EXAM 3 Quizzes Flashcards
The _________________ provides circumstantial evidence that amounts paid for assets and expenditures exceed income from known sources for a given period of time.
Bank records method
Invigilation method
Net worth method
Lifestyle analysis method
Net worth method
The main benefit of using the elements of fraud in an investigation is that in virtually every fraud or financial crime, ____________________.
It eliminates the need to develop a compelling storyline grounded in the evidence
Fraudsters use them in attempt to outwit fraud examiners
Courts are required to consider the findings admissible
The evidence of each element can be developed
The evidence of each element can be developed
Generally, evidence is admitted at trial provided that: it is relevant to the issue at hand, any probative effect outweighs any prejudicial effect, and the evidence is ________.
Direct (rather than circumstantial)
Trustworthy
Compelling
Reasonably conclusive
Trustworthy
The value of ________, to include “smoking gun” evidence of financial crimes, fraud, motivations for activity, and other information cannot be overstated.
Wiretaps
Email
Video surveillance
Confidential informants
In essence, ____________ are where evidence intersects with the tools and techniques of the antifraud and forensic accounting profession.
Probative values
Red flags
Examinations
Daubert challenges
Examinations
The difference between a mistake and fraud is ____________. If the fraud examiner or forensic accountant cannot prove it, a civil or criminal conviction for fraud most likely cannot be sustained.
Perceived pressure
Rationalization
Intent
Ego/entitlement
Intent
You have been hired by the prosecution to provide expert testimony in a fraud case you helped investigate. As you provide answers to key questions around the fraud examination, your testimony will be more convincing to the judge and jury if you:
Can articulate a clear opinion about the guilt of the perpetrator(s).
Have woven the answers into a coherent storyline grounded in the evidence.
Ground your answers in the elements of the fraud triangle, particularly with respect to motive.
Omit any reference to evidentiary shortcomings in your testimony.
Have woven the answers into a coherent storyline grounded in the evidence.
_____________ is an examination technique that considers periods before, during, and after a suspected fraud has occurred.
Consideration of red flags
Invigilation
Earnings management
Defalcation
Invigilation
Three types of evidence may be offered at trial: testimony, real, and ____________.
Demonstrative
Compelling
Reliable/trustworthy
Non-prejudicial
Demonstrative
In preparing to rebut defenses to cash from unknown sources, the fraud examiner should develop an evidence trail, if possible, which suggests that defenses are not feasible. Four common defenses to unknown sources of cash include the assertion that the cash was: accumulated in prior periods, obtained by gift or inheritance, obtained from loan proceeds, or a result of:
Selling some other asset (such as a painting)
Foreign held investments
Frugality
Lottery or gambling winnings
Lottery or gambling winnings
To be admitted at trial, evidence must be shown to have unique identifiers (preferable), or that the chain of evidence has been followed. This process is known as:
Verisimilitude certification
Authentication
Chain of custody audit
Invigilation
Authentication
___________________ is defined as anything perceivable by the five senses, any proof, such as testimony of witnesses, records, documents, facts, data, and tangible objects, legally presented at trial to prove a contention and to induce a belief in the minds of the jury.
Predication
Perceptibility
The Federal Rules of Evidence
Evidence
Evidence
Things such as the timing of key transactions, altered documents, concealed documents, destroyed evidence, missing documents, false statements, patterns of suspicious activity, and breaks in patterns of expected activity are examples of ___________________ that may indicate the act, concealment, or conversion in fraud.
Predication
Direct evidence
Circumstantial evidence
MICE
Circumstantial evidence
According to ACFE research, ______________________ are the most common concealment methods for all three categories: asset misappropriation, corruption, and financial reporting fraud.
Creating fraudulent documents and altering physical documents
Creating fraudulent transactions in the accounting system
Creating fraudulent electronic documents or files
Creating fraudulent audit records
Creating fraudulent documents and altering physical documents
Typically, a few _______________ are not in themselves sufficient as a basis for a fraud examination.
Red flags
Instances of missing cash or other assets
Tips with some corroborating evidence
Falsified financial reports
Red flags
You are a fraud examiner who is investigating a suspected embezzlement. As you comb through the general ledger looking for debit entries to offset credits to cash, which account of those listed below is the most commonly used in concealment in such cases?
Debits to equity
Debits to liabilities
Debits to expense accounts
Debits to revenues
Debits to expense accounts
True big data, data analytics, and data mining software doesn’t just change the presentation, but actually discovers _____________________ among the data.
Materiality
Fraud schemes
Previously unknown relationships
Patterns/breaks in patterns
Previously unknown relationships
The primary challenge related to using financial profiling methods is the _________________________________________.
Amount of legwork involved in developing sources of information
Difficulty in dealing with offshore banks and foreign laws
Identification of shell company beneficial owners
Difficulty in accessing tax returns without a court order
Amount of legwork involved in developing sources of information
Analysis of cash flows, analysis of competing hypotheses, consideration of analytical and accounting anomalies, big data and data analytics, consideration of the fraud triangle, use of graphical tools for analysis and communication, internal controls, the control environment and opportunity, interviewing for information and admissions, analysis of nonaccounting and nonfinancial numbers and metrics, financial statement and ratio analysis, consideration of red flags, and analysis of related parties are all examples of:
Direct evidence.
Methods by which evidence can be assessed for validity and reliability.
Board and management responsibilities.
Forensic accounting and fraud examination tools/techniques.
Forensic accounting and fraud examination tools/techniques.
In fraud cases, evidence of ______________ in particular, provides some of the best circumstantial evidence that the act and conversion (benefits) were intentional.
Concealment
Motive, intent, concatenate, and elude (MICE)
A bribe
Rationalization
Concealment
You are conducting a fraud examination in which a confidential informant told you that the key suspect purchased a brand new luxury vehicle with cash that was embezzled. Which kind of report should you obtain to verify this?
Large Cash Purchase Report (LCPR)
Suspicious Activity Report (SAR)
Currency Transaction Report (CTR)
IRS Form 8300
IRS Form 8300
An excellent tool to analyze evidence and develop a compelling storyline is the _______________________.
Hypothesis-Evidence Matrix
The Fraud Triangle
A correlation coefficient of .95 or greater for each variable associated with the fraud
Use of software tools such SAS or IDEA geared toward fraud analysis
Hypothesis-Evidence Matrix
There is a debate in the profession about whether tracing money to a perpetrator’s bank account is sufficient evidence of conversion, or whether the fraud examiner or forensic accountant needs to show how the ill-begotten money was used. Legal precedent indicates that tracing the money into the hands of the perpetrator or his or her bank account is____________________.
Insufficient
Sufficient
More powerful than showing how the perpetrator benefited from it
Only useful to the extent that you can show how the money was used
Sufficient
The most common means for hiding real estate and business ownership is to __________________________________________.
Place the titles in an undisclosed safe deposit box
Make payments to insurance policies from unknown accounts
Pay down mortgages without running the payments through known bank accounts
Transfer those assets to another party over which the person holding the assets has some element of control
Transfer those assets to another party over which the person holding the assets has some element of control
___________ evidence is the backbone of most financial forensic examinations.
Group of answer choices
Compelling
Demonstrative
Documentary
Circumstantial
Documentary
_______________ is defined as the totality of circumstances that would lead a reasonable, professionally trained, and prudent individual to believe that a fraud has occurred, is occurring, or is about to occur.
Premonition
Prevarication
Probable cause
Predication
Predication
The primary benefits of using public sources of data such as the local county courthouse, database searches, Internet searches, and other extra-organizational sources of data are that open sources of data provide evidence of conversion, and can be useful in ________________________.
Cases where the perpetrator deals mostly in cash
Expressing an opinion of guilt grounded in the evidence
Developing new leads
Investigating high profile suspects
Developing new leads
To complete a fraud examination, the fraud examiner or forensic accountant needs to answer the essential questions of ____________________ with ________________.
Opportunity, motive, and rationalization; conviction
Money, ideology, coercion, and ego/entitlement (MICE); clarity
Who, what, when, where, and why; evidence
Which specific fraud laws were violated; authority
Who, what, when, where, and why; evidence
Most fraud and forensic accounting cases are proved with ___________ evidence.
Demonstrative
Direct
Documentary
Circumstantial
Circumstantial
When it is time to obtain a signed statement from the confessor, which approach is best?
The interviewer should have the confessor draft the statement, preferably in his or her own handwriting.
The interviewer should suggest that the confessor’s legal counsel draft a statement.
The interviewer should prepare the statement for the confessor to sign.
The interviewer should have the confessor dictate the statement to him or her for signature
The interviewer should prepare the statement for the confessor to sign.
Instead of taking detailed notes during an interview, the authors advise jotting down keywords. The reason they recommend this is that:
Taking extensive notes distracts interviewers from their main responsibility to watch and listen.
Taking extensive notes tends to make witnesses uncomfortable which may cause them to be less forthcoming.
Taking extensive notes allows the opposing side to obtain them during discovery which may reveal your side’s strategy.
Taking extensive notes is impractical and will cause interviews to last unnecessarily long, thereby fatiguing both the examiners and witnesses.
Taking extensive notes distracts interviewers from their main responsibility to watch and listen.
Given a choice between using the words, “theft” or “shortage,” an interviewer should generally opt for “shortage.” This is because:
Words that normally put people on the defensive should be avoided.
Interviewees who are innocent may feel that you are implying they are to blame.
Until the facts are resolved, you don’t actually know whether the shortage is attributable to theft.
It may help lull a target into a false sense of security because he may assume that the interviewer doesn’t believe a theft has occurred.
Words that normally put people on the defensive should be avoided.
A liar will often request that the interviewer “Check with my wife,” or “Talk to my minister.” Why do they say this?
To add credibility to the false statement.
To vindicate themselves.
To gain sympathy from the interviewer.
To identify co-conspirators without having to name them.
To add credibility to the false statement.
Most frauds are solo ventures—committed without the aid of an accomplice. However, the interviewer should still seek to determine whether other parties were involved. Which choice from the list below would be the best way to phrase this?
Did someone else know?
Who else knew besides you?
Give me the names, right now, of everyone who knew besides you!
Who are the other losers involved in this?
Who else knew besides you?
You are conducting an admission-seeking interview of a suspected embezzler. At some point during the interview, you might say something like, “I totally get it. You were under such financial pressure at home, you just didn’t see any other way out. That’s a pretty common feeling, if you ask me, especially in this day and age where we’re expected to do so much at work with so few resources.” What are you attempting to do by saying this to the target?
Make yourself feel less conflicted about being confrontational.
Gain the confession without reducing the legal responsibility for the act.
Establish a firm moral boundary in the target’s mind between right and wrong.
Make yourself seem more human to a jury if the case goes to trial.
Gain the confession without reducing the legal responsibility for the act
In the course of an admission-seeking interview, you could display physical evidence of the fraud, discuss the testimony of witnesses, or discuss the accused’s deceptions. All of these may be useful to:
Defuse alibis
Establish rapport
Increase fear
Appear compassionate
Defuse alibis
In a typical interview, in what stage would the question be asked, “Is there anyone else I should speak with about the matter?”
The close
The nadir
The introduction
The body
The close
You are a fraud examiner who has been hired to investigate a potential embezzlement case. In which order should you go about gathering the evidence?
Document analysis, neutral third-party witnesses, co-conspirator(s), corroborative witnesses, target.
Target, co-conspirator(s), corroborative witnesses, document analysis, neutral third-party witnesses.
Document analysis, neutral third-party witnesses, corroborative witnesses, co-conspirator(s), target.
Target, co-conspirator(s), corroborative witnesses, neutral third-party witnesses, document analysis.
Document analysis, neutral third-party witnesses, corroborative witnesses, co-conspirator(s), target.
Engaging in “small talk” for a few minutes at the beginning of an interview is:
Not advisable because it’s not on-point where the purpose of the interview is concerned.
Not advisable because most people see it for what it is: a banal social custom.
Advisable because it can be a means of breaking the ice and establishing a flow of communication.
Advisable because you want to extend the interview for as long as possible in an attempt to breakdown the witness.
Advisable because it can be a means of breaking the ice and establishing a flow of communication.
Interviewers need to have complete command of the facts, events, dates, other relevant details, especially in potentially adversarial interviews, in order to _______________________.
Appear to not be caught off guard by previously unknown information
Present a professional image that establishes the authority of the interviewer
Focus on more granular details that would likely be known only by the subject or target
Deflate attempts at misdirection and deception by the subject or target
Deflate attempts at misdirection and deception by the subject or target
Under which kind of fraud would an examiner start with the suspected perpetrator?
Cases of collusion where a co-conspirator agrees to testify against the perpetrator
Fraudulent representations (such as tax returns and financial statements)
Almost every instance where the suspected perpetrator has a prior fraud conviction
If surveillance footage contains “smoking gun” evidence against the perpetrator
Fraudulent representations (such as tax returns and financial statements)
Once the subject has admitted to remembering the first instance, the interviewer should ______________________.
Say to him or her to “tell me about it”
Express some moral indignation so that the confessor knows he or she has done wrong
Remind the confessor that actions have consequences
Immediately get the confessor to sign a written statement
Say to him or her to “tell me about it”
In a fraud examination, evidence is usually gathered in a manner that moves from __________ to __________.
Facts; hypothesis
Hypothesis; facts
Specific; general
General; specific
General; specific
During the admission-seeking interview, the interviewer must, at some point, make a direct accusation of the subject. Which of the following accusations below would best serve this purpose?
We have reason to believe that you …
Our examination has clearly established that you …
It seems likely, based on statements from your co-workers, that you …
You are suspected of …
Our examination has clearly established that you …
Giving vague or evasive answers to questions, avoiding eye contact with the interviewer, casting guilt to others in general but not specifically, and being indignant may be signs of _______________________________.
The interviewer having failed to adequately prepare
A pathological liar
Stress that may accompany deception
A confessor who is almost ready to admit their guilt
Stress that may accompany deception
As with any interview, there are three general approaches to obtaining the verbal confession: chronologically, by transaction, or by:
Association
Display of physical evidence
Event
Official documentation (e.g., tax return)
Event
One issue that arises in interviews is the use of checklists and prewritten questionnaires. The main benefit of these is that the interviewer will be well prepared and less likely to miss an important inquiry. However, checklists can _________________.
Be subpoenaed by opposing counsel which may give it information it didn’t have
Create tunnel vision and distract the interviewer from looking for signs of deception
Cause the interviewer to lose credibility with the witness because they make the interviewer look like they don’t know what they’re doing
Inadvertently divulge to a witness critical information known to the interviewer
Create tunnel vision and distract the interviewer from looking for signs of deception
Many antifraud professionals, forensic accountants, and attorneys will suggest that the outcome of an interview or interrogation may be determined before the first question is asked. What is the underlying belief to this axiom?
If you position yourself as an expert, witnesses will generally be reluctant to lie.
Professional experience trumps attempts at concealment in most frauds.
Eyewitness testimony is reasonably reliable.
Preparation is the primary key to success.
Preparation is the primary key to success.
In an admission-seeking interview, there comes a point at which the accused is deliberating whether or not to confess. When this occurs, the interviewer should present an alternative question to the accused which forces him or her to make one of two choices. One alternative allows the accused a morally accepted reason for the misdeed; the other paints the accused in a negative light. Regardless of which answer the accused chooses, her or she is acknowledging guilt. This is known as a/an:
Benchmark admission
Fork-in-the-road admission
Lesser-of-two evils admission
Exculpatory admission
Benchmark admission
_________ is an essential element in all criminal and civil actions involving fraud.
Motive
Intent
Conversion
Ego/entitlement
Intent
Admission-seeking questions are reserved specifically for individuals whose culpability is reasonably certain. Such questions have at least three purposes: (1) to distinguish the innocent from the culpable, (2) to obtain a valid confession, and (3) ______________________.
To identify potential co-conspirators or other matters salient to the investigation
To establish a rapport with the subject and make them feel relaxed
To obtain from the confessor a written statement acknowledging the facts.
To establish the credibility of the respondent
To obtain from the confessor a written statement acknowledging the facts.
Generally, truthful behavior includes direct answers that give the impression that the interviewee has nothing to hide, spontaneous answers that indicate that the interviewee has nothing to think about, a perception by the interviewee of attentiveness and interest in the interview outcomes, an orientation toward the interviewer, and ________________________.
Increased or decreased use of illustrators in speech during threatening questions
Being overly friendly and polite
Appearing outwardly unconcerned
Behavioral consistency between verbal and nonverbal cues
Behavioral consistency between verbal and nonverbal cues
Regardless of whom we interview, and about what, there are five general types of questions we can ask: introductory, informational, assessment, closing, and ____________.
Probative
Relational
Admission-seeking
Confirmation
Admission-seeking
According to research, the average person’s ability to judge deception is relatively poor. Some studies have indicated that interviewers fail to identify lies as much ____ of the time.
25%
50%
35%
70%
50%
In the fraud examination and forensic accounting professions, nothing is more important to the successful resolution of a case than the ability to conduct thorough interviews of ____________ and interrogation of ________________________.
Subjects and targets; witnesses
Employees and board members; fraudsters
Witnesses; subjects and targets
Fraudsters; felons
Witnesses; subjects and targets
You are a fraud examiner investigating the theft of a company’s automotive parts inventory. After reviewing documents and interviewing witnesses, you have narrowed the list of probable perpetrators to three warehouse workers who appear to have colluded with each other: a forklift operator, a shift leader, and a loader. All three have high school diplomas and earn about 15% more than minimum wage (except for the shift leader, who earns a little more). You decide to interview the forklift driver first (on the belief that the shift leader and the loader are the probable the primary targets). As you talk, you use the terms, “collusion,” “defalcation,” and “predication.” Which of the following statements is most applicable?
You should use technical terms and language whenever possible as a power dynamic to persuade witnesses into cooperating with you.
You should avoid technical terms and language because they may confuse the interviewee.
You should use technical terms and language frequently, especially with people not trained in accounting or forensics because it may prompt them to confess sooner because they tend to assume you know what you are doing.
You should avoid technical terms and language because it may cause the interviewee to want to play “one-upmanship” games with you.
You should avoid technical terms and language because they may confuse the interviewee.
_____________ is the systematic questioning of a person who has knowledge of events, people, evidence, and other details surrounding a fraud or forensic accounting issue.
Interrogating
Interviewing
Canvassing
Structured dialoguing
Interviewing
Rather than being confrontational in interviews, constantly seek agreement from the accused. No matter what the accused has supposedly done, do not express shock, outrage, or condemnation. This posture is recommended because:
Only trained experts in a controlled environment should risk provoking a suspect.
It limits the interviewer’s liability to formal charges of harassment.
The goal is to remain in control while still appearing compassionate and understanding.
The evidence in the case may ultimately point elsewhere
The goal is to remain in control while still appearing compassionate and understanding.
