Forensic Accounting Exam ACTUAL
QUESTIONS AND CORRECT ANSWERS
SAS 99 - CORRECT ANSWERS✅✅Consideration of Fraud in Financial Statement Audit
-fraud as an intentional act resulting in material misstatement
-brainstorming sessions to determine how financial statements are susceptible to fraud
-gather information to identify risks
-evaluate programs and controls that address the identified risk
-fraud risk categories identified
(recommend brainstorming, professional skepticism, discussions with management,
unpredictable audit tests, responding to management override of controls)
SOX - CORRECT ANSWERS✅✅- auditor independence
-corporate responsibility for financial reports
-enhanced financial disclosures
-management assessment of internal controls
-real time issuer disclosures
-criminal penalties for altering documents
-increased penalties for violation
-whistleblower protection
forensic accounting - CORRECT ANSWERS✅✅the action of identifying, recording,
settling, extracting, sorting, reporting, and verifying past financial data or other accounting
activities for settling current or prospective legal disputes or using such past financial data for
projecting future financial data to settle legal disputes
-use of accounting for legal purposes
Forensic Accounting AICPA view - CORRECT ANSWERS✅✅-investigative accounting:
detect, prevent and control fraud
-litigation services: bankruptcy, business and real estate valuation, lost profits/damages
calculation, marital dissolutions, tax issues assessment/analysis, general consulting
,Forensic accountant vs fraud auditor - CORRECT ANSWERS✅✅Fraud Auditor: an
accountant especially skilled in auditing who is generally engaged in auditing with a view
toward fraud discovery, documentation, and prevention. "trust buy verify" (set up system to
stop fraud from happening in the future, determine how fraud was committed, find fraud)
Forensic Accountant: may do the same as fraud auditor, also use accounting, consulting, and
legal skills in broader engagements, and needs a working knowledge of the legal system and
communication skills to give expert testimony and aid litigation "nothing is as it seems" (find
fraud, determine how the fraud was committed, set up a system to stop the fraud from
happening in the future)
Knowledge and Skillset Forensic must have - CORRECT ANSWERS✅✅-auditing skills
-investigative knowledge/skills
-criminology
-accounting knowledge
-legal knowledge
-information technology knowledge
-communication skills
--knowledge base of law, accounting, investigative auditing, and criminology
Auditing Skills - CORRECT ANSWERS✅✅-analysis of financial information through
vertical analysis, horizontal analysis, ratio analysis, and reasonableness testing
-understand how financials fit together, what documentation exists, risk and internal controls,
and good written and oral communication
investigative knowledge/skillsets - CORRECT ANSWERS✅✅-developing evidence
(interviews, surveillance, search warrants, etc.)
-sources of information (physical, testimonial, documentary, demonstrative)
-preserving evidence (chain of custody, packaging of evidence, maintaining evidence)
Legal Knowledge: Civil vs Criminal - CORRECT ANSWERS✅✅look up chart
-in general no accountant-client priviledge
Criminology (Fraud Triangle) - CORRECT ANSWERS✅✅-motivation (personal financial,
adverse relationships at work, lifestyle)
, -opportunity (lack of internal controls, size of company)
-rationalization (management doesn't care, I deserve it)
data mining - CORRECT ANSWERS✅✅-software to identify and review unusual data
trends, patterns, and anomalies within a data set
Communication Skills (most important) - CORRECT ANSWERS✅✅-oral communication
for in court and written communication for reports and interview results
What is fraud - CORRECT ANSWERS✅✅any intentional act or omission designed to
deceive others, resulting in the victim suffering a loss and or the perpetrator achieving a gain
4 elements: a false representation or willful omission regarding a material fact, the fraudster
knew the representation was false, the target relied on this misrepresentation, and the victim
suffered damages or incurred a loss
elements of fraud - CORRECT ANSWERS✅✅-a false representation or willful omission
regarding a material fact
-the fraudster knew the representation was false
-the target relied on this misappropriation
-the victim suffered damages or incurred a loss
--need scienter (knowledge of wrongdoing), mens rea (intent), and knowingly**
Cost of Fraud - CORRECT ANSWERS✅✅-estimated 5% of annual revenue and cost more
than $4 trillion annually
Fraud method frequency - CORRECT ANSWERS✅✅-asset misappropriation accounts for
89% of fraud, corruption for 38%, and financial statement for 10%
3 M's of Financial Reporting Fraud - CORRECT ANSWERS✅✅- manipulation: alteration
of accounting records or supporting documents from which financial statements are prepared
-misrepresentation: internal omission from financial statements of significant information
QUESTIONS AND CORRECT ANSWERS
SAS 99 - CORRECT ANSWERS✅✅Consideration of Fraud in Financial Statement Audit
-fraud as an intentional act resulting in material misstatement
-brainstorming sessions to determine how financial statements are susceptible to fraud
-gather information to identify risks
-evaluate programs and controls that address the identified risk
-fraud risk categories identified
(recommend brainstorming, professional skepticism, discussions with management,
unpredictable audit tests, responding to management override of controls)
SOX - CORRECT ANSWERS✅✅- auditor independence
-corporate responsibility for financial reports
-enhanced financial disclosures
-management assessment of internal controls
-real time issuer disclosures
-criminal penalties for altering documents
-increased penalties for violation
-whistleblower protection
forensic accounting - CORRECT ANSWERS✅✅the action of identifying, recording,
settling, extracting, sorting, reporting, and verifying past financial data or other accounting
activities for settling current or prospective legal disputes or using such past financial data for
projecting future financial data to settle legal disputes
-use of accounting for legal purposes
Forensic Accounting AICPA view - CORRECT ANSWERS✅✅-investigative accounting:
detect, prevent and control fraud
-litigation services: bankruptcy, business and real estate valuation, lost profits/damages
calculation, marital dissolutions, tax issues assessment/analysis, general consulting
,Forensic accountant vs fraud auditor - CORRECT ANSWERS✅✅Fraud Auditor: an
accountant especially skilled in auditing who is generally engaged in auditing with a view
toward fraud discovery, documentation, and prevention. "trust buy verify" (set up system to
stop fraud from happening in the future, determine how fraud was committed, find fraud)
Forensic Accountant: may do the same as fraud auditor, also use accounting, consulting, and
legal skills in broader engagements, and needs a working knowledge of the legal system and
communication skills to give expert testimony and aid litigation "nothing is as it seems" (find
fraud, determine how the fraud was committed, set up a system to stop the fraud from
happening in the future)
Knowledge and Skillset Forensic must have - CORRECT ANSWERS✅✅-auditing skills
-investigative knowledge/skills
-criminology
-accounting knowledge
-legal knowledge
-information technology knowledge
-communication skills
--knowledge base of law, accounting, investigative auditing, and criminology
Auditing Skills - CORRECT ANSWERS✅✅-analysis of financial information through
vertical analysis, horizontal analysis, ratio analysis, and reasonableness testing
-understand how financials fit together, what documentation exists, risk and internal controls,
and good written and oral communication
investigative knowledge/skillsets - CORRECT ANSWERS✅✅-developing evidence
(interviews, surveillance, search warrants, etc.)
-sources of information (physical, testimonial, documentary, demonstrative)
-preserving evidence (chain of custody, packaging of evidence, maintaining evidence)
Legal Knowledge: Civil vs Criminal - CORRECT ANSWERS✅✅look up chart
-in general no accountant-client priviledge
Criminology (Fraud Triangle) - CORRECT ANSWERS✅✅-motivation (personal financial,
adverse relationships at work, lifestyle)
, -opportunity (lack of internal controls, size of company)
-rationalization (management doesn't care, I deserve it)
data mining - CORRECT ANSWERS✅✅-software to identify and review unusual data
trends, patterns, and anomalies within a data set
Communication Skills (most important) - CORRECT ANSWERS✅✅-oral communication
for in court and written communication for reports and interview results
What is fraud - CORRECT ANSWERS✅✅any intentional act or omission designed to
deceive others, resulting in the victim suffering a loss and or the perpetrator achieving a gain
4 elements: a false representation or willful omission regarding a material fact, the fraudster
knew the representation was false, the target relied on this misrepresentation, and the victim
suffered damages or incurred a loss
elements of fraud - CORRECT ANSWERS✅✅-a false representation or willful omission
regarding a material fact
-the fraudster knew the representation was false
-the target relied on this misappropriation
-the victim suffered damages or incurred a loss
--need scienter (knowledge of wrongdoing), mens rea (intent), and knowingly**
Cost of Fraud - CORRECT ANSWERS✅✅-estimated 5% of annual revenue and cost more
than $4 trillion annually
Fraud method frequency - CORRECT ANSWERS✅✅-asset misappropriation accounts for
89% of fraud, corruption for 38%, and financial statement for 10%
3 M's of Financial Reporting Fraud - CORRECT ANSWERS✅✅- manipulation: alteration
of accounting records or supporting documents from which financial statements are prepared
-misrepresentation: internal omission from financial statements of significant information
