Forensic Accounting & Fraud Midterm
Exam Questions and Accurate Answers
Forensic accounting - ✔✔use of accounting knowledge or skill for court room purposes. So FA
can therefore involve not only fraud but also bankruptcy, business valuation and disputes,
divorce and other other litigation
fraud examination - ✔✔involves obtaining documentary evidence, interviewing witnesses and
potential subjects, writing investigative reports, testifying to findings and assisting in general
detection and prevention of fraud
corporate scandals - ✔✔Enron, Worldcom, xerox, waste management
Fraud - ✔✔Black's Law Dictionary - intentional perversion of truth for the purpose of inducing
another in reliance upon perversion of truth, to part with some valuable thing belonging to him
or to surrender a legal right
occupational fraud and abuse - ✔✔use of occupation for personal enrichment (not just money)
through deliberate misuse or misapplication of employer's resources/assets (on the job)
(doesnt have to benefit you)
four elements of fraud - ✔✔material false statement, knowledge that the statement was false,
reliance on the statement by victim, damages
Edwin H. Sutherland - ✔✔first defined "white collar crime," theory of differential association -->
crime is learned, not genetic
Donald R. Cressey - ✔✔studied embezzlers (why people become trust violators), developed the
fraud triangle
, Steve Albrecht - ✔✔nine motivators of fraud (types of pressures/motivation) --> 1 living beyond
means, 2 overwhelming desire for personal gain, 3 high personal debt, 4 close association with
customers, 5 pay not commensurate with job, 6 wheeler dealer (gamblers), 7 strong challenge
to beat system, 8 excessive gambling, 9 family/peer pressure
corruption - ✔✔bribery, conflicts of interest, illegal gratuities, extortion; becoming more
prevalent - global mkts cultural
asset misappropriation - ✔✔misuse of a company asset for personal gain; cash (larceny,
skimming, fraudulent disbursements) and inventory
fraudulent statements - ✔✔financial and non financial; biggest $$ frauds
white collar crime - ✔✔criminal acts of corporations, individuals in corporate capacity
fraud triangle - ✔✔pressure, perceived opportunity and rationalization
fraud scale - ✔✔situational pressures, opportunity to commit, personal integrity
skimming - ✔✔theft of cash from victim organization before the cash hits the accounting
system (off-book fraud, no direct audit trail, books stay balanced, most common form of cash
fraud); very hard to find bc never creates a money/audit trail; types --> sales, receivables
check tampering - ✔✔form of fraudulent disbursement; employee does one of two things:
prepares a fraudulent check for own benefit or converts a check intended for someone else
(check washing)
register disbursements - ✔✔form of fraudulent disbursement; cash stolen from cash register;
perpetrator enters a reversing transaction to justify the disbursement of funds; register is
balanced
Exam Questions and Accurate Answers
Forensic accounting - ✔✔use of accounting knowledge or skill for court room purposes. So FA
can therefore involve not only fraud but also bankruptcy, business valuation and disputes,
divorce and other other litigation
fraud examination - ✔✔involves obtaining documentary evidence, interviewing witnesses and
potential subjects, writing investigative reports, testifying to findings and assisting in general
detection and prevention of fraud
corporate scandals - ✔✔Enron, Worldcom, xerox, waste management
Fraud - ✔✔Black's Law Dictionary - intentional perversion of truth for the purpose of inducing
another in reliance upon perversion of truth, to part with some valuable thing belonging to him
or to surrender a legal right
occupational fraud and abuse - ✔✔use of occupation for personal enrichment (not just money)
through deliberate misuse or misapplication of employer's resources/assets (on the job)
(doesnt have to benefit you)
four elements of fraud - ✔✔material false statement, knowledge that the statement was false,
reliance on the statement by victim, damages
Edwin H. Sutherland - ✔✔first defined "white collar crime," theory of differential association -->
crime is learned, not genetic
Donald R. Cressey - ✔✔studied embezzlers (why people become trust violators), developed the
fraud triangle
, Steve Albrecht - ✔✔nine motivators of fraud (types of pressures/motivation) --> 1 living beyond
means, 2 overwhelming desire for personal gain, 3 high personal debt, 4 close association with
customers, 5 pay not commensurate with job, 6 wheeler dealer (gamblers), 7 strong challenge
to beat system, 8 excessive gambling, 9 family/peer pressure
corruption - ✔✔bribery, conflicts of interest, illegal gratuities, extortion; becoming more
prevalent - global mkts cultural
asset misappropriation - ✔✔misuse of a company asset for personal gain; cash (larceny,
skimming, fraudulent disbursements) and inventory
fraudulent statements - ✔✔financial and non financial; biggest $$ frauds
white collar crime - ✔✔criminal acts of corporations, individuals in corporate capacity
fraud triangle - ✔✔pressure, perceived opportunity and rationalization
fraud scale - ✔✔situational pressures, opportunity to commit, personal integrity
skimming - ✔✔theft of cash from victim organization before the cash hits the accounting
system (off-book fraud, no direct audit trail, books stay balanced, most common form of cash
fraud); very hard to find bc never creates a money/audit trail; types --> sales, receivables
check tampering - ✔✔form of fraudulent disbursement; employee does one of two things:
prepares a fraudulent check for own benefit or converts a check intended for someone else
(check washing)
register disbursements - ✔✔form of fraudulent disbursement; cash stolen from cash register;
perpetrator enters a reversing transaction to justify the disbursement of funds; register is
balanced
