Forensic Accounting Exam 1 Flashcards
What is the most recognized fraud credential?
Certified Fraud Examiner (CFE)
In a criminal case, what is the burden of proof?
The obligation to prove allegations by presenting strong evidence
Which of the following is not one of the sources of law?
a. Judicial opinions
b. Public opinion
c. Constitutions
d. Statutes
b. Public opinion
What is the definition of forensic accounting?
The application of investigative skills for the purpose of resolving financial issues in a manner that meets standards required by courts of law
If your actions result in misleading action or inaction, you have committed what?
Fraud
Which of the following does a forensic accountant investigate?
a. Purchases of businesses
b. Valuation of divorce assets
c. Calculation of lost profits
d. All of the above
d. All of the above
An error or omission is considered to be material if what?
It influences the decision of a reasonable user
What type of organization typically uses forensic accountants?
Many different types of organizations
An auditor communicates their conclusions by issuing a what?
Audit report
What is one of the most dangerous implications of SOX?
CEOs are responsible for their own actions and the actions of their subordinates
If you’re trying to get two parties to compromise, you’re engaged in what?
Mediation
The Public Company Accounting Oversight Board (PCAOB) was created by what?
Sarbanes-Oxley Act (SOX)
State constitutional laws are considered supreme unless what?
They conflict with federal laws or the U.S. Constitution.
The ability to trace transactions to the source documents is called what?
Audit trail
Burglary, embezzlement, larceny and extortion are what kind of crimes?
Common law crimes
The difference between civil and criminal law violations will involve what?
Violation of a statute
If an employee is determined to have been under pressure to commit a crime, and the opportunity to commit a crime, and rationalized committing a crime, what does this represent?
The fraud triangle
If you’re chosen to serve on a grand jury, you will serve for what?
A specific period of time
Crimes covered under SOX have penalties that range from 5 to 20 years. What type of crimes do these penalties apply to?
White-collar crimes
If two or more people are to commit a crime, they have committed what?
Conspiracy
Internal controls must provide what level of assurance?
Reasonable assurance
Write a paragraph in detail about the concept of materiality. Provide the main bulletpoints you will tackle in your paragraph.
In forensic accounting, materiality refers to the significance of financial information, transactions, or discrepancies in relation to a case or investigation. It determines whether an omission, misstatement, or fraud is substantial enough to influence decisions made by stakeholders, such as auditors, regulators, or courts. Materiality is assessed both quantitatively (based on dollar amounts) and qualitatively (considering the nature of the issue, such as intent or fraud risk). In forensic investigations, materiality thresholds may be lower than in standard financial audits, as even small irregularities can indicate larger fraudulent schemes.
Write a paragraph in detail about professional skepticism and its importance. Provide the main bulletpoints you will tackle in your paragraph.
In forensic accounting, professional skepticism is a critical mindset that requires accountants to question assumptions, verify evidence, and remain alert to potential fraud or misrepresentation. It involves a heightened level of scrutiny, recognizing that financial statements and supporting documents may be intentionally misleading. Forensic accountants apply professional skepticism by critically analyzing data, challenging inconsistencies, and seeking corroborating evidence rather than accepting information at face value. This mindset helps detect fraudulent activity, uncover hidden assets, and strengthen the reliability of investigative findings.
