CPA Examinations

Summer-2020

Student Name:
Professional
Registration Number:
Course Code
Exam Center:
S-611

Forensic Accounting
Online Paper (with Solutions)

NOTES:
Time allowed
• Attempt ALL questions.
1 hour
• All questions carry equal marks
Which of the following is one of the procedures in the planning phase?

a) Select staff to perform the audit.

b) Determine need for other professionals.
c) Determine materiality.
d) Prepare client proposal.
Inquiries of management and personnel include discussion of all the
following except:

a) Objectives.
b) Reports.
c) Audit procedures needed.
d) Expectations.

The standards given in ‘Understanding the Entity and Its Environment and
Assessing the Risks of Material Misstatement’ (ISA 315) emphasizes:

a) Obtaining an understanding of business risks and significant risks.

b) Reports to federal regulators.
c) Procedures for sampling audit tests.
d) Obtaining an understanding of control risk.

Information acquired during the planning phase about business operations may
include all of the following except:

a) Market.
b) Acquisition and disposals of business divisions.
c) Nature of revenue sources.
d) Employment.

Which of the following is not a procedure to obtain an understanding of risk in the

planning stage (described in ISA 315)?

a) Procedures for sampling audit tests.

b) Inquiries of management.
c) Analytical procedures.
d) Observation and inspection.

ISAs require that ________________________ discuss the susceptibility of the

entity’s financial statements to material misstatement.

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The engagement partner and other key engagement team members.
The engagement partner and an outside partner.
Auditee management and the engagement partner.
Key engagement team members.

Important investment transactions for which information should be gathered

include all the following except:

a) Types of major investment by the company.

b) Investments of the audit staff.
c) Acquisitions, mergers and disposals of business divisions.
d) Capital investment activities.

When investigating the company’s legal position, the auditor should look at:

a) Minutes of the board of directors and stockholders’ meetings.

b) Attorney billings.
c) Customs import documents.
d) The auditee’s website.

Significant conditions, events, circumstances or actions that could adversely affect

the entity’s ability to achieve its objectives and execute its strategies create:

a) Detection risks.
b) Business risks.
c) Control risks.
d). Management risks.

In determining what a significant risk is, the auditor considers a number of matters,
including all the following except:

a) The degree of subjectivity in the measurement of financial information related to the

risk.
b) The complexity of transactions that may give rise to the risk.
c) The likelihood of the occurrence of the risk.
d) Whether the risk is related to recent significant accounting developments
and, therefore, requires specific attention.

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The audit standards define fraud as ‘an intentional act by one or more individuals
among management, those charged with governance, ___________________ ,
involving the use of deception to obtain an unjust or illegal advantage.’

a) Employees or third parties.

b) Employees, vendors or third parties.
c) Employees or vendors.
d) Employees or others.

A situation where someone believes they have a favourable or promising

combination of circumstances to commit an undetectable fraud is the description of:

a) Perceived pressure.
b) Management fraud.
c) Perceived opportunity.
d) Rationalisation.

The auditor must obtain an understanding of the controls of the service organisation
used by the auditee from one or more of the following procedures except:

a) Contacting the service organisation’s auditor.

b) Using another auditor to perform procedures that will provide the necessary controls
information at the service organisation.
c) Obtaining a Type 1 or Type 2 report.
d) Visiting the service organisation and performing procedures.

Business operations, types of investments, capital structure and financing, and

ownership structures are areas that are considered when obtaining an understanding
of:

a) The nature of the entity.

b) Accounting policies.
c) Measurement and review of financial performance.
d) Objectives and strategies.

Detection risk is:

a) The risk that an auditor’s substantive procedures will not detect a

misstatement that exists and that could be material.
b) The susceptibility of an assertion to misstatements that could be material, before
consideration of any related controls.

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 c) The risk that a misstatement that could occur in an assertion, and that could be
material, will not be prevented, or detected and corrected, on a timely basis by the
entity’s internal control.
d) The risk that the auditor expresses an inappropriate audit opinion when the financial
statements are materially misstated.

Which of the following might be a commonly used guideline related to a financial

statement materiality base?

a) 15% to 20% of current assets.

b) 1/2% to 2% of total assets.

c) 2% to 4% of net income before taxes.

d) 5% to 10% of long-term liabilities.

Risk assessment procedures that may indicate fraud include inquiries of management
regarding:

a) If there is fraud elsewhere in their industry.

b) Internal control effectiveness.
c) Whether management knows of any fraud in the entity.
d) If there are any relatives of the executives employed in the entity.

The difference between a Type 1 and Type 2 internal control report is that the Type 2
report and not a Type 1 report includes:

a) Management’s description of the service organisation, service organisation’s system,

control objectives and related controls.
b) The report on internal controls given to those charged with corporate governance.
c) A report by the service auditor conveying their opinion on the description of the
service organisation’s system, etc. and the operating effectiveness of the controls.
d) A description of the service auditor’s tests of the controls and the results
thereof.

Typically, an audit planning memorandum would contain the following

sections except:

a) Assessment of business risk.

b) Audit approach.
c) Objectives of the audit.
d) Background information.

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Choice Questions
1. Forensic Accounting is defined as:
a. The practice of applying defined financial ratios to investigate a company’s financial health.
b. The use of law enforcement to subpoena financial records to determine unlawful actions.
C. The application of investigative and analytical skills for the purpose of resolving financial issues in a
manner that meets standards required by courts of law.
d. The investigatory arm of the Securities and Exchange Commission.

2. If your actions are the result of misleading, intentional actions or inaction (including misleading
statements and the omission of relevant information) to gain an advantage, then you have
committed:
a. Perjury.
b. Contempt.
c. Treason.
D. Fraud.

3. 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.

4. Which of the following two are types of auditors?

A. External and Internal
b. Internal and Forensic
c. Forensic and International
d. External and Forensic

5. Forensic accounting can be broken into how many categories?

A. Two: Investigative and Litigation.
b. Two: Internal and External.
c. Three: Investigative, External, Preventative.
d. Three: Internal, Litigation, Certified.

6. What is one of the primary differences between a Financial Statement auditor and a Forensic
Accountant?
a. Financial statement auditors are likely to follow leads suggested by immaterial items whereas
Forensic Accountants often must restrict their efforts to searching for material misstatements.
B. Forensic Accountants are likely to follow leads suggested by immaterial items whereas financial
statement auditors often must restrict their efforts to searching for material misstatements.
c. Forensic Accountants must focus on specific legal areas that produce fraud charges under the courts
of law whereas financial statement auditors focus their attention on the Generally Accepted Accounting
Principles.
d. Forensic Accountants are likely to ask individuals to fix discrepancies found in financial statements
whereas financial statement auditors will fail a corporations financial statement certification, therefore

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having repercussions with the SEC.

7. Which of the following is not a skill needed by a Forensic Accountant?

a. Auditing Skills.
b. Criminology.
C. Sociology.
d. Information Technology.

8. Which of the following events have made the Forensic Accounting industry more popular recently?
a. Corporate Scandals.
b. Sarbanes-Oxley Act of 2002.
c. Crime Dramas on Television.
D. Both a and b.

9. Which is one of the areas that the Sarbanes-Oxley Act of 2002 has made CEO's rely on forensic
accountants heavily?
A.CEO’s must now certify their financial statements.
b. CFO's must become qualified as forensic accountants.
c. To become a CEO in a public company, their personal financial records must be certified by a forensic
accountant.
d. Both a and b.

10. According to the 2002 Report to the Nation on Occupational Fraud and Abuse, what percentage of
corporate revenues were lost in that year to fraud?
a. 2%.
b. 4%.
C. 5%.
d. 8%.

11. Which of the following types of organizations typically use Forensic Accountants?
a. Publicly held corporations.
b. Private/non-profit corporations.
c. Federal/State Agencies.
D. All of the above.

12. What is the most recognized fraud credential?

A. Certified Fraud Examiner (CFE).
b. Certified Public Accountant (CPA).
c. American Counsel of Accredited Business Accountants (ACABA).
d. Enrolled Agent (EA).

13. What types of organizations offer credentials to forensic accountants?

a. Association of Certified Fraud Examiners.
b. American College of Forensic Examiners.
c. Institute of Business Appraisers.
D. All of the above.

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14. Who was the founder of the Association of Certified fraud Examiners?
a. The 187th Congress of the United States.
b. President Bill Clinton.
C. Joseph Wells.
d. All of the above worked together to form the ACFE.

15. Which of the following is NOT a way to become a Certified Fraud Specialist (CFS)?
a. Successfully completing a multipart examination that covers the detection, deterrence, investigation,
and prosecution of white-collar crime.
B. A bachelor's degree in business or ten years of accounting-related experience and pass the two
parts of the Certified Fraud Specialist examination.
c. Completing the ACFS Academy core courses and taking an examination at the end of each course.
d. Being grandfathered in by means of submitting information on the experience and education.

16. What is the mission of the Association of Certified Fraud Specialists (ACFS)?
a. To encourage CPAs to report potential areas that a Forensic Accountant should be used within.
b. To pre-screen potential Forensic Accountants who would make good FBI agents.
C. To encourage its members to offer pro-bono service to the communities in which its members
reside.
d. All of the above are part of the ACFS's mission.

17. What is a way to become a CFS?

a. Complete a multi-part examination that covers the detection, deterrence, investigation, and
prosecution of white-collar crime.
b. Complete the ACFS Academy core courses and take an examination at the end of each course.
c. Be grandfathered in by means of submitting information on the experience and education of the
candidate.
D. All of the above are ways to become a CFS.

18. If you are a CPA and want to become credentialed by the National Association of Certified Valuation
Analysts (NACVA), which credential would you be issued?
A. Certified Valuation Analyst.
b. Accredited Valuation Analyst.
c. Certified Forensic Financial Analyst.
d. National Valuation Analyst.

19. If you are experienced in the valuation field and want to become credentialed by the National
Association of Certified Valuation Analysts (NACVA), which credential would you be issued?
a. Certified Valuation Analyst.
B. Accredited Valuation Analyst.
c. Certified Forensic Financial Analyst.
d. National Valuation Analyst.

20. If you are a litigation consultants and want to become credentialed by the National Association of
Certified Valuation Analysts (NACVA), which credential would you be issued?
a. Certified Valuation Analyst.

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b. Accredited Valuation Analyst.
C. Certified Forensic Financial Analyst.
d. National Valuation Analyst.

21. The National Litigation Support Services Association (NLSSA) allows only one CPA firm into its
membership:
A. In each Metropolitan Statistical Area.
b. In each Megalopolis.
c. Per million residents in the city it resides.
d. Each four year presidential cycle.

22. The Institute of Business Appraisers (IBA) supports the valuating of which type of businesses?
a. Public Corporations.
b. Private Corporations.
C. Closely-held Businesses.
d. Non-Profit Organizations.

23. The Institute of Business Appraisers offers which certification?

a. CPA.
B. CBA.
c. AICPA.
d. EA.

24. In which way does the AICPA support Forensic Accountants?

a. Through its Forensic Accountants division.
B. Through its Business Valuation and Forensic & Litigation Services section.
c. Through its credentialing of Forensic Accountants.
d. The AICPA does not support Forensic Accountants.

25. What credential does the AICPA offer?

A. Accredited in Business Valuation.
b. Accredited Business Accountant.
c. Forensic Accountant Accreditation.
d. Accounting for Forensic and Litigation.

26. How does forensic accounting differs from other types of accounting?
a. It is a separate field that has no relation to accounting.
b. Forensic Accountants require at least an masters in accounting.
C. Forensic Accountants are more likely to be found dissecting these statements and obtaining
evidence from other sources.
d. General Accountants must hold to subjective evidence whereas forensic accountants must use
objective evidence.

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27. What is Defalcation?
a. The ruling of a judge to restore the assets wrongfully taken to their rightful owner.
b. The act of conspiring to commit perjury.
c. The process of finding stolen assets through financial statement analysis.
D. The appropriation of assets for the benefit of those who do not rightfully deserve them.

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28. What are litigation services?
a. It is another term for a law firm.
b. It is a specialized branch of forensic accounting.
C. It is the service provided to the courts to determine an equitable judgment.
d. It is an out of court settlement service for corporations.

29. You are attempting to get two parties to compromise on a situation. This means that you are
engaged in:
a. Litigation.
B. Mediation.
c. Plea Bargaining.
d. Grand Jury testimony.

30. Misrepresentation is the act of presenting oneself in a manner that does not agree with reality.
What does "presenting" mean?
A. Actions, statements, or omissions.
b. Words, court judgments or opinions.
c. Appearance, style or function.
d. Both a and b.

31. In most cases, the penalties of monetary damages or equitable relief are awarded in which type of
case?

a) Civil
b) Criminal
c) Grand Jury
d) Disposition

32. Whom does the burden of proof fall upon?

a) Defense
b) Plaintiff
c) Jury
d) Investigators

33. The burden of proof must be met to satisfy the judge or jury in which of the following types
of trial?

a) Civil
b) Criminal
c) Both a & b
d) Trails involving monetary damages

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34. State constitutional laws are considered supreme laws unless;

a) The burden of proof is not meet

b) There are local laws that are violated
c) The case is a criminal case
d) The state laws are in conflict with the Constitution

35. The first major computer crimes act was:

a) The Sarbanes-Oxley (SOX) Act of 2002

b) Computer fraud and Abuse Act
c) The cyber intrusion Detection Act 1996
d) Computer Detection Infiltration Act

36. 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?

37. Which of the following is a technique of fraud detection?

a) Perception of detection
b) Analysis of financial statement
c) Pre-employment screening
d) Evaluation of hiring practices

38. which of thefollowing statements is true of forensic accounting investigative services?

a) These are provided in connection with actual, pending, or potential legal or regulatory
proceddings-criminal of civil
b) These are only performed when the crime has occurred
c) These include fraud detection, fraud examination, and fraud deterrence
d) These generally involve actual or threatened litigation

39. which of the following statement is true of forensic accounting?

a) They should have reactive mindset

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 b) They should embrace systematic thinking
c) They must trust their preexisting judgements
d) They should focus their investigations on numbers rather than looking beyond them

40. Which of the following situations shows Kelcie, a foresic accountant, exercising professional
skepticisim?

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.

41. 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

42. Which of the following are the two major components of forensic accounting services?

a) Fraud detection services and fraud deterrence services

b) Expert services and consulting services
c) Investigative services and litigation services
d) Fraud examination services and business valuation services

43. Which of the following is a difference between external auditor and forensic accountant?

a) An external auditor captures and records all economic transactions of the organisations,
whereas a forensic accountant ensures compliance with policy and procedures.
b) An external auditor manages the organisation’s accounting and internal system, whereas
a forensic accountant validates effectiveness of controls in various processes or areas of
the organisation
c) An external auditor adds credibility to reported financial information, whereas a forensic
accountant provides assurance that management is adequately identifying and mitigating
risks

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 d) An external auditor forms an opinion on the overall financial statements taken as a
whole, whereas a forensic accountant addresses a specific question/issue.

44. Which of the following is true of transactional accountants?

a) They evaluate the internal control systems of an organisation and test the accounts to
ensure that all economic events are recorded and reported properly.
b) They form and express an opinion as to whether an organisation’s financial statements,
taken as a whole, reflect its financial postion on a given date and the results of its
operations for a given period
c) They report on the adequacy of internal controls, the accurqacy and propriety of
transactions.
d) They employ generally accepted accounting principles (GAAP) to process information
useful in decision making

45. The purpose of the ________ is to form and express an opinion as to whether the
organisation’s financial statements, taken as a whole, reflects its financial position on a given
date and the results of its operations for a given period.

a) Forensic accountant
b) External auditor
c) Transactional accountant
d) Internal auditor

46. A __________ records, classifies and summarises the financial transactions of a company.

a) Transactional accountant
b) Internal auditor
c) External auditor
d) Management accountant

47. Which of the following exemplifies the role of an internal auditor?

a) Chloe classifies the transactions of Pole Star, Inc. and records it in the books of accounts
b) Chloe reports on sufficiency of the insurance policies taken out on the assets of Pole
Star, Inc.
c) Chloe on financial positions of Pole Star, Inc. at the end of the accounting period.
d) Chloe assists the management of Pole Star, Inc.to determine the tax and tax benefits.

48. Which of the following exemplifies the role of an external auditor?

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 a) Victor recorded the transactions entered in to by Trident, Inc. in the proper accounting
period.
b) Victor prepared the annual budget of Trident Inc. and he also helped the department
heads prepare budgets for each departments
c) Victor evaluated the internal controls of Trident, Inc. and reported on the financial
position at the year end
d) Victor conducted an investigated into the affairs of Trident, Inc. to ally suspicious of
mismanagement of funds.

49. The purpose of the _________ is to form and express an opinion as to whether the
organisation’s financial statements, taken as a whole, reflect its financial position on a given date
and the results of its operations for a given period.

a) Forensic accountant
b) External accountant
c) Transactional accounting
d) Internal accounting

50. Which of the following is the objective of an external auditor?

a) Form an opinion on the overall financial statements taken as a whole

b) Capture and record all economic transactions of the organisation
c) Ensure compliance with policy and procedures, offer recommendations for improvement
of internal controls
d) Address a specific question/issue

51. Which of the following defines the term deductive reasoning?

a) It is defined as reasoning from the general to the specific

b) It is defined as reasoning from a logically valid conclusion to the premises
c) It is defined as generalizing results to arrive at a valid conclusion.
d) It is defined as reasoning from particular facts to general conclusions

52.All birds have wings. Kiwis have wings. Which of the following can be conducted using
deductive reasoning?

a) Kiwis are birds

b) All birds are kiwis
c) Kiwis can fly
d) No conclusion can be obtained.

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53. in 2008, the sales of the Trident Inc. went up by 10% and its stock prices increased by 20%. In
2010, the sales of the Trident Inc. went up by 15% and its stock prices increased by 30%. You
conclude that in 2013, since the sales increased by 5%, the stock price will increase by 10%.

Which type of reasoning are you using?

a) Deductive reasoning
b) Intuitive reasoning
c) Suggestive reasoning
d) Inductive reasoning

54. Which of the following is a primary responsibility of a testifying expert?

a) To render an opinion that will assist the judge in understanding the evidence
b) To render an opinion that will assist the attorney in advocating for the client
c) To render an opinion that will assist the attorney in understanding the evidence
d) To render an opinion that will assist the trier of fact in reaching a judgement

55. If two or more people agree to commit a crime, with even the smallest amount of
coordination, they have committed a;

a) Conspiracy
b) Robbery
c) Burglary
d) Fraud

56. The Foreign Corrupt Practices Act is applicable to whom?

a) Parliamentarians
b) Multinational Corporations
c) Any Corporations
d) All of the above

57. To arrest a suspect, law enforcement must have;

a) Indisputable evidence that the person is guilty

b) A search Warrant
c) Probable cause
d) DNA evidence

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58. If issued a citation, a person must:

a) Report for incarceration

b) Submit to the booking procedure within several days after the citation
c) Sign a confession
d) Provide evidence that they are not guilty

59. If you are chosen to serve on a Grand jury, you will serve;

a) For one trial

b) For a specific period of time
c) Until you are released by the judge
d) Until you are selected for a trail jury

60. A forensic accountant can become involved in financial crimes investigation by being:

a) An in house accountant
b) External accountant
c) External consultant
d) All of the above

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