Legal Elements of Fraud
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Course Introduction
This course provides a comprehensive overview of the legal concepts, frameworks, and case law governing fraud in civil and criminal contexts. Students will examine the essential elements required to establish fraudulent conduct, including misrepresentation, intent, reliance, and damages. Key topics include statutory and common law definitions of fraud, evidentiary standards, defenses to fraud claims, and the role of regulatory agencies. Through real-world case studies and practical exercises, participants will develop a nuanced understanding of how fraud is prosecuted and defended in legal settings, as well as the ethical and professional responsibilities involved in detecting and preventing fraudulent activity.
Recommended Textbook
Forensic Accounting 1st Edition by Robert Rufus
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Chapter 1: Introduction to the World of Forensic Accounting
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Q1) Which of the following are the two major components of forensic accounting services?
A) fraud detection services and fraud deterrence services
B) expert services and consulting services
C) investigative services and litigation services
D) fraud examination services and business valuations services
Answer: C
Q2) Write a short note on value of critical thinking for forensic accountants.
Answer: Critical thinking is a necessary skill for any type of investigation,research,or scientific inquiry.The analytical processes employed by forensic accountants are based on a scientific approach.This involves (1)identifying a question,(2)gathering sufficient relevant data,(3)analyzing the data,(4)drawing conclusions,and (5)communicating results.In this context,critical thinking serves as a guiding frame to preserve the integrity of the scientific process.Various threats to the integrity of this process are manifested in the concept of "blind spots." Blind spots are caused by mistakes in reasoning,human irrationality,biases,distortions,and self-interest.Exercising critical thinking can help in the detection of blind spots.
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Chapter 2: The Legal Environment of Forensic Accounting
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Q1) Which of the following is a difference between Rule 704 and Rule 705 of the Federal Rules of Evidence?
A) Rule 704 allows an expert to state an opinion without first testifying to the underlying facts or data, whereas Rule 705 allows an expert to testify to the underlying facts or data.
B) Rule 704 allows an expert to testify on areas that embrace an ultimate issue to be decided by the fact finder, whereas Rule 705 allows an expert witness a considerable degree of latitude regarding the facts or data upon which his or her opinions are based.
C) Rule 704 allows an expert to testify on areas that embrace an ultimate issue to be decided by the fact finder, whereas Rule 705 allows an expert to state an opinion without first testifying to the underlying facts or data.
D) Rule 704 allows an expert witness a considerable degree of latitude regarding the facts or data upon which his or her opinions are based, whereas Rule 705 allows an expert to testify on areas that embrace an ultimate issue to be decided by the fact finder.
Answer: C
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Chapter 3: Screening and Staging Engagements
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Q1) Which of the following is the last step of the five step scientific process?
A) interpreting data
B) drawing conclusions
C) refining the hypothesis
D) preparing a report
Answer: B
Q2) Joseph Smith,a forensic accountant,is considering whether to accept an engagement or not.From the preliminary information of the case,he is not able to identify a specific conflict of interest.However,he realizes that there is a chance that the engagement might create the perception of a conflict of interest in the professional community.Joseph should
A) accept the engagement as there is not real conflict of interest.
B) not accept the engagement because law does not allow acceptance of such engagements.
C) accept the engagement because perception of conflict is not likely to affect him.
D) not accept the engagement as perception of a conflict could erode his credibility.
Answer: D
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Chapter 4: Gathering Evidence Interviews and Observations
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Q1) Structured questions are designed to stimulate conversation.
A)True
B)False
Q2) Which of the following statements is true of the interviewing process in a forensic accounting engagement?
A) Public employees cannot refuse to answer questions from a forensic accountant if they have exposure to criminal liability.
B) Employees have the right to be represented by counsel during an interview.
C) An employee can be fired for refusing to answer questions during an administrative or civil proceeding.
D) Private employers can be sued for Fifth or Sixth Amendment violations.
Q3) Which of the following type of questions are asked in an interview with the purpose of summarizing and gathering any additional information the interviewee wants to share?
A) introductory questions
B) closing questions
C) close-ended questions
D) cross questions
Q4) Write a short note on observations.
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Chapter 5: Financial Statements Analysis Reading
Between the Lines
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Q1) Which of the following is a systematic technique for categorizing words into content categories using special coding rules?
A) DuPont analysis
B) content analysis
C) Altman's Z-score
D) content coding
Q2) In which of the following aspects does audit differ from compilation or review?
A) An audit gives reasonable level of assurance to the users, whereas a compilation or review does not give any level of assurance to the users.
B) An audit requires an understanding of the entity's internal controls and assessment of fraud risk, whereas a compilation or review does not require such understanding or assessment.
C) An audit requires an auditor or accountant to perform inquiry and analytical procedures, whereas a compilation or review does not require such procedures.
D) An audit is performed to obtain limited assurance that there are no material modifications that should be made to the financial statements, whereas a compilation or review is performed without obtaining any level of assurance.
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Chapter 6: Fraud and White-Collar Crime
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Q1) Which of the following are the three factors of the fraud triangle?
A) pressure, opportunity, and capability
B) opportunity, capability, and rationalization
C) pressure, opportunity, and rationalization
D) pressure, capability, and rationalization
Q2) Which of the following best describes the term fraud?
A) use of force to persuade someone to surrender property
B) use of one's wealth to gain power and influence decisions
C) use of deception to persuade someone to surrender property
D) unintentional misrepresentation of financial statements
Q3) White-collar crime offenders commonly receive light or no detention and rarely make full restitution.
A)True
B)False
Q4) Which of the following statements is true of white-collar crime?
A) There are often easy and inexpensive to prove.
B) These are mostly victimless acts.
C) These are not committed by organizational agents.
D) These are often a low priority for law enforcement.
Q5) List the six attributes of white-collar crime.
Page 8
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Chapter 7: Conducting a Fraud Investigation
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Q1) A ________ is a payment back by a seller of a portion of the purchase price to a buyer to induce purchase or influence future purchases.
A) false discount
B) expense reimbursement
C) kickback
D) check tampering
Q2) Which of the following is a difference between mediation and arbitration?
A) Mediation is a nonbinding structured process, whereas arbitration is a binding process.
B) Mediation is done in front of a panel, whereas arbitration is facilitated by an independent third party.
C) Mediation is generally time-consuming, whereas arbitration takes significantly less time.
D) Mediation is completely flexible, whereas arbitration is comparatively rigid.
Q3) Diverting proceeds of business loans for personal use is known as unauthorized disbursements.
A)True
B)False
Q4) Fraud is not an accounting problem - it is a social phenomenon.Explain.
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Chapter 8: Transforming Data Into Evidence
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Q1) The end transcript of an interview is more important than the process of transcribing an interview.
A)True
B)False
Q2) Descriptive statistics and digital analysis are examples of A) tools of analysis.
B) methods of analysis.
C) techniques of analysis.
D) systems of analysis.
Q3) Which of the following is true of the universe of data?
A) Maintaining the proper boundaries of the data universe is an ongoing effort throughout the investigation.
B) After selecting a sample from the universe of data, conclusions are arrived at by using deductive reasoning.
C) In most cases, forensic accountants have access to the entire universe of relevant data.
D) It is often defined toward the end of the investigation.
Q4) Explain why an interview should be transcribed by the person who conducted the interview.
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Chapter 9: Transforming Data Into Evidence
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Q1) A positive skewness is when the distribution is more heavily weighted toward smaller numbers.
A)True
B)False
Q2) Which of the following is a bar chart,in which each bar represents a single interval and the height of the bar indicates the number of observations in the interval?
A) pie chart
B) histogram
C) line chart
D) distribution chart
Q3) It is more difficult to identify significant deviations from Benford's profile in small data sets.
A)True
B)False
Q4) A parameter is a measure that describes a sample.
A)True
B)False
Q5) What is the purpose of data mining? Give examples of specific applications of data mining.
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Chapter 10: Professional Responsibilities
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Q1) What's the difference between a principle and a rule? Do principles provide a framework for rules and,if yes,how?
Q2) Which of the following statements best defines the rule of compliance as per AICPA's Code of Professional Conduct,ET Sec.200,Rule 202?
A) It requires a member to be honest and candid within the constraints of client confidentiality.
B) It urges the members to adhere the standards promulgated by various professional bodies designated by Council.
C) It precludes relationships that may appear to impair a member's objectivity in rendering various professional services.
D) It induces members to disclose any confidential client information without the specific consent of the client.
Q3) ACFE,the world's largest antifraud organization,requires its members to comply with six fundamental rules as per ACFE's Code of Professional Standards.
A)True
B)False
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Chapter 11: Fundamentals of Business Valuation
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Q1) Which of the following statements is true of fair value as a standard of valuation?
A) It is the most widely recognized standard of value.
B) It does not propose a hypothetical sale in an open and unrestricted market.
C) It is mandated for all federal tax matters.
D) Its operational meaning does not vary from state to state because it is statutorily defined.
Q2) Which of the following is a difference between a forecast and a projection?
A) A forecast reflects conditions that may occur, whereas a projection reflects expected conditions based on current knowledge of trends in relevant factors.
B) A forecast is typically for a short period, whereas projections can be made several years into the future projection.
C) A forecast is based on hypothetical assumptions, whereas a projection is based on current knowledge of trends.
D) A forecast invites rebuttal arguments of speculation and bias, whereas a projection is deemed to be the most appropriate indicator of expected future benefits.
Q3) Why is identification of the ownership interest to be valued important?
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Chapter 12: Special Topics
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Q1) Methods of proof employed by forensic accountants can be either direct or indirect,but a combination of the two is not acceptable.
A)True
B)False
Q2) To make a report effective,a forensic accountant
A) should be concise even if it not comprehensive.
B) should be mindful of the plaintiff requirements rather than audience.
C) should avoid redundant statements.
D) should not rely on others' work.
Q3) The direct method of proof is always preferable to the indirect method because it A) provides a lesser level of uncertainty.
B) is generally more dissuasive.
C) is easier to refute.
D) uses more circumstantial evidence.
Q4) Indirect methods of proof are founded on logic,common sense,critical thinking,and deductive reasoning.
A)True
B)False
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