1.2 Multiple-Choice Questions
1) Which of the following best describes the term forensic accounting?
A) It is a discipline that deals with the preparation and analysis of financial statements of companies.
B) It is the use of accounting principles to consolidate financial statements of foreign corporations.
C) It is a discipline that primarily deals with methods of preparation of financial budgets of a company.
D) It is the use of accounting theories, principles, or analyses in a legal action, often through expert witness testimony.
2) Which of the following is recognized as the first forensic accountant?
A) Frank J. Wilson
B) Maurice Peloubet
C) Alphonse Capone
D) Leslie A. Shuway
3) Which of the following statement is true of forensic accountants?
A) They should have a reactive mindset.
B) They should focus their investigations on numbers rather than looking beyond them.
C) They should embrace systematic thinking.
D) They must trust their preexisting judgments.
4) Which of the following shows Paul, a forensic accountant, indicating an intellectually curious mindset?
A) He relies on the reports given by the management to form an opinion on the financial viability of the business.
B) He bases his judgments on the existing industry standards and not on the environment in which the organization operates.
C) He gives room for the possibility that mistakes maybe attributable to negligence.
D) He questions his understanding of an issue, in spite of being an expert in the field.
5) Which of the following situations shows Kelcie, a forensic accountant, exercising professional skepticism?
A) Kelcie argues that the immediate previous year’s records serve as a better basis for the investigation than the earlier years.
B) Kelcie believes that the reputation of the external auditor is an indicator of the reliability of the audit report.
C) Kelcie believes in the phrase “guilty, until proved otherwise” and does not presume innocence until she has reasonable doubt.
D) Kelcie verifies the reports given by the internal auditor against available evidence before using it in her reports.
6) Which of the following statements is true of forensic accounting investigative services?
A) These are provided in connection with actual, pending, or potential legal or regulatory proceedings-criminal or civil.
B) These are only performed after a crime has occurred.
C) These include fraud detection, fraud examination, and fraud deterrence.
D) These generally involve actual or threatened litigation.
7) Which of the following is a technique of fraud detection?
A) perception of detection
B) analysis of financial statement
C) preemployment screening
D) evaluation of hiring practices
8) Which of the following is NOT the primary focus of a fraud examination by a forensic accountant?
A) Who committed the fraud?
B) How was the fraud committed?
C) When was the fraud committed?
D) Why was the fraud committed?
9) Which of the following is a difference between fraud examination and fraud detection?
A) Fraud examination is done before a fraud has been committed, whereas fraud detection is done after a fraud has been committed.
B) Fraud examination is the investigation specific allegations or suspicions of fraud, whereas fraud detection is the identification of an error or irregularity after it has occurred.
C) Fraud examination focuses on the time and duration of the fraud, whereas fraud detection focuses on the need or motive of the fraud.
D) Fraud examination adapts proactive strategies, whereas fraud detection adapts reactive strategies.
10) Which of the following is most likely a short-term strategy for fraud deterrence?
A) financial statement analysis
B) employee invigilation
C) time series analysis
D) evaluation of hiring practices
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