Acc574 Forensic Accounting: Week 4 Midterms (30 MCQs)

Acc574 Forensic Accounting
Week 4 Midterms: The Forensic Accountant Role in a Legal Dispute

1. (TCO A) Which is not one of the six areas of litigation services that the AICPA committee suggested in 1986? (Points : 4)
Damages
Valuation
Accounting
Analyses
All the above were suggested.

2. (TCO A) Which is not one of the six areas of litigation services? (Points : 4)
Anti-trust analysis
Valuation
Legal knowledge
Analysis
Damages

3. (TCO A) Which organization or group controls forensic accounting? (Points : 4)
ACFEI
Association of Certified Fraud Specialists
ACFE
NACVA
None of the above

4. (TCO A) Which statement is false with respect to Howard M. Schilit's financial shenanigans? (Points : 4)
Five of the shenanigans boost current-year earnings.
Two of the shenanigans shift current-year earnings into the future.
Recognizing current revenues as deferred revenues is one of the shenanigans.
He suggested nine financial shenanigans.
None of the above

5. (TCO A) Which of the following is a red flag for forensic accountants? (Points : 4)
A) Complex financial products
B) Recurring charges
C) Aggressive revenue recognition policies
Both A and C
None of the above
All of the above

6. (TCO A) What is an operating and financial stability risk factor? (Points : 4)
New accounting requirements for the company
Substance over form questions
Company declining in the industry
High degree of competition
All of the above

7. (TCO A) Which would be a detective control? (Points : 4)
Required approvals
Job rotation
Passwords
Surprise cash count
All of the above

8. (TCO A) Control risk is: (Points : 4)
A risk that a material error in the balance or transaction class will not be prevented or detected.
The risk that an account or transactions contain material misstatements before the effects or the controls.
The measure of whether something is significant enough to change an investor's investment decision is a prime consideration in how the audit is conducted.
The risk that audit procedures will not turn up material error when it exists.
None of the above

9. (TCO A) Which statement is false? (Points : 4)
Accounting is the language of business, and internal controls set the ethical standards that govern business activities.
The internal auditor's standard states that the auditor must consider the possibility of material irregularities or noncompliance during an internal audit.
Tests of controls are always effective in detecting fraud.
The internal auditor's competency framework does not stress technical accounting knowledge.
None of the above.

10. (TCO A) Which scheme does not inflate sales? (Points : 4)
Recognizing sales on disputed claims against customers
Recognizing sales without shipping the goods
Understanding allowances for sales discounts
Recognizing full sales amount for partial shipments
All inflate sales

11. (TCO A) Horizontal analysis typically involves what? (Points : 4)
A) Comparison of companies by market share in the industry
B) Comparison of cash value at a predictable moment in liquidity
C) Comparison of year-to-year changes in financial statements
D) Comparison of organizational structure best suited for a planned business venture
Both A and B

12. (TCO A) Given these facts, calculate return on equity:
Sales $8,200,000
Net Income 2,050,000
Average Total Assets 7,100,000
Average Total Liabilities 3,500,000 (Points : 4)
.29
.57
2.28
.71
Not enough information is given.

13. (TCO B) Which factor would not indicate a fraud warning sign for not-for-profit organizations? (Points : 4)
Increase in amount owed to creditors
Deterioration of key ratio
Expense accounts are decreasing
Non-payment of insurance premiums
Regular deferral of capital expenditures

14. (TCO B) Accounts receivable fraud prevention controls include all of the following except: (Points : 4)
Placing a credit limit on customer accounts to immediately flag when exceeded.
Requiring supervisory approval for all credit memos and write-offs.
Requiring supervisory approval before customers are added to or deleted from the master file.
Requiring investment documents to be sent only to upper management for safekeeping.
None of the above.

15. (TCO B) A ____________ chart is a pictorial display of personal relationships among related or unrelated parties. (Points : 4)
Link
Invigilation
Entity
Genogram
None of the above

16. (TCO B) Which statement is false? (Points : 4)
The net worth method may be used when there is a year-to-year increase in net worth and the taxpayer does not have adequate records to determine taxable income or when fraud is strongly suspected.
The net worth technique may be appropriate for any taxpayer when two or more years are being audited and the agent determines that there have been substantial changes in assets and liabilities from year to year.
Under the net worth method, nondeductible expenditures are deducted to arrive at adjusted gross income.
If a person's net worth increase (as adjusted) exceeds the reported taxable income, there may be unreported income (or a previous cash hoard or large gift).
None of the above.

17. (TCO B) Which would not be a procurement fraud scheme? (Points : 4)
Lapping
Phantom vendors
Defective pricing
Conflict of interest
Defective delivery

18. (TCO B) Which would be a red flag of phantom vendors? (Points : 4)
Unfamiliar vendor
Vendor's name consists of initials
Vendor has post office box address
Rapidly increasing purchases from one vendor
All of the above

19. (TCO B) In computing income under the net worth method, the following facts are found:
Total Assets $1,600,000
Total Liabilities 825,000
Nondeductable Expenses 120,000
Nontaxable Income 45,000
Net Worth at Beginning of Year 560,000
Adjusted Gross Income is:
(Points : 4)
$170,000.
$215,000.
$290,000.
$335,000.
None of the above

20. (TCO B) A first step in a money laundering operation is to: (Points : 4)
Obtain legal money.
Deposit illegal money into the banking system.
Open a correspondent account.
Send a money wire transfer to another country.
None of the above.

21. (TCO B) The difference between an off-shore bank and a shell bank is that: (Points : 4)
The shell bank has a physical presence in the country in which it is licensed whereas the off-shore bank does not.
The off-shore bank specifically cannot carry on business in the jurisdiction in which it is licensed whereas such restrictions do not specifically affect shell banks.
Only shell banks use correspondent services.
U.S.banks have more access to client account information in a shell bank than in an off-shore bank.
None of the above.

22. (TCO B) Which one of the following is the easiest to falsify? (Points : 4)
Web logs
Paper documents
Wire transfer reports
Hard drive files

23. (TCO B) Money launderers prefer to establish business relationships with a company whose operations are characterized by: (Points : 4)
Being located in a foreign country.
Large cash flows.
Low inventories.
Being run by one entrepreneur.
None of the above.

24. (TCO C) Which is not one of the Daubert factors? (Points : 4)
Whether the theory existed before litigation began
Whether the theory or technique in question can be and has been tested
The theory's known or potential error rate
The theory has attracted widespread acceptance
All of the above are Daubert factors

25. (TCO C) Which would not be a subject matter expertise under Fed. Rul. 702 of Evidence? (Points : 4)
Special knowledge
Special skills
Special training
Special education
All of the above are subject matter expertise

26. (TCO C) Which statement is true? (Points : 4)
Leading questions may be asked during direct examination.
Leading questions are allowed during cross-examination.
Experts may state a legal opinion while testifying.
Avoid looking directly at the jurors.
None of the above is true.

27. (TCO C) Which would not be a type of evidence? (Points : 4)
Testimony of a lay witness
Testimony of an expert witness
A particular document
A computer
All of above are types of evidence

28. (TCO C) Which statement is false? (Points : 4)
A motion in limine may be used to exclude the testimony of an expert.
Under the concept of judicial notice, a court can take as proven certain matters that are considered indisputable.
Circumstantial evidence is evidence from which a fact at issue may be proved directly.
The most common form of direct evidence is testimony based on a witness's personal knowledge or observation of facts.
None of the above is false.

29. (TCO C) Which statement is false? (Points : 4)
Criminal cases require a higher standard of proof.
A person may qualify as an expert without formal training.
An expert must testify from personal knowledge.
Generally, non-expert witnesses are not permitted to give opinions.
All of the above are true.

30. (TCO C) The fifth major phase of litigation is which of the following? (Points : 4)
Trial
Pleadings
Discovery
Outcome
Possible appeal
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