WGU D551 PRE-ASSESSMENT: FRAUD AND
FORENSIC ACCOUNTING FINAL TEST 2026
QUESTIONS WITH CORRECT ANSWERS
GRADED A+
◍ What was the public's perception of auditors' training in the context of fraud
detection?.
Answer: The auditors were not sufficiently trained in GAAP rules and
regulations to identify fraud risks properly.
◍ True or False - Middle management never has an opportunity of incentive to
overstate earnings; only the top-level management really benefits from
having a falsely inflated stock price..
Answer: FalseDivision managers could inflate the earnings from their sphere
of influence to meet some internal benchmark or other incentive.
◍ How does the new auditor's lack of knowledge affect fraud detection?.
Answer: The new auditor may not recognize what is 'normal' for the client,
making it easier for fraud to go undetected.
◍ What does creating an expectation of punishment relate to in the fraud
triangle?.
Answer: It is associated with reducing perceived fraud opportunities.
◍ True or False - In early 2009, the Satyam scandal (termed "India's Enron")
was discovered and it was revealed that the company had overstated
revenues by 76% and net income by 97%. The Satyam scandal cost
countless jobs and caused individuals to lost retirements and savings in just
three days..
Answer: True
,◍ What is a potential consequence of not adhering to the Sarbanes-Oxley
Act?.
Answer: Increased risk of fraud and loss of investor trust.
◍ How does discovery sampling relate to fraud risk exposure?.
Answer: Only 100% examination guarantees no fraud; discovery sampling
allows auditor to control the fraud exposure by extrapolating the sample
onto the population.
◍ What is the primary focus when analyzing changes in relationships from
period to period?.
Answer: To identify potential fraud in inventory and cost of goods sold.
◍ What is the main focus of a good accounting system?.
Answer: To ensure accurate financial reporting and prevent fraud.
◍ What is the correct answer regarding the accrual basis of the Statement of
Cash Flows?.
Answer: False. The statement of cash flows does not show a Company's
sources and uses of cash on an accrual basis.
◍ While it appeared that SAS No. 16 was placing (at least in part) part of the
responsibility on the shoulders of auditors to search for fraud, how did
auditors take responsibility for detecting fraud?.
Answer: They were unwilling to accept or acknowledge a substantial
responsibility for detecting fraud.
◍ What is the role of fraud investigation in an organization?.
Answer: While important, fraud investigation typically does not result in the
same level of savings as fraud prevention.
◍ Analytical symptoms of fraud.
Answer: Unusual activities, relationships, events, etc, that are unexpected or
unexplained
◍ True or False: If fraud risk is higher, auditors should incorporate
unpredictability in the audit..
, Answer: False.
◍ SAS No. 53, The Auditor's Responsibility to Detect and Report Errors and
Irregularities, issued by the AICPA's Auditing Standards Board (ASB)
modified the auditor's responsibility to "design the audit to provide
reasonable assurance of detecting errors and irregularities." What was the
principal goal in the release of this statement?.
Answer: Narrow the expectation gap between auditor efforts and public
expectations regarding fraud
◍ What is the effect of fraudulent financial statements on interest rates?.
Answer: Interest rates rise as a result of financial statement fraud.
◍ What was the primary focus of auditors in the early 20th century?.
Answer: Fraud detection.
◍ What should auditors focus on when they find symptoms of fraud?.
Answer: They should ensure proper documentation and not change their
audit approach.
◍ What is the role of the FASB in accounting standards?.
Answer: To establish and improve standards of financial accounting and
reporting.
◍ What degree of assurance does SAS No. 82 stipulate that GAAS audits will
provide regarding the detection of fraud within the financial statements?.
Answer: Reasonable assurance
◍ SAP No. 30 was issued to inform the public on auditors' increased
responsibility regarding fraud. How did auditors' responsibility to detect
fraud really change?.
Answer: It didn't change; it stayed exactly the same—auditors just need to
be aware that the possibility of fraud exists.
◍ Is it true that liability fraud schemes are the same across all industries?.
Answer: False; each industry has unique risks and schemes.
◍ What is the role of internal auditors within an organization?.
, Answer: To evaluate the internal controls on a regular basis.
◍ Many accounts payable frauds occur with timing/cut-off issues around the
end-of-period events..
Answer: True
◍ To detect fraud, the symptoms must be both OBSERVED and RECOGNIZE
D. .
Answer: True
◍ Six categories of fraud symptoms.
Answer: Analytical; accounting or documentary; lifestyle; control; behavior
and verbal; tips and complaints.
◍ Which of the following is RARELY used as a method to perpetrate an
inventory/cost of goods sold fraud?.
Answer: Understate beginning inventory
◍ VIE qualifications.
Answer: 1. Entity's equity isn't sufficient to absorb it's expected losses2.
Investors do not have control of the entity3. Investors do not absorb losses
or returns
◍ Why is backdating stock options considered fraud?.
Answer: Backdating is motivated by greed and violates SEC reporting rules
and GAAP regulations.
◍ According to the COSO report on fraud, firms that engaged in fraudulent
behavior:.
Answer: OFTEN changed auditors between the last clean financial
statements and the last fraudulent financial statements.
◍ What was the misconception about auditors' responsibilities before SAS No.
99?.
Answer: That auditors only needed to provide reasonable assurance of the
lack of fraud without clearly defined responsibilities.
◍ What is the two-fold positive benefit of understating unearned revenue on
FORENSIC ACCOUNTING FINAL TEST 2026
QUESTIONS WITH CORRECT ANSWERS
GRADED A+
◍ What was the public's perception of auditors' training in the context of fraud
detection?.
Answer: The auditors were not sufficiently trained in GAAP rules and
regulations to identify fraud risks properly.
◍ True or False - Middle management never has an opportunity of incentive to
overstate earnings; only the top-level management really benefits from
having a falsely inflated stock price..
Answer: FalseDivision managers could inflate the earnings from their sphere
of influence to meet some internal benchmark or other incentive.
◍ How does the new auditor's lack of knowledge affect fraud detection?.
Answer: The new auditor may not recognize what is 'normal' for the client,
making it easier for fraud to go undetected.
◍ What does creating an expectation of punishment relate to in the fraud
triangle?.
Answer: It is associated with reducing perceived fraud opportunities.
◍ True or False - In early 2009, the Satyam scandal (termed "India's Enron")
was discovered and it was revealed that the company had overstated
revenues by 76% and net income by 97%. The Satyam scandal cost
countless jobs and caused individuals to lost retirements and savings in just
three days..
Answer: True
,◍ What is a potential consequence of not adhering to the Sarbanes-Oxley
Act?.
Answer: Increased risk of fraud and loss of investor trust.
◍ How does discovery sampling relate to fraud risk exposure?.
Answer: Only 100% examination guarantees no fraud; discovery sampling
allows auditor to control the fraud exposure by extrapolating the sample
onto the population.
◍ What is the primary focus when analyzing changes in relationships from
period to period?.
Answer: To identify potential fraud in inventory and cost of goods sold.
◍ What is the main focus of a good accounting system?.
Answer: To ensure accurate financial reporting and prevent fraud.
◍ What is the correct answer regarding the accrual basis of the Statement of
Cash Flows?.
Answer: False. The statement of cash flows does not show a Company's
sources and uses of cash on an accrual basis.
◍ While it appeared that SAS No. 16 was placing (at least in part) part of the
responsibility on the shoulders of auditors to search for fraud, how did
auditors take responsibility for detecting fraud?.
Answer: They were unwilling to accept or acknowledge a substantial
responsibility for detecting fraud.
◍ What is the role of fraud investigation in an organization?.
Answer: While important, fraud investigation typically does not result in the
same level of savings as fraud prevention.
◍ Analytical symptoms of fraud.
Answer: Unusual activities, relationships, events, etc, that are unexpected or
unexplained
◍ True or False: If fraud risk is higher, auditors should incorporate
unpredictability in the audit..
, Answer: False.
◍ SAS No. 53, The Auditor's Responsibility to Detect and Report Errors and
Irregularities, issued by the AICPA's Auditing Standards Board (ASB)
modified the auditor's responsibility to "design the audit to provide
reasonable assurance of detecting errors and irregularities." What was the
principal goal in the release of this statement?.
Answer: Narrow the expectation gap between auditor efforts and public
expectations regarding fraud
◍ What is the effect of fraudulent financial statements on interest rates?.
Answer: Interest rates rise as a result of financial statement fraud.
◍ What was the primary focus of auditors in the early 20th century?.
Answer: Fraud detection.
◍ What should auditors focus on when they find symptoms of fraud?.
Answer: They should ensure proper documentation and not change their
audit approach.
◍ What is the role of the FASB in accounting standards?.
Answer: To establish and improve standards of financial accounting and
reporting.
◍ What degree of assurance does SAS No. 82 stipulate that GAAS audits will
provide regarding the detection of fraud within the financial statements?.
Answer: Reasonable assurance
◍ SAP No. 30 was issued to inform the public on auditors' increased
responsibility regarding fraud. How did auditors' responsibility to detect
fraud really change?.
Answer: It didn't change; it stayed exactly the same—auditors just need to
be aware that the possibility of fraud exists.
◍ Is it true that liability fraud schemes are the same across all industries?.
Answer: False; each industry has unique risks and schemes.
◍ What is the role of internal auditors within an organization?.
, Answer: To evaluate the internal controls on a regular basis.
◍ Many accounts payable frauds occur with timing/cut-off issues around the
end-of-period events..
Answer: True
◍ To detect fraud, the symptoms must be both OBSERVED and RECOGNIZE
D. .
Answer: True
◍ Six categories of fraud symptoms.
Answer: Analytical; accounting or documentary; lifestyle; control; behavior
and verbal; tips and complaints.
◍ Which of the following is RARELY used as a method to perpetrate an
inventory/cost of goods sold fraud?.
Answer: Understate beginning inventory
◍ VIE qualifications.
Answer: 1. Entity's equity isn't sufficient to absorb it's expected losses2.
Investors do not have control of the entity3. Investors do not absorb losses
or returns
◍ Why is backdating stock options considered fraud?.
Answer: Backdating is motivated by greed and violates SEC reporting rules
and GAAP regulations.
◍ According to the COSO report on fraud, firms that engaged in fraudulent
behavior:.
Answer: OFTEN changed auditors between the last clean financial
statements and the last fraudulent financial statements.
◍ What was the misconception about auditors' responsibilities before SAS No.
99?.
Answer: That auditors only needed to provide reasonable assurance of the
lack of fraud without clearly defined responsibilities.
◍ What is the two-fold positive benefit of understating unearned revenue on
