TEST BANK
Forensic Accounting and Fraud Examination
MARY-JO KRANACHER, RICHARD RILEY
2nd Edition
,Test bank project for Forensic Accounting and Fraud Examination (2nd Ed.) by Mary-Jo Kranacher and Dick Riley
Test bank written by Brian L. Carpenter, PhD, CFE ∙ (989) 205-4182 ∙
CHAPTER 1
Module 1
1. Which of the following is NOT one of the four essential elements of fraud under common law?
A. A material false statement
B. Reliance on the false statement by the victim
C. Knowledge that the statement was false when it was spoken
D. Use of email, wire, or telephone with a criminal intent to deceive
2. The “felonious stealing, taking and carrying, leading, riding, or driving away with another’s
property, with the intent to convert it or deprive the owner thereof” is the legal definition of:
A. Embezzlement
B. Tort
C. Larceny
D. Fraud
3. A fiduciary is someone who:
A. Swears an oath before taking office
B. Acts for the benefit of another
C. Betrays the trust of another
D. Controls access to an organization’s cash or assets
4. An unauthorized 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
rights is the definition of:
A. Collusion
B. Concealment
C. Capital misappropriation
D. Conversion
5. The intentional, deliberate misstatement, or omission of material facts or accounting data that is
misleading and, when considered with all the information made available, that would cause the
reader to change or alter his or her judgment or decision is defined by the Association of Certified
Fraud Examiners as:
A. Financial statement fraud
B. Financial statement misstatement
C. Financial statement concealment
D. Financial statement re-statement
1|Page
,Test bank project for Forensic Accounting and Fraud Examination (2nd Ed.) by Mary-Jo Kranacher and Dick Riley
Test bank written by Brian L. Carpenter, PhD, CFE ∙ (989) 205-4182 ∙
6. Which of the following is an example of financial statement and reporting fraud?
A. Failing to post audit results on the company’s website
B. Debt ratio is materially higher than industry standards
C. Improper timing of revenue and expense recognition
D. Net income for any quarterly filing is 17% or more below analyst predictions
7. The essential characteristics of financial statement fraud are:
A. The misstatement is material and intentional and the users of the financial
statements are investors in publicly traded companies.
B. This misstatement is material and intentional and the preparers of the financial
statements have a fiduciary obligation to the organization.
C. The misstatement is material and intentional and the preparers of the financial
statements fail to report the misstatement to the SEC or other applicable authority.
D. The misstatement is material and intentional and the users of the financial
statements have been misled.
8. As a result of the Sarbanes-Oxley Act (2002), which of the following became part of the business
landscape?
A. Assessment of internal controls, preservation of evidence, whistleblower protection and
increased penalties for securities fraud
B. Mandatory separation of duties, two-factor authentication for online transactions, and
prohibition of fraudulent financial reporting
C. Mandatory quarterly reporting of shell company beneficial ownership, mandatory
criminal background checks on all publicly traded company officers and directors, and
annual review of internal controls by the SEC
D. Auditing firm competence certification, annual disclosure of conflicts of interest by the
board of directors, prohibition of illegal gratuities and penalties for whistleblowers
9. The occupational fraud and abuse classification system (fraud tree) arranges
organizational frauds in which three categories?
A. The act, concealment, and conversion
B. Existence of a fiduciary relationship, breach of duty, harm to the plaintiff or benefit to the
fiduciary
C. Asset misappropriation, corruption, and financial statement fraud
D. Incentive, opportunity, and rationalization.
10. Internal fraud committed by one or more employees of an organization is more commonly
referred to as:
A. Fiduciary breach and embezzlement
B. Insider trading and market timing
2|Page
, Test bank project for Forensic Accounting and Fraud Examination (2nd Ed.) by Mary-Jo Kranacher and Dick Riley
Test bank written by Brian L. Carpenter, PhD, CFE ∙ (989) 205-4182 ∙
C. Occupational fraud and abuse
D. Check tampering and billing schemes
11. The approach to investigating fraud recommended by the text:
A. Identify the specific law that was violated
B. Examine relevant evidence with an eye toward demonstrating three attributes of fraud
C. Defer decisions that are suited to an attorney’s expertise
D. Provide reasonable evidence in support of any opinion of guilt
12. The three attributes of a fraud are:
A. The scheme or fraud act, the concealment activity, and the conversion or benefit.
B. The motive, rationalization and opportunity.
C. The intent, the planning, and the execution of a fraudulent act.
D. Asset misappropriations, corruption, and financial statement fraud and other
fraudulent statements.
13. Who said, “White collar criminals consider your humanity as a weakness to be exploited
…”?
A. Dr. Joseph T. Wells
B. Sherron Watkins
C. Sam E. Antar
D. Andrew Fastow
Module 2
14. Forensic accounting is the application of financial principles and theories to facts or
hypotheses in a legal dispute and consists of two primary functions:
A. Litigation advisory services and investigative services
B. Expressing an opinion of guilt or innocence in court regarding audit results and
documenting the steps taken to reach that opinion
C. Subjecting accounting data to a Benford Analysis and explaining the results to a judge
or jury
D. Providing courtroom testimony and administrative technical guidance to attorneys
15. Forensic and Valuation Services (FVS) professionals can expect that:
A. Their opinion will be carefully noted in court.
B. The attorney for opposing counsel to defer to the FVS professional’s expert opinion on
matters pertaining to forensic accounting.
C. Their work will be carefully scrutinized by the opposing side and that engagements are
adversarial in nature.
3|Page
Forensic Accounting and Fraud Examination
MARY-JO KRANACHER, RICHARD RILEY
2nd Edition
,Test bank project for Forensic Accounting and Fraud Examination (2nd Ed.) by Mary-Jo Kranacher and Dick Riley
Test bank written by Brian L. Carpenter, PhD, CFE ∙ (989) 205-4182 ∙
CHAPTER 1
Module 1
1. Which of the following is NOT one of the four essential elements of fraud under common law?
A. A material false statement
B. Reliance on the false statement by the victim
C. Knowledge that the statement was false when it was spoken
D. Use of email, wire, or telephone with a criminal intent to deceive
2. The “felonious stealing, taking and carrying, leading, riding, or driving away with another’s
property, with the intent to convert it or deprive the owner thereof” is the legal definition of:
A. Embezzlement
B. Tort
C. Larceny
D. Fraud
3. A fiduciary is someone who:
A. Swears an oath before taking office
B. Acts for the benefit of another
C. Betrays the trust of another
D. Controls access to an organization’s cash or assets
4. An unauthorized 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
rights is the definition of:
A. Collusion
B. Concealment
C. Capital misappropriation
D. Conversion
5. The intentional, deliberate misstatement, or omission of material facts or accounting data that is
misleading and, when considered with all the information made available, that would cause the
reader to change or alter his or her judgment or decision is defined by the Association of Certified
Fraud Examiners as:
A. Financial statement fraud
B. Financial statement misstatement
C. Financial statement concealment
D. Financial statement re-statement
1|Page
,Test bank project for Forensic Accounting and Fraud Examination (2nd Ed.) by Mary-Jo Kranacher and Dick Riley
Test bank written by Brian L. Carpenter, PhD, CFE ∙ (989) 205-4182 ∙
6. Which of the following is an example of financial statement and reporting fraud?
A. Failing to post audit results on the company’s website
B. Debt ratio is materially higher than industry standards
C. Improper timing of revenue and expense recognition
D. Net income for any quarterly filing is 17% or more below analyst predictions
7. The essential characteristics of financial statement fraud are:
A. The misstatement is material and intentional and the users of the financial
statements are investors in publicly traded companies.
B. This misstatement is material and intentional and the preparers of the financial
statements have a fiduciary obligation to the organization.
C. The misstatement is material and intentional and the preparers of the financial
statements fail to report the misstatement to the SEC or other applicable authority.
D. The misstatement is material and intentional and the users of the financial
statements have been misled.
8. As a result of the Sarbanes-Oxley Act (2002), which of the following became part of the business
landscape?
A. Assessment of internal controls, preservation of evidence, whistleblower protection and
increased penalties for securities fraud
B. Mandatory separation of duties, two-factor authentication for online transactions, and
prohibition of fraudulent financial reporting
C. Mandatory quarterly reporting of shell company beneficial ownership, mandatory
criminal background checks on all publicly traded company officers and directors, and
annual review of internal controls by the SEC
D. Auditing firm competence certification, annual disclosure of conflicts of interest by the
board of directors, prohibition of illegal gratuities and penalties for whistleblowers
9. The occupational fraud and abuse classification system (fraud tree) arranges
organizational frauds in which three categories?
A. The act, concealment, and conversion
B. Existence of a fiduciary relationship, breach of duty, harm to the plaintiff or benefit to the
fiduciary
C. Asset misappropriation, corruption, and financial statement fraud
D. Incentive, opportunity, and rationalization.
10. Internal fraud committed by one or more employees of an organization is more commonly
referred to as:
A. Fiduciary breach and embezzlement
B. Insider trading and market timing
2|Page
, Test bank project for Forensic Accounting and Fraud Examination (2nd Ed.) by Mary-Jo Kranacher and Dick Riley
Test bank written by Brian L. Carpenter, PhD, CFE ∙ (989) 205-4182 ∙
C. Occupational fraud and abuse
D. Check tampering and billing schemes
11. The approach to investigating fraud recommended by the text:
A. Identify the specific law that was violated
B. Examine relevant evidence with an eye toward demonstrating three attributes of fraud
C. Defer decisions that are suited to an attorney’s expertise
D. Provide reasonable evidence in support of any opinion of guilt
12. The three attributes of a fraud are:
A. The scheme or fraud act, the concealment activity, and the conversion or benefit.
B. The motive, rationalization and opportunity.
C. The intent, the planning, and the execution of a fraudulent act.
D. Asset misappropriations, corruption, and financial statement fraud and other
fraudulent statements.
13. Who said, “White collar criminals consider your humanity as a weakness to be exploited
…”?
A. Dr. Joseph T. Wells
B. Sherron Watkins
C. Sam E. Antar
D. Andrew Fastow
Module 2
14. Forensic accounting is the application of financial principles and theories to facts or
hypotheses in a legal dispute and consists of two primary functions:
A. Litigation advisory services and investigative services
B. Expressing an opinion of guilt or innocence in court regarding audit results and
documenting the steps taken to reach that opinion
C. Subjecting accounting data to a Benford Analysis and explaining the results to a judge
or jury
D. Providing courtroom testimony and administrative technical guidance to attorneys
15. Forensic and Valuation Services (FVS) professionals can expect that:
A. Their opinion will be carefully noted in court.
B. The attorney for opposing counsel to defer to the FVS professional’s expert opinion on
matters pertaining to forensic accounting.
C. Their work will be carefully scrutinized by the opposing side and that engagements are
adversarial in nature.
3|Page
