6) Which of the following statements is true of forensic accounting investigative services?
A) These are provided in connection with actual, pending, or potential legal or regulatory proceedings-criminal or civil.
B) These are only performed after a crime has occurred.
C) These include fraud detection, fraud examination, and fraud deterrence.
D) These generally involve actual or threatened litigation.
Answer: C
Explanation: C) Investigative services provided by forensic accountants are generally related to corporate investigations, which are initiated for the purpose of protecting the organization and its assets from internal or external threats.
Diff: 2
LO: 1-2
AACSB: Analytical Thinking
7) Which of the following is a technique of fraud detection?
A) perception of detection
B) analysis of financial statement
C) preemployment screening
D) evaluation of hiring practices
Answer: B
Explanation: B) Fraud detection includes a variety of strategies, such as internal control procedures, statistical analysis, financial statements analysis, and anonymous reporting channels (such as hotlines).
Diff: 2
LO: 1-2
AACSB: Analytical Thinking
8) Which of the following is NOT the primary focus of a fraud examination by a forensic accountant?
A) Who committed the fraud?
B) How was the fraud committed?
C) When was the fraud committed?
D) Why was the fraud committed?
Answer: D
Explanation: D) The primary focus of a fraud examination is to determine the following elements of the fraud: who committed the fraud, how they committed it (the fraud scheme), when it was committed (time frame and duration), how much was taken, and who else was involved. The why (need or motive), although important to our overall understanding of fraud, is not the immediate challenge.
Diff: 2
LO: 1-2
AACSB: Analytical Thinking
9) Which of the following is a difference between fraud examination and fraud detection?
A) Fraud examination is done before a fraud has been committed, whereas fraud detection is done after a fraud has been committed.
B) Fraud examination is the investigation specific allegations or suspicions of fraud, whereas fraud detection is the identification of an error or irregularity after it has occurred.
C) Fraud examination focuses on the time and duration of the fraud, whereas fraud detection focuses on the need or motive of the fraud.
D) Fraud examination adapts proactive strategies, whereas fraud detection adapts reactive strategies.
Answer: B
Explanation: B) Fraud detection is simply the discovery of fraud. Detective procedures are designed to identify an error or irregularity after it has occurred. A fraud examination's purpose is to investigate specific allegations or suspicions of fraud.
Diff: 2
LO: 1-2
AACSB: Analytical Thinking
10) Which of the following is most likely a short-term strategy for fraud deterrence?
A) financial statement analysis
B) employee invigilation
C) time series analysis
D) evaluation of hiring practices
Answer: D
Explanation: D) Examples of short-term (or procedural) strategies include evaluation of hiring practices, internal controls, and performance monitoring.
Diff: 1
LO: 1-2
AACSB: Analytical Thinking
11) Which of the following is a proactive employee strategy of fraud deterrence?
A) perception of detection
B) analysis of financial statement
C) analysis of statistical data
D) employee contracts
Answer: A