WGU D551 - FRAUD & FORENSIC
ACCOUNTING FINAL TEST 2026
QUESTIONS WITH CORRECT ANSWERS
GRADED A+
◍ Which rule is most commonly violated by fraudsters?.
Answer: Revenue recognition.
◍ What aspect of management is evaluated by reviewing the involvement of
boards of directors in decision-making processes?.
Answer: Their ability to influence decisions.
◍ What common theme motivates fraud cases?.
Answer: Attempts to improve financial information to support high stock
price, support a bond or stock offering, and increase stock price.
◍ What is the difference between forensic accounting and traditional
auditing?.
Answer: Forensic accounting focuses on legal disputes and fraud, while
traditional auditing ensures financial statements are accurate.
◍ What is the most significant red-flag or tell-tale sign of fraud?.
Answer: The symptoms, or red-flags, cannot be ranked in order of their
significance or extent.
◍ What happens to investor confidence as a result of financial statement
fraud?.
Answer: Financial statement fraud leads investors to lose confidence.
◍ Under what circumstances can auditors rely upon the truthfulness of records
obtained from the client according to SAS 16?.
Answer: Until there is evidence to suggest otherwise.
,◍ True or False: The percentage of financial statement frauds is small, but the
damage they can cause is enormous..
Answer: True.
◍ What are control activities in an organization?.
Answer: Control activities include adequate segregation of duties, proper
procedures for authorization, and adequate documents and records.
◍ What is financial statement fraud?.
Answer: The intentional misstatement or omission of material facts in
financial statements that misleads users.
◍ Which of the following is NOT a way that overstated fixed assets get on
financial statements?.
Answer: Revenues are capitalized inappropriately in the balance sheet and
not removed to the income statement in the proper period.
◍ What is a simple definition of fraud?.
Answer: Fraud is an intentional deception that causes economic loss to the
victim or gain to the perpetrator.
◍ What is the primary motivation behind most financial statement fraud?.
Answer: To make the firm look better to outside viewers.
◍ What graphical tools are used in fraud investigations?.
Answer: Link charts, flow charts, commodity and money flow diagrams, and
timelines.
◍ What is a common issue with the capitalization process in financial
statements?.
Answer: Improper capitalization leading to incorrect financial reporting.
◍ What must a fraudster do when offsetting/inflating ending inventory
amounts?.
Answer: Continue inflating that amount from year to year.
◍ What did Audit Standard No. 99 do that previous standards didn't?.
Answer: Audit Standard No. 99 began to define audits as more than just
, fraud detection.
◍ What is the role of data analytics in fraud investigations?.
Answer: To highlight anomalies over time, by location, or by employee that
may indicate fraudulent activity.
◍ What common failure did the auditors of Computer Systems and Lincoln
Savings and Loan share?.
Answer: They did not look into management's background.
◍ What does the term 'consultatory standards' imply for auditors?.
Answer: Auditors are expected to provide guidance and insights beyond
mere compliance with regulations.
◍ Who is required to certify a company's financial statements under the
Sarbanes-Oxley Act?.
Answer: CEO/CFO or management.
◍ What is the significance of implementing controls after a fraud incident?.
Answer: To prevent the problem from occurring again.
◍ What is the main focus of documentary symptoms in fraud detection?.
Answer: They provide the best opportunity to find contingent liabilities that
should be recorded.
◍ Why is backdating stock options considered fraud?.
Answer: Backdating is motivated by greed and violates SEC reporting rules
and GAAP regulations.
◍ What is a significant concern regarding management override in internal
controls?.
Answer: It relates to the revenue cycle and can involve new, unusual, or
large clients bypassing the usual customer-approval process.
◍ What is the implication of switching auditors for companies involved in
fraud?.
Answer: It may indicate an attempt to escape scrutiny from previous audits.
◍ What factors increase the difficulty of detecting fraud from an auditor's
, perspective?.
Answer: Collusion by fraudsters, forgery, and small frauds relative to
financial statement balances.
◍ What is the significance of management's discussion and analysis section in
annual reports?.
Answer: It is significant as it reflects the company's public relations efforts.
◍ What is the significance of the PCAOB's regulatory power?.
Answer: It provides oversight to ensure that audit firms comply with
established standards.
◍ What is the significance of tips and complaints in an audit?.
Answer: They can indicate potential issues that require further investigation.
◍ What is the role of internal audit committees in fraud prevention?.
Answer: To ensure capable oversight and involvement in decision-making
processes.
◍ What does the sales return percentage measure?.
Answer: It measures the percentage of sales that are being returned by
customers and is useful in detecting revenue-related financial statement
fraud.
◍ According to the financial statement fraud detection framework, fraud is
rarely detected by what method?.
Answer: Analyzing the financial statements.
◍ What is the 'double down' effect in fraud?.
Answer: The tendency to commit further fraud to cover up previous
fraudulent activities.
◍ What are common rationalizations employees might use to justify dishonest
behavior?.
Answer: Statements like 'It's really not that serious' or 'Everyone is a little
dishonest'.
◍ What is the impact of financial reporting fraud on an organization?.
ACCOUNTING FINAL TEST 2026
QUESTIONS WITH CORRECT ANSWERS
GRADED A+
◍ Which rule is most commonly violated by fraudsters?.
Answer: Revenue recognition.
◍ What aspect of management is evaluated by reviewing the involvement of
boards of directors in decision-making processes?.
Answer: Their ability to influence decisions.
◍ What common theme motivates fraud cases?.
Answer: Attempts to improve financial information to support high stock
price, support a bond or stock offering, and increase stock price.
◍ What is the difference between forensic accounting and traditional
auditing?.
Answer: Forensic accounting focuses on legal disputes and fraud, while
traditional auditing ensures financial statements are accurate.
◍ What is the most significant red-flag or tell-tale sign of fraud?.
Answer: The symptoms, or red-flags, cannot be ranked in order of their
significance or extent.
◍ What happens to investor confidence as a result of financial statement
fraud?.
Answer: Financial statement fraud leads investors to lose confidence.
◍ Under what circumstances can auditors rely upon the truthfulness of records
obtained from the client according to SAS 16?.
Answer: Until there is evidence to suggest otherwise.
,◍ True or False: The percentage of financial statement frauds is small, but the
damage they can cause is enormous..
Answer: True.
◍ What are control activities in an organization?.
Answer: Control activities include adequate segregation of duties, proper
procedures for authorization, and adequate documents and records.
◍ What is financial statement fraud?.
Answer: The intentional misstatement or omission of material facts in
financial statements that misleads users.
◍ Which of the following is NOT a way that overstated fixed assets get on
financial statements?.
Answer: Revenues are capitalized inappropriately in the balance sheet and
not removed to the income statement in the proper period.
◍ What is a simple definition of fraud?.
Answer: Fraud is an intentional deception that causes economic loss to the
victim or gain to the perpetrator.
◍ What is the primary motivation behind most financial statement fraud?.
Answer: To make the firm look better to outside viewers.
◍ What graphical tools are used in fraud investigations?.
Answer: Link charts, flow charts, commodity and money flow diagrams, and
timelines.
◍ What is a common issue with the capitalization process in financial
statements?.
Answer: Improper capitalization leading to incorrect financial reporting.
◍ What must a fraudster do when offsetting/inflating ending inventory
amounts?.
Answer: Continue inflating that amount from year to year.
◍ What did Audit Standard No. 99 do that previous standards didn't?.
Answer: Audit Standard No. 99 began to define audits as more than just
, fraud detection.
◍ What is the role of data analytics in fraud investigations?.
Answer: To highlight anomalies over time, by location, or by employee that
may indicate fraudulent activity.
◍ What common failure did the auditors of Computer Systems and Lincoln
Savings and Loan share?.
Answer: They did not look into management's background.
◍ What does the term 'consultatory standards' imply for auditors?.
Answer: Auditors are expected to provide guidance and insights beyond
mere compliance with regulations.
◍ Who is required to certify a company's financial statements under the
Sarbanes-Oxley Act?.
Answer: CEO/CFO or management.
◍ What is the significance of implementing controls after a fraud incident?.
Answer: To prevent the problem from occurring again.
◍ What is the main focus of documentary symptoms in fraud detection?.
Answer: They provide the best opportunity to find contingent liabilities that
should be recorded.
◍ Why is backdating stock options considered fraud?.
Answer: Backdating is motivated by greed and violates SEC reporting rules
and GAAP regulations.
◍ What is a significant concern regarding management override in internal
controls?.
Answer: It relates to the revenue cycle and can involve new, unusual, or
large clients bypassing the usual customer-approval process.
◍ What is the implication of switching auditors for companies involved in
fraud?.
Answer: It may indicate an attempt to escape scrutiny from previous audits.
◍ What factors increase the difficulty of detecting fraud from an auditor's
, perspective?.
Answer: Collusion by fraudsters, forgery, and small frauds relative to
financial statement balances.
◍ What is the significance of management's discussion and analysis section in
annual reports?.
Answer: It is significant as it reflects the company's public relations efforts.
◍ What is the significance of the PCAOB's regulatory power?.
Answer: It provides oversight to ensure that audit firms comply with
established standards.
◍ What is the significance of tips and complaints in an audit?.
Answer: They can indicate potential issues that require further investigation.
◍ What is the role of internal audit committees in fraud prevention?.
Answer: To ensure capable oversight and involvement in decision-making
processes.
◍ What does the sales return percentage measure?.
Answer: It measures the percentage of sales that are being returned by
customers and is useful in detecting revenue-related financial statement
fraud.
◍ According to the financial statement fraud detection framework, fraud is
rarely detected by what method?.
Answer: Analyzing the financial statements.
◍ What is the 'double down' effect in fraud?.
Answer: The tendency to commit further fraud to cover up previous
fraudulent activities.
◍ What are common rationalizations employees might use to justify dishonest
behavior?.
Answer: Statements like 'It's really not that serious' or 'Everyone is a little
dishonest'.
◍ What is the impact of financial reporting fraud on an organization?.
