EXAM 3 Quizzes

Question 1

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

Answer 1

Net worth method

Question 2

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

Answer 2

The evidence of each element can be developed

Question 3

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

Answer 3

Trustworthy

Question 4

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

Answer 4

Email

Question 5

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

Answer 5

Examinations

Question 6

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

Answer 6

Intent

Question 7

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.

Answer 7

Have woven the answers into a coherent storyline grounded in the evidence.

Question 8

_____________ is an examination technique that considers periods before, during, and after a suspected fraud has occurred.

Consideration of red flags
Invigilation
Earnings management
Defalcation

Answer 8

Invigilation

Question 9

Three types of evidence may be offered at trial: testimony, real, and ____________.

Demonstrative
Compelling
Reliable/trustworthy
Non-prejudicial

Answer 9

Demonstrative

Question 10

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

Answer 10

Lottery or gambling winnings

Question 11

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

Answer 11

Authentication

Question 12

___________________ 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

Answer 12

Evidence

Question 13

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

Answer 13

Circumstantial evidence

Question 14

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

Answer 14

Creating fraudulent documents and altering physical documents

Question 15

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

Answer 15

Red flags

Question 16

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

Answer 16

Debits to expense accounts

Question 17

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

Answer 17

Previously unknown relationships

Question 18

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

Answer 18

Amount of legwork involved in developing sources of information

Question 19

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.

Answer 19

Forensic accounting and fraud examination tools/techniques.

Question 20

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

Answer 20

Concealment

Question 21

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

Answer 21

IRS Form 8300

Question 22

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

Answer 22

Hypothesis-Evidence Matrix

Question 23

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

Answer 23

Sufficient

Question 24

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

Answer 24

Transfer those assets to another party over which the person holding the assets has some element of control

Question 25

___________ evidence is the backbone of most financial forensic examinations.
Group of answer choices

Compelling

Demonstrative

Documentary

Circumstantial

Answer 25

Documentary

Question 26

_______________ 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

Answer 26

Predication

Question 27

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

Answer 27

Developing new leads

Question 28

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

Answer 28

Who, what, when, where, and why; evidence

Question 29

Most fraud and forensic accounting cases are proved with ___________ evidence.

Demonstrative

Direct

Documentary

Circumstantial

Answer 29

Circumstantial

Question 30

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

Answer 30

The interviewer should prepare the statement for the confessor to sign.

Question 31

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.

Answer 31

Taking extensive notes distracts interviewers from their main responsibility to watch and listen.

Question 32

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.

Answer 32

Words that normally put people on the defensive should be avoided.

Question 33

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.

Answer 33

To add credibility to the false statement.

Question 34

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?

Answer 34

Who else knew besides you?

Question 35

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.

Answer 35

Gain the confession without reducing the legal responsibility for the act

Question 36

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

Answer 36

Defuse alibis

Question 37

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

Answer 37

The close

Question 38

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.

Answer 38

Document analysis, neutral third-party witnesses, corroborative witnesses, co-conspirator(s), target.

Question 39

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.

Answer 39

Advisable because it can be a means of breaking the ice and establishing a flow of communication.

Question 40

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

Answer 40

Deflate attempts at misdirection and deception by the subject or target

Question 41

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

Answer 41

Fraudulent representations (such as tax returns and financial statements)

Question 42

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

Answer 42

Say to him or her to “tell me about it”

Question 43

In a fraud examination, evidence is usually gathered in a manner that moves from __________ to __________.

Facts; hypothesis

Hypothesis; facts

Specific; general

General; specific

Answer 43

General; specific

Question 44

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 …

Answer 44

Our examination has clearly established that you …

Question 45

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

Answer 45

Stress that may accompany deception

Question 46

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)

Answer 46

Event

Question 47

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

Answer 47

Create tunnel vision and distract the interviewer from looking for signs of deception

Question 48

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.

Answer 48

Preparation is the primary key to success.

Question 49

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

Answer 49

Benchmark admission

Question 50

_________ is an essential element in all criminal and civil actions involving fraud.

Motive

Intent

Conversion

Ego/entitlement

Answer 50

Intent

Question 51

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

Answer 51

To obtain from the confessor a written statement acknowledging the facts.

Question 52

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

Answer 52

Behavioral consistency between verbal and nonverbal cues

Question 53

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

Answer 53

Admission-seeking

Question 54

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%

Answer 54

50%

Question 55

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

Answer 55

Witnesses; subjects and targets

Question 56

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.

Answer 56

You should avoid technical terms and language because they may confuse the interviewee.

Question 57

_____________ 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

Answer 57

Interviewing

Question 58

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

Answer 58

The goal is to remain in control while still appearing compassionate and understanding.