1.Which of the following is considered a fraudulent activity?

a.A mistake in gathering or processing accounting data from which financial statements are prepared

b.An incorrect accounting estimate arising from oversight or misinterpretation of facts

c.Misappropriation of assets

d.A mistake in the application of accounting principles relating to amount, classification, manner of presentation or disclosure

e.None of the above

2.Spouses can conceal assets and income by using many different methods. These methods are more numerous if the spouse who does the concealing owns a business. Still, spouses who are employees have opportunities to hide assets, especially cash. One method of concealment is exchanging cash earned in a business for products or expenses. The following are investigative techniques that can be applied in such a situation:

a.Compare levels of cash received prior to the time the divorce became imminent with the level of cash after divorce was initiated

b.Compare levels of inventory and cost of goods sold for periods prior to filing to post-filing periods

c.Compare the amount of prepaid expenses after the initiation of divorce proceedings to the amount that existed prior to initiation

d.Contact suppliers to determine how they are paid and whether any changes in method of payment have been made

e.A, b and c

f.A, b and d

g.All of the above

3.Brenda is married to Tom. Three years ago, Tom confided in Brenda that he had overstated certain expenses of his unincorporated business to lower the amount of taxes to be paid. Brenda knows that Tom has consistently done this for the last three years. Can Brenda avail herself of the innocent spouse rules contained in the Internal Revenue Code for the amount owing last year?

a.Yes, because Brenda did not commit this act of evasion

b.Yes, but only if Brenda did not file separate tax returns during the last year

c.Yes, if Brenda files the election referred to in the Internal Revenue Code within two years after the IRS begins collection efforts against her

d.No

e.None of the above

4.During 2015, John Connors sold his personal car for $2500. He had purchased the car in 2011for $6000. In March 2015, he sold 500 shares of stock for $10,000. He had acquired the stock in December 2010 for $22,000. On January 11, 2015, he gave his nephew a truck that had been used solely in his business. The truck cost $9,000 in 2012. Depreciation totaling $6,500 had been previously deducted on the truck at the time of the gift. John also paid $17,100 in personal expenses in 2015. For 2015, John reported adjusted gross income of $19,000. The balances in his bank accounts were $1,500 at the end of 2014 and $18,900 at the end of 2015. Assuming John correctly reported his income for 2015, the net worth computation would show that:

a.He understated his income by $8,200

b.He understated his income by $11,300

c.He overstated his income by $9,400

d.He did not understate his income

e.None of the above

5.The risk that an auditor will examine a fraudulent check and not recognize it as being fraudulent is called

a.Sampling risk

b.Non-sampling risk

c.Systematic risk

d.Systemic risk

e.None of the above

6.During a concealment investigation, an investigator fails to recognize that an invoice has been forged.This represents

a.Systemic risk

b.Systematic risk

c.Non-sampling risk

d.Sampling risk

e.None of the above

7.Methods for concealment investigation include all but which of the following?

a.Searching public records

b.Computer searches

c.Document examination

d.Audits

e.None of the above

8.Which of the following are specialized bank accounts, in connection with wire transfer services, that invite misuse by sophisticated and professional money launderers?

a.Basic checking accounts

b.Threshold accounts

c.Cupo accounts

d.B and c

e.None of the above

9.In attempting to stop purchasing agent's kickbacks, which would not be helpful in segregating duties?

a.Vendor approvals

b.Sales requisitions

c.Purchase approval

d.Receiving

e.Payments

10.Which is not a verbal clue that would place suspicion on an interviewee?

a.Frequent reference to good character

b.Answering with a question

c.Avoidance of emotionally charged terms

d.Eagerness to end the interview

e.None of the above

11.Assessment questions seek to

a.Gain an admission

b.Find out specific details related to the fraud

c.Establish credibility of the respondent

d.Obtain previously unknown facts

e.None of the above

12.Identify an appropriate accusation in an effective admission-seeking interview.

a.We have reason to believe that you took company assets without permission.Do you agree?

b.We have clearly established that you made a false entry in the books

c.We understand you may have taken money from a vendor

d.We have been conducting an investigation into the kickback fraud, and your responses so far indicate you lied

e.None of the above

13.Which of the following is not a verbal clue that someone may be lying?

a.Expressing reluctance to terminate the interview

b.Asking for the question to be repeated

c.Showing intolerance for the shady conduct of others

d.Refusal to implicate other suspects

e.None of the above

14.Jim Salazar is the majority shareholder of JKL Co.JKL Co. filed for chapter 11 bankruptcy on January 1, 2018. Which of the following may be considered a fraudulent transfer?

a.Transfer of fixed assets to Jim's brother John on December 15, 2017

b.Transfer of land to Jim's sister on July 1, 2016

c.Sale of inventory at regular price to a new customer on February 15, 2018

d.Transfer of inventory to a subsidiary for less than fair value on August 1, 2016

e.Both a and c are correct

15.Which would be the least effective procedure for preventing procurement fraud?

a.Confirming inventory

b.Creating an approved vendor list

c.Reviewing monthly bank reconciliations

d.Separating job responsibilities

e.Looking for cliques

16.Each of the following is a clue that an interviewee is dishonest except:

a.Interviewee's denials become more vehement as accusations are repeated

b.Interviewee requests that the interviewers obtain character testimony from other people

c.Interviewee refuses to implicate possible suspects

d.Interviewee frequently cover his/her mouth with hand or fingers

e.None of the above

17.Which of the following actions by the company auditor increases the potential to detect fraud?

a.Comparing current procedure test results to a prior year

b.Carefully checking the audit test results

c.Performing new procedures not conducted in prior years

d.Assigning the same staff to the audit from year to year

e.None of the above

18.Which of the following elements is not true regarding a confession?

a.A written confession should be drafted by the confessor

b.Obtain facts previously unknown

c.Find out specific details related to the fraud

d.Gain an admission

e.None of the above