
B)Non-sampling risk
C)Sampling risk
D)Compliance risk
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10
Chapter 9: Conversion Investigation Methods
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Q1) Which of the following is a primary reason for conducting conversion searches?
A)To find out suspect's feelings about the organization.
B)To understand the suspect's reaction to crisis.
C)To check the extent of sudden changes in lifestyle.
D)To gather evidence that can be used in interrogations to obtain a confession.
Q2) Funds from unknown sources equals:
A)Assets liabilities.
B)Net worth increase + living expenses.
C)Income funds from known sources.
D)Net worth prior year's net worth.
Q3) Refer Data Set 9-1.The income from unknown sources for years 2 and 3 respectively are:
A)$255,200; $300,200
B)$171,200; $307,200
C)$73,800; $179,800
D)$65,800; $47,800
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11
Chapter 10: Inquiry Methods and Fraud Reports
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Q1) Which is NOT a verbal clue that would place suspicion on an interviewee?
A)Frequent reference to good character
B)Eagerness to end the interview
C)Avoidance of emotionally charged terms
D)Answering with a question
Q2) What is one of the most important personality traits of being an effective interviewer?
A)Introversion
B)Strict
C)Outgoing
D)Formal
Q3) Which of the following would be considered a form of denial while reacting to a crisis?
A)A person's anger is directed at friends, relatives, or co-workers.
B)After an attempt to resolve the problem fails, a person's hope diminishes.
C)A person's anger is replaced by disappointment or embarrassment.
D)A person insists that there is some mistake.
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12
Chapter 11: Financial Statement Fraud
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Q1) In addition to changes in financial statements,which of the following can indicate financial statement fraud has occurred?
A)Information in the footnotes to the financial statements
B)Stable dividend payout ratio
C)Increased hiring of qualified employees by the company
D)Addition of an independent member on the board
Q2) Which of the following occurs when an auditor and auditee only consider conditions that directly affect themselves but not the other party?
A)Zero-order reasoning
B)Deductive reasoning
C)First-order reasoning
D)Higher-order reasoning
Q3) Identify an example of a perceived pressure that can motivate financial statement fraud.
A)The ability to obfuscate the fraud behind complex transactions
B)Failure to meet Wall Street's earnings expectations
C)Rationalizing that all companies use aggressive accounting practices
D)A weak board of directors
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13
Chapter 12: Revenue- and Inventory-Related Financial
Statement Frauds
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Q1) Which of the following involves examining percentage changes in account balances from period to period?
A)Horizontal analysis
B)Vertical analysis
C)Statement mapping
D)Variance analysis
Q2) Which of the following is a documentary symptom associated with revenue-related fraud?
A)Unusual delays by the entity in providing revenue-related, requested information.
B)Weaknesses in the cutoff processes or other key accounting processes.
C)Unsupported or unauthorized revenue-related balances or transactions.
D)Unusual relationships between two revenue related accounts.
Q3) Working capital turnover ratio indicates:
A)the difference between current assets (excluding inventory) and current liabilities.
B)the amount of working capital used in generating sales for the period.
C)the bare minimum working capital that a company should have at any time.
D)the amount of working capital used as a percentage of the assets owned by the company
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Chapter 13: Liability, asset, and Inadequate Disclosure
Frauds
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Q1) Analytical symptoms for unrecorded notes and mortgages payable include which of the following?
A)Significant increases in recorded debt
B)Unreasonable relationships between interest expense and recorded liabilities
C)Recorded amounts of notes payable, mortgages payable, and other debts that appear to be too high
D)Significant sales of assets with not much cash flow
Q2) Which of the following expenditures would be most suspicious if it were capitalized?
A)Equipment purchases
B)Computer purchases
C)Prepaid expenses
D)Salaries to the top management
Q3) Which of the following is an example of liability fraud?
A)Underrecording accounts payable
B)Improperly capitalizing costs
C)Overstating accounts receivable
D)Recording fictitious sales
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Page 15
Chapter 14: Fraud Against Organizations
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Q1) Which of the following occurs when an employee demands a payment from a vendor in order to make a decision in that vendor's favor?
A)Bribery
B)Larceny
C)Economic extortion
D)Illegal gratuity
Q2) Larceny is easier to detect than skimming because:
A)larceny involves stealing cash after it has already been recorded in the company's accounting system.
B)larceny involves fraudulent disbursements of cash, while skimming involves fraudulent receipts of cash.
C)larceny involves stealing cash as it is paid by a customer.
D)larcenies can take place in any circumstance in which an employee has access to cash.
Q3) Identify the unlawful trading schemes engaged in through mutual funds.
A)Leveraging and layering
B)Commission fraud and speculative trading
C)Market timing and late trading
D)Circular trading and NAV manipulation
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Page 16
Chapter 15: Consumer Fraud
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Q1) Which of the following observations is NOT true of foreign-advance fee scams?
A)Perpetrators are well-known businesses and there is usually some urgency to participate.
B)Perpetrators claim to trust the victim with their money or assets.
C)Perpetrators are always willing to transfer money or other assets to the victims, but only after money or information is extracted.
D)Perpetrators claim to have access to large sums of money or assets.
Q2) Product testing is a fraud:
A)that request the consumers to review the products presented in the brochures and send their commentaries to the supplier for review.
B)where consumers respond to an advertisement that promises income simply for stuffing envelopes.
C)that promise victims a job that involves strolling through stores, enjoying the displays, shopping for merchandise, and then filing reports on the experiences they have had. D)where perpetrators promise high pay for working on different projects.
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Chapter 16: Bankruptcy, divorce, and Tax Fraud
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Q1) Which of the following is NOT listed as a duty of the trustee in a Chapter 7 bankruptcy?
A)Furnish information about the estate and its administration
B)Ensure that the debtor files the statement of intention to retain or surrender property
C)After confirmation of a plan, file such reports as are necessary or as the court orders
D)Oppose the discharge of the debtor when appropriate
Q2) Which of the following is NOT a duty of the court-appointed trustee in a chapter 11 case?
A)Investigate the acts, assets, liabilities, and financial condition of the debtor
B)Examine proofs of claims
C)Collect and liquidate the property of the debtor's estate
D)All of the above are duties of a court-appointed trustee
Q3) The Office of U.S.Trustee is an agency in which of the following departments?
A)Homeland Defense
B)Department of Justice
C)Department of the Treasury
D)Department of Agriculture
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Chapter 17: E-Commerce Fraud
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Q1) What is a person who sends e-mail or pop-up messages to users asking for personal information in inventive ways called?
A)trojan
B)sniffer
C)spoofer
D)phisher
Q2) What is the most important aspect of internal control?
A)Audit committee
B)Control policies
C)Control system
D)Personnel
Q3) Generally,the best way to prevent fraud in e-business settings is to focus on:
A)reducing pressures.
B)buying and implementing anti-virus software.
C)reducing fraud opportunities.
D)hiring security experts.
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Chapter 18: Legal Follow-Up
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Q1) Which amendment protects the defendant from "unreasonable searches and seizures by the government?"
A)Fourth Amendment
B)Fifth Amendment
C)Sixth Amendment
D)Seventh Amendment
Q2) Which of the following is a part of expert witness testimony during a trial?
A)presenting visuals to convey issues more completely regarding complex fraud issues
B)responding to direct-questioning by the attorney representing the opposing side
C)responding to questions for clarification from the jury
D)responding to cross examination by the attorney who hired the expert witness
Q3) What is the legal process by which each party's attorneys try to gain information about the other side's case before the trial begins called?
A)pleading
B)investigation
C)discovery
D)admission
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