WGU D551 - FRAUD & FORENSIC
ACCOUNTING ACTUAL EXAM PAPER 2026
QUESTIONS WITH ANSWERS GRADED A+
◍ 1) a material false statement 2) knowledge that the statement was false when
it was spoken3) reliance on the false statement by the victim 4) damages
resulting from the victims reliance on the false statements.
Answer: What are the 4 legal elements of fraud?
◍ - separate payroll preparation, authorization, distribution, and reconciliation
- supervisor authorization for overtime, sick leave, and vacation - verify all
wage rate changes- restrict access of approval timecards - supervisor should
be present when timecards are punched - supervisor should maintain copies
of timecards- actively test for overtime abuse by using comparison reports,
trend analysis, and exception reports.
Answer: Preventing and Detecting falsifying hours and salary schemes:
◍ - civil trails generally have 6 jurors- if the opposing councel agrees,
unanimous verdict is not required - requires prespondence evidence rather
than "beyond a reasonable doubt".
Answer: The differences between civil and criminal trails:
◍ 1) Interrogatories2) "Requests to Produce Documents" 3) Depositions4)
"Requests for Admission".
Answer: Discovery can take at least 4 forms:
◍ to protect investors by promoting fair and informative financial reports.
Answer: What is the main purpose of the PCAOB?
◍ What is motivation behind committing fraud through backdating of stock
options?
A. giving bonuses to employees
, B. increasing executive compensation
C. ensuring a successful stock issuance
D. preventing a violation of debt covenants.
Answer: B
◍ - to conceal true business performance- to preserve personal status/control -
to maintain personal income/wealth.
Answer: Senior managers and business owners may "cooks the books" for
several reasons, such as:
◍ What is a reason why corporate relationships with lawyers pose an even
greater threat than relationships with auditors when evaluating the threat of
fraud?
A. lawyers usually own stock in the company
B. lawyers usually have insider information from the SEC
C. lawyers usually have a good relationship with the auditors
D. lawyers usually have information about the client's legal difficulties.
Answer: D
◍ - domination of management by a single person without compensating
controls- ineffective board of directors or audit committee oversight-
signficant related-party transactions not in ordinary course of business-
overly complex orgnaizational structure- recurring attempts to management
to justify marginal or inappropriate accounting - restrictions on the auditor
that limit access to people or information.
Answer: What are the red flags associated with improper disclosures?
◍ "Rubber Stamp" Supervisors.
Answer: inattentive or overly trusting supervisors
◍ Business Reversals.
Answer: differs from "personal failures", because here the trust violators
tend to see their problems arising from conditions beyond their control
(employee status plays a big role in the decision)
◍ - fact gathering portion of the interview - 3 types of questions: open, closed,
, leading - question sequence should proceed from general to specific -
methodology: beging with background questions, observe verbal and
nonverbal behavior, ask non-leading questions, and approach sensitive
questions carefully.
Answer: Informational Questions for interviews:
◍ it minimizes income in the current year for tax considerations and it
increases income in the future periods.
Answer: What happens when expensing capital expenditures?
◍ - public accounting firms must be registered with the board- establsihed
standards for auditing, quality control, ethics, and independence standards
and rules - SOX allows the board to conduct regular inspections of public
accounting firms- the board has the authority to investigate registered public
accounting firms and the right to disciplinary proceedings.
Answer: PCAOB
◍ - simply overstate the cost of actual business expenses - this can be
accomplished in a number of ways such as altered receipts, overpurchasing,
overstating another employee's expenses, and orders to overstate expenses.
Answer: Overstated Expense Reimbursements:
◍ - establish effective board oversight of the "tone at the top" created by
management - avoid setting unattainable or unreasonable goals - avoid
applying excessive pressure on employees to achieve goals- change goals if
changed market conditions require it - remove operational obstacles
blocking effective corporate performance- discourage excessive external
expectations of future corporate performance - ensure compensation systens
are fair and do not create too much incentive to commit fraud.
Answer: How can you reduce the pressure to commit FS fraud?
◍ - establishing higher standards for corporate governance and accountability -
creating an independent regulatory framework for the accounting profession
- enhancing the quality of transparency of financial reports- developing
severe civil and criminal penalties for corporate wrongdoers- establishing
new protections for corporate whistleblowers.
, Answer: The Sarbanes-Oxley Act of 2002 provides sweeping measures
aimed at:
◍ 1) Duty - a duty to act exists between the parties 2) Breach - the defendant
failed to use some ordinary or reasonable care in the exercise of the duty 3)
Cause in Fact - a connection between the defendants breach of duty and the
plaintiffs harm can be established 4) Proximate Cause - the defendant must
have contributed to the injury to the plaintiff 5) Damages - damages must've
resulted from the defendents breach of duty.
Answer: The legal standard for negligence has 5 elements:
◍ - deliberate actions by management to meet specific earnings objectives for
private gain- materiality threshold- accounting principles and policies
provide some degree of choice - may lead to fraud- clear and convincing
evidence.
Answer: Earnings management and fraud:
◍ $3.7 Trillion Annually.
Answer: According to the 2014 World GDP, the cost of fraud may be as
high as?
◍ - "inside influence"- competitive bidding process- categorized based on the
stage in which the fraudster exerts his influence: pre-solicitation phase ,
soliciation phase, and submission phase.
Answer: Bid-Rigging Schemes:
◍ Conversion.
Answer: an authorized assumption and exercise of the right of ownership
over goods or personal chattels belonging to another, to the alteration of
their condition or the exclusion of the owner's righst
◍ 1) committment to compliance and an antifraud environment2) assessment,
training, and communication efforts3) org leaders and stakeholders
acknowledge and affirm their commitment to compliance and effective
antifraud efforts 4) conflict-of-interest disclosure 5) systematically
completes it compliance and fraud risk assessment 6) established reporting
ACCOUNTING ACTUAL EXAM PAPER 2026
QUESTIONS WITH ANSWERS GRADED A+
◍ 1) a material false statement 2) knowledge that the statement was false when
it was spoken3) reliance on the false statement by the victim 4) damages
resulting from the victims reliance on the false statements.
Answer: What are the 4 legal elements of fraud?
◍ - separate payroll preparation, authorization, distribution, and reconciliation
- supervisor authorization for overtime, sick leave, and vacation - verify all
wage rate changes- restrict access of approval timecards - supervisor should
be present when timecards are punched - supervisor should maintain copies
of timecards- actively test for overtime abuse by using comparison reports,
trend analysis, and exception reports.
Answer: Preventing and Detecting falsifying hours and salary schemes:
◍ - civil trails generally have 6 jurors- if the opposing councel agrees,
unanimous verdict is not required - requires prespondence evidence rather
than "beyond a reasonable doubt".
Answer: The differences between civil and criminal trails:
◍ 1) Interrogatories2) "Requests to Produce Documents" 3) Depositions4)
"Requests for Admission".
Answer: Discovery can take at least 4 forms:
◍ to protect investors by promoting fair and informative financial reports.
Answer: What is the main purpose of the PCAOB?
◍ What is motivation behind committing fraud through backdating of stock
options?
A. giving bonuses to employees
, B. increasing executive compensation
C. ensuring a successful stock issuance
D. preventing a violation of debt covenants.
Answer: B
◍ - to conceal true business performance- to preserve personal status/control -
to maintain personal income/wealth.
Answer: Senior managers and business owners may "cooks the books" for
several reasons, such as:
◍ What is a reason why corporate relationships with lawyers pose an even
greater threat than relationships with auditors when evaluating the threat of
fraud?
A. lawyers usually own stock in the company
B. lawyers usually have insider information from the SEC
C. lawyers usually have a good relationship with the auditors
D. lawyers usually have information about the client's legal difficulties.
Answer: D
◍ - domination of management by a single person without compensating
controls- ineffective board of directors or audit committee oversight-
signficant related-party transactions not in ordinary course of business-
overly complex orgnaizational structure- recurring attempts to management
to justify marginal or inappropriate accounting - restrictions on the auditor
that limit access to people or information.
Answer: What are the red flags associated with improper disclosures?
◍ "Rubber Stamp" Supervisors.
Answer: inattentive or overly trusting supervisors
◍ Business Reversals.
Answer: differs from "personal failures", because here the trust violators
tend to see their problems arising from conditions beyond their control
(employee status plays a big role in the decision)
◍ - fact gathering portion of the interview - 3 types of questions: open, closed,
, leading - question sequence should proceed from general to specific -
methodology: beging with background questions, observe verbal and
nonverbal behavior, ask non-leading questions, and approach sensitive
questions carefully.
Answer: Informational Questions for interviews:
◍ it minimizes income in the current year for tax considerations and it
increases income in the future periods.
Answer: What happens when expensing capital expenditures?
◍ - public accounting firms must be registered with the board- establsihed
standards for auditing, quality control, ethics, and independence standards
and rules - SOX allows the board to conduct regular inspections of public
accounting firms- the board has the authority to investigate registered public
accounting firms and the right to disciplinary proceedings.
Answer: PCAOB
◍ - simply overstate the cost of actual business expenses - this can be
accomplished in a number of ways such as altered receipts, overpurchasing,
overstating another employee's expenses, and orders to overstate expenses.
Answer: Overstated Expense Reimbursements:
◍ - establish effective board oversight of the "tone at the top" created by
management - avoid setting unattainable or unreasonable goals - avoid
applying excessive pressure on employees to achieve goals- change goals if
changed market conditions require it - remove operational obstacles
blocking effective corporate performance- discourage excessive external
expectations of future corporate performance - ensure compensation systens
are fair and do not create too much incentive to commit fraud.
Answer: How can you reduce the pressure to commit FS fraud?
◍ - establishing higher standards for corporate governance and accountability -
creating an independent regulatory framework for the accounting profession
- enhancing the quality of transparency of financial reports- developing
severe civil and criminal penalties for corporate wrongdoers- establishing
new protections for corporate whistleblowers.
, Answer: The Sarbanes-Oxley Act of 2002 provides sweeping measures
aimed at:
◍ 1) Duty - a duty to act exists between the parties 2) Breach - the defendant
failed to use some ordinary or reasonable care in the exercise of the duty 3)
Cause in Fact - a connection between the defendants breach of duty and the
plaintiffs harm can be established 4) Proximate Cause - the defendant must
have contributed to the injury to the plaintiff 5) Damages - damages must've
resulted from the defendents breach of duty.
Answer: The legal standard for negligence has 5 elements:
◍ - deliberate actions by management to meet specific earnings objectives for
private gain- materiality threshold- accounting principles and policies
provide some degree of choice - may lead to fraud- clear and convincing
evidence.
Answer: Earnings management and fraud:
◍ $3.7 Trillion Annually.
Answer: According to the 2014 World GDP, the cost of fraud may be as
high as?
◍ - "inside influence"- competitive bidding process- categorized based on the
stage in which the fraudster exerts his influence: pre-solicitation phase ,
soliciation phase, and submission phase.
Answer: Bid-Rigging Schemes:
◍ Conversion.
Answer: an authorized assumption and exercise of the right of ownership
over goods or personal chattels belonging to another, to the alteration of
their condition or the exclusion of the owner's righst
◍ 1) committment to compliance and an antifraud environment2) assessment,
training, and communication efforts3) org leaders and stakeholders
acknowledge and affirm their commitment to compliance and effective
antifraud efforts 4) conflict-of-interest disclosure 5) systematically
completes it compliance and fraud risk assessment 6) established reporting
