Forensic Accounting Midterm Exam
Questions and Accurate Answers
What is Forensic Accounting? - ✔✔Detection and prevention of financial crimes
Competencies:
-Accounting
-Auditing
-Investigative techniques
What are do forensic accountants work in? - ✔✔-Business economic losses and bankruptcy
-Family and marital disputes
-Hidden or misappropriated assets
Forensic Accounting audit procedures - ✔✔-Investigation
-Reporting
-Litigation
How to become a forensic accountant - ✔✔-Education (relevant degree)
-Gain professional experience
-Become a certified fraud examiner (CFE)
Skills needed for a forensic accountant - ✔✔Technical Skills:
-Operate accounting software
-Analyze financial statements
-Conduct technical interviews for witnesses or suspects
,-Legal knowledge to review documents
-Analyze data to identify trends
-Conduct internal audits
Workplace Skills:
-Critical thinking
-Detail oriented
-Excellent communication
-Analytical thinking
What is fraud? - ✔✔Any intentional act or omission designed to deceive others, resulting in the
victim suffering a loss and/or the perpetrator achieving a gain.
Why do people commit fraud? - ✔✔The fraud triangle
-Opportunity
-Rationalization
-Pressure
Fraud Facts - ✔✔In 2022, 54% of fraud cases were discovered by tips or during routine reviews
by management.
Tips: 42%
-Employees: 55%
-Customer: 18%
-Anonymous: 16%
-Vendor: 10%
-Competitor: 3%
Internal Audit: 16%
Management Review: 12%
,Common Fraud Schemes - ✔✔Asset Misappropriation
-Cash theft
-Inventory and other assets
-Fraudulent disbursements (billing schemes, expense reimbursements, check tampering)
-Corruption (conflicts of interest, bribery and incentives)
-Larceny
Employee fraud indicators - ✔✔-Sudden change in work habits - tardiness, productivity,
reliability
-Sudden change in lifestyle - living beyond means, clothing, cars, jewelry, vacations, cash
-Sense of entitlement, complaints of being underpaid
-Sudden change in personality/appearance
-Prior history of misconduct/criminal history
-Excessive unscheduled absences/tardiness
-Evidence of mounting financial difficulties - collection agency calls, wage garnishments,
borrowing money from co-workers
-Complaints from vendors (contactors, consultants, suppliers)
-Difficulty contacting during workday, unavailability
-Unreported outside employment/business activities
-Unwillingness to be away from job for extended- Unwillingness to be away from job for
extended periods, no vacations
-Non-acceptance of promotions
- Failure to share important information with supervisor or subordinates
-Resistance to supervision/oversight
-Reluctance to delegate to subordinates
-Excessive non-work related phone calls or emails during the workday
-Consistent failure to follow established procedures/overrides established internal controls
, -Poor record-keeping/inadequate documentation to support decisions or transactions
-Non-cooperation with auditors/inspectors
-By-pass chain of command
-High turnover of subordinates
-No/limited segregation of key functions within work unit, weak controls
-Untimely bank deposits/bank reconciliations
-Consistent math errors in computations
-Alteration/falsification/destruction of official records- Alteration/falsification/destruction of
official records-
-Socialization with vendors
-Soliciting/accepting gifts and gratuities from vendors
-Frequent, unexplained meetings with vendors behind closed doors or off- site
-Meeting with "unfamiliar" people in office
-Failure to enforce contract provisions with vendors
-Consistent use of same vendors
-Vendor'
What are fraud red flags? - ✔✔-Undesirable situations or conditions that consistently
contribute to fraud, waste, and abuse of resources
-Contributors to fraud or circumstances that may indicate the presence of fraud.
Behavioral Red Flags - ✔✔-Living beyond means (most common, per ACFE)
-Financial difficulties
-Unusually close association with vendor/customer
-Control issues; unwillingness to share duties
-Excessive pressure from within the organization
-Irritability, suspiciousness or defensiveness
-"Wheeler-dealer" attitude
Questions and Accurate Answers
What is Forensic Accounting? - ✔✔Detection and prevention of financial crimes
Competencies:
-Accounting
-Auditing
-Investigative techniques
What are do forensic accountants work in? - ✔✔-Business economic losses and bankruptcy
-Family and marital disputes
-Hidden or misappropriated assets
Forensic Accounting audit procedures - ✔✔-Investigation
-Reporting
-Litigation
How to become a forensic accountant - ✔✔-Education (relevant degree)
-Gain professional experience
-Become a certified fraud examiner (CFE)
Skills needed for a forensic accountant - ✔✔Technical Skills:
-Operate accounting software
-Analyze financial statements
-Conduct technical interviews for witnesses or suspects
,-Legal knowledge to review documents
-Analyze data to identify trends
-Conduct internal audits
Workplace Skills:
-Critical thinking
-Detail oriented
-Excellent communication
-Analytical thinking
What is fraud? - ✔✔Any intentional act or omission designed to deceive others, resulting in the
victim suffering a loss and/or the perpetrator achieving a gain.
Why do people commit fraud? - ✔✔The fraud triangle
-Opportunity
-Rationalization
-Pressure
Fraud Facts - ✔✔In 2022, 54% of fraud cases were discovered by tips or during routine reviews
by management.
Tips: 42%
-Employees: 55%
-Customer: 18%
-Anonymous: 16%
-Vendor: 10%
-Competitor: 3%
Internal Audit: 16%
Management Review: 12%
,Common Fraud Schemes - ✔✔Asset Misappropriation
-Cash theft
-Inventory and other assets
-Fraudulent disbursements (billing schemes, expense reimbursements, check tampering)
-Corruption (conflicts of interest, bribery and incentives)
-Larceny
Employee fraud indicators - ✔✔-Sudden change in work habits - tardiness, productivity,
reliability
-Sudden change in lifestyle - living beyond means, clothing, cars, jewelry, vacations, cash
-Sense of entitlement, complaints of being underpaid
-Sudden change in personality/appearance
-Prior history of misconduct/criminal history
-Excessive unscheduled absences/tardiness
-Evidence of mounting financial difficulties - collection agency calls, wage garnishments,
borrowing money from co-workers
-Complaints from vendors (contactors, consultants, suppliers)
-Difficulty contacting during workday, unavailability
-Unreported outside employment/business activities
-Unwillingness to be away from job for extended- Unwillingness to be away from job for
extended periods, no vacations
-Non-acceptance of promotions
- Failure to share important information with supervisor or subordinates
-Resistance to supervision/oversight
-Reluctance to delegate to subordinates
-Excessive non-work related phone calls or emails during the workday
-Consistent failure to follow established procedures/overrides established internal controls
, -Poor record-keeping/inadequate documentation to support decisions or transactions
-Non-cooperation with auditors/inspectors
-By-pass chain of command
-High turnover of subordinates
-No/limited segregation of key functions within work unit, weak controls
-Untimely bank deposits/bank reconciliations
-Consistent math errors in computations
-Alteration/falsification/destruction of official records- Alteration/falsification/destruction of
official records-
-Socialization with vendors
-Soliciting/accepting gifts and gratuities from vendors
-Frequent, unexplained meetings with vendors behind closed doors or off- site
-Meeting with "unfamiliar" people in office
-Failure to enforce contract provisions with vendors
-Consistent use of same vendors
-Vendor'
What are fraud red flags? - ✔✔-Undesirable situations or conditions that consistently
contribute to fraud, waste, and abuse of resources
-Contributors to fraud or circumstances that may indicate the presence of fraud.
Behavioral Red Flags - ✔✔-Living beyond means (most common, per ACFE)
-Financial difficulties
-Unusually close association with vendor/customer
-Control issues; unwillingness to share duties
-Excessive pressure from within the organization
-Irritability, suspiciousness or defensiveness
-"Wheeler-dealer" attitude
