Forensic Accounting Exam 1 Questions and
CORRECT Answers
Forensic Accountant - CORRECT ANSWER A forensic accountant may take on fraud
auditing engagements and may be a fraud auditor, but he or she will also use other
accounting, consulting, and legal skills in broader engagements. In addition to accounting
skills, he or she will need a working knowledge of the legal system and excellent
communication skills to carry out expert testimony in the courtroom and to aid in other
litigation support engagements
Fraud Auditor - CORRECT ANSWER An accountant especially skilled in auditing
who is generally engaged in auditing with a view toward fraud discovery, documentation, and
prevention
Forensic Accounting - CORRECT ANSWER 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
Two Types of Forensic Accounting Services - CORRECT ANSWER IAS (investigative
advisory services) and DAS (Dispute Advisory Services)
SAS 99 - CORRECT ANSWER requires brainstorm session and clarifies auditor's
responsibility in regards to fraud. Attempts to minimize the expectations gap; increases
Auditor's responsibility as it relates to fraud (superseded SAS 82)
Forensic Accountants Knowledge Base - CORRECT ANSWER ■ Law
■ Accounting
■ Investigative auditing
■ Criminology
(& Technology)
, Two Certifying Boards and Licenses - CORRECT ANSWER ACFE (CFE); AICPA
(CFF)
Three M's of Financial Reporting Fraud - CORRECT ANSWER ● Manipulation
● Misrepresentation
● Misapplication
Manipulation - CORRECT ANSWER ○ Falsification or alteration of accounting
records or supporting documents from which financial statements are prepared
Misrepresentation - CORRECT ANSWER ○ Intentional omission of events,
transactions, or other significant information
Misapplication - CORRECT ANSWER ○ Misapplication of accounting principles
relating to amounts, classifications, manner of presentation, or disclosure
Types of Fraud - CORRECT ANSWER i. Cookie Jar Reserves
ii. Lapping/Kiting
iii. Channel Stuffing
iv. Skimming
v. Ghost Employees
vi. Bill and Hold
vii. Ponzi Scheme
Cookie Jar Reserves - CORRECT ANSWER Form of earnings management; use
estimates to make numbers look better/worse at times
Lapping - CORRECT ANSWER form of A/R fraud; employee misappropriates funds
from a payment on Customer A's account and uses Customer B's payment to pay Customer
A's account and so on
CORRECT Answers
Forensic Accountant - CORRECT ANSWER A forensic accountant may take on fraud
auditing engagements and may be a fraud auditor, but he or she will also use other
accounting, consulting, and legal skills in broader engagements. In addition to accounting
skills, he or she will need a working knowledge of the legal system and excellent
communication skills to carry out expert testimony in the courtroom and to aid in other
litigation support engagements
Fraud Auditor - CORRECT ANSWER An accountant especially skilled in auditing
who is generally engaged in auditing with a view toward fraud discovery, documentation, and
prevention
Forensic Accounting - CORRECT ANSWER 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
Two Types of Forensic Accounting Services - CORRECT ANSWER IAS (investigative
advisory services) and DAS (Dispute Advisory Services)
SAS 99 - CORRECT ANSWER requires brainstorm session and clarifies auditor's
responsibility in regards to fraud. Attempts to minimize the expectations gap; increases
Auditor's responsibility as it relates to fraud (superseded SAS 82)
Forensic Accountants Knowledge Base - CORRECT ANSWER ■ Law
■ Accounting
■ Investigative auditing
■ Criminology
(& Technology)
, Two Certifying Boards and Licenses - CORRECT ANSWER ACFE (CFE); AICPA
(CFF)
Three M's of Financial Reporting Fraud - CORRECT ANSWER ● Manipulation
● Misrepresentation
● Misapplication
Manipulation - CORRECT ANSWER ○ Falsification or alteration of accounting
records or supporting documents from which financial statements are prepared
Misrepresentation - CORRECT ANSWER ○ Intentional omission of events,
transactions, or other significant information
Misapplication - CORRECT ANSWER ○ Misapplication of accounting principles
relating to amounts, classifications, manner of presentation, or disclosure
Types of Fraud - CORRECT ANSWER i. Cookie Jar Reserves
ii. Lapping/Kiting
iii. Channel Stuffing
iv. Skimming
v. Ghost Employees
vi. Bill and Hold
vii. Ponzi Scheme
Cookie Jar Reserves - CORRECT ANSWER Form of earnings management; use
estimates to make numbers look better/worse at times
Lapping - CORRECT ANSWER form of A/R fraud; employee misappropriates funds
from a payment on Customer A's account and uses Customer B's payment to pay Customer
A's account and so on
