Forensic Accounting (Rufus), GE
Chapter 1 Introduction to the World of Forensic Accounting
1.1 True/False Questions
1) Forensic accounting can be defined as the application of financial facts to legal situations.
Answer: TRUE
Explanation: Forensic accounting can be defined as the application of financial facts to legal situations.
Diff: 1
LO: 1-1
AACSB: Analytical Thinking
2) "Trust, but verify" is the general rule while exercising professional skepticism.
Answer: TRUE
Explanation: Forensic accountants must exercise a healthy dose of professional skepticism. This reflects a proactive, questioning mindset, where nothing is as it seems and "trust, but verify" is the general rule.
Diff: 1
LO: 1-1
AACSB: Analytical Thinking
3) Fraud detection and fraud examination describes reactive strategies while fraud deterrence describes proactive strategies.
Answer: TRUE
Explanation: Fraud deterrence differs from fraud detection and fraud examination in that it describes proactive (rather than reactive) strategies.
Diff: 1
LO: 1-2
AACSB: Analytical Thinking
4) The need or motive of the fraud is not the immediate challenge of a fraud examination.
Answer: TRUE
Explanation: The primary focus of a fraud examination is to determine the following elements of the fraud: who committed the fraud, how they committed it, when it was committed, how much was taken, and who else was involved. The why (need or motive), although important to the overall understanding of fraud, is not the immediate challenge.
Diff: 1
LO: 1-2
AACSB: Analytical Thinking
5) Fraud deterrence strategies include statistical analysis.
Answer: FALSE
Explanation: Statistical analysis is a fraud detection strategy.
Diff: 1
LO: 1-2
AACSB: Analytical Thinking
6) Fact witnesses can express opinions but expert witnesses cannot.
Answer: FALSE
Explanation: Expert witnesses differ from fact witnesses in that they can express opinions.
Diff: 1
LO: 1-2
AACSB: Analytical Thinking
7) The accounting process has three basic steps: recording, classifying, and summarizing.
Answer: TRUE
Explanation: The accounting process has three basic steps: recording, classifying, and summarizing.
Diff: 1
LO: 1-3
AACSB: Analytical Thinking
8) The first line of defense against accounting failures within an organization is the external auditor.
Answer: FALSE
Explanation: The first line of defense against accounting failures within an organization is the internal auditor.
Diff: 1
LO: 1-3
AACSB: Analytical Thinking
9) Deductive reasoning draws conclusions from patterns.
Answer: FALSE
Explanation: Inductive reasoning draws conclusions from patterns.
Diff: 1
LO: 1-4
AACSB: Analytical Thinking
10) Expert reports prepared in the course of litigation are exempt from professional report writing standards.
Answer: TRUE
Explanation: Expert reports prepared in the course of litigation are exempt from professional report writing standards.
Diff: 1
LO: 1-4
AACSB: Analytical Thinking
1.2 Multiple-Choice Questions