Forensic Accounting and Fraud Examination 2nd Edition Hopwood Test Bank

Forensic Accounting and Fraud
Examination 2nd Edition Hopwood Test

Bank
Visit to Download in Full: https://testbankdeal.com/download/forensic-accounting-and-
fraud-examination-2nd-edition-hopwood-test-bank/
Chapter 07 - The Fraud Investigation and Engagement Processes
Chapter 07
The Fraud Investigation and Engagement Processes
Multiple Choice Questions
1. The fraud investigation process involves:

a. Quarterly gathering and reviewing evidence for the purpose of documenting the presence
or absence of fraud.
b. Annually gathering and reviewing evidence for the purpose of documenting the presence
or absence of fraud.
c. Periodically gathering and reviewing evidence for the purpose of documenting the
presence or absence of fraud.
D. Systematically gathering and reviewing evidence for the purpose of documenting the
presence or absence of fraud.
Difficulty: Easy
2. How many steps are there in the fraud investigation process?

a. 1
b. 2
c. 3
D. 4
Difficulty: Moderate
3. Which of the following is NOT a step in the fraud investigation process?

A. The in briefing process
b. The engagement process
c. The evidence collection process
d. The reporting process
Difficulty: Easy
7-1
© 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
4. When does the fraud investigation engagement process end?

a. With first contact to an organization.
b. After a 12-month follow-up audit
C. With a complete agreement regarding the fraud-investigation services to be provided by
the investigator.
d. Upon conviction of a criminal.
Difficulty: Easy
5. When does the fraud investigation engagement process begin?

A. With first contact to an organization.
b. After a 12-month follow-up audit
c. With a complete agreement regarding the fraud-investigation services to be provided by
the investigator.
d. Upon conviction of a criminal.
Difficulty: Easy
6. Which of the following is a step in the fraud-theory approach?

a. Prove the hypotheses invalid.
B. Refine and amend the hypotheses.
c. Link the hypotheses to a GAAP.
d. None of the above are a step in the fraud-theory approach.
7. What are the four types of evidence collected in the evidence collection process?
a. Physical evidence, financial statement evidence, observational evidence, and interview
evidence.
b. Physical evidence, documentary evidence, tip hotline evidence, and interview evidence.
c. Physical evidence, documentary evidence, observational evidence, and witness evidence.
D. Physical evidence, documentary evidence, observational evidence, and interview evidence.
7-2
8. The reporting process involves:

a. Video recording and summarizing the results of the fraud investigation.
b. Documenting and summarizing the results of the civil litigation.
C. Documenting and summarizing the results of the fraud investigation.
d. A formal out brief to the Executives of the Corporation outlining the fraud discovered.
Difficulty: Hard
9. If law enforcement is called during an investigation, then:

a. Law enforcement will take over the investigation and the business will be forced to
comply with whatever demands they have.
B. There may still be some give and take as to what the process will be.
c. The fraud investigator will serve as the liaison between law enforcement and the business.
d. Law enforcement will not be called during a fraud investigation because District Attorneys
are the sole legal enforcement agent for any fraud crime.
10. How many steps does the fraud engagement process involve?
A. 6
b. 8
c. 10
d. 6 to 12, depending upon law enforcements involvement
Difficulty: Easy
11. Which of the following is a part of the fraud engagement process?

a. Provide a copy of the U.S. Code being investigated.
B. Provide an engagement letter or memorandum.
c. Provide an engagement letter or letter of Miranda.
d. Provide a bill of retainer for the costs of the investigation.
7-3
12. During the fraud investigation process, it is important to remember:

a. To never exceed the amount of billable hours authorized under GAAP.
b. The fraud investigator is not law enforcement and cannot provide evidence in a trial.
C The rights of the victim as well as the accused.
d. To limit the investigation to the U.S. Code that has been violated.
Difficulty: Hard
13. The incident report contains:

a. All evidence that will need to be turned over to the defense during discovery.
b. Detailed working papers to prove the fraud.
C. The initial information used to justify the investigation.
d. A bench warrant for the accused.
14. For all fraud investigations, it is essential that a(n) ____________ be created.
a. Affidavit of findings
B. Unified case file
c. Sworn statement file
d. Working paper archive
15. Which of the following is NOT a legal issue to consider prior to a fraud investigation?
a. Rights of workers or other suspects under investigation.
b. The possibility of conducting the investigation under attorney-client privilege.
C. Possible illegal activities by the corporation itself.
d. Rights of investigating employers.
7-4
16. An example of Loss Mitigation would be:

a. Filing for an injunction with a U.S. Circuit Court.
b. Confronting the employee(s) involved prior to the investigation.
c. Notifying the insurance company covering corporate losses due to theft or fraud.
D. The corporation taking immediate action to prevent additional loss to the company.
Difficulty: Easy
17. If the investigator is attempting to prove that a given fraud theory is correct but also
attempting to prove that it is not correct, he is engaging in:
a. Double Jeopardy
b. Proving beyond a reasonable doubt
c. Double crossing
D. Reverse proof
Difficulty: Easy
18. Some standard defenses include the following:

A. All of the below are possible standards of defense.
b. Someone else did it.
c. A hacker did it.
d. Those were simply errors and not fraudulent entries.
Difficulty: Easy
19. Which is a consideration for reporting a loss to the insurance carrier of the corporation?
a. Can the loss be absorbed into current net profits for the corporation?
b. Can personal assets of the accused be sold to recover the loss?
C. Has the corporation used all reasonable means to mitigate losses?
d. All of the above are considerations.
7-5
20. Recovery through litigation means:

a. The corporation must pay the legal costs of the accused.
b. Both the plaintiff and defendant must pay a court fee for the proceedings.
C. The court may require the accused to pay if found guilty.
d. If found not guilty, the defendant may require legal fees be paid by the plaintiff.
21. Possible objectives of a fraud investigation might include:

A. All of these
b. Make an example of a fraudster
c. Minimize any embarrassing disclosures in the press
d. Punish the fraudster
Difficulty: Easy
22. What are the two main reasons that independent investigator will not draw conclusions
regarding guilt or innocence?
a. Investigators are not deputized and have not earned a law degree.
B. Guilt and innocence are generally a matter of opinion and opinion regarding guilt could
open up the investigator to a law suit for defamation.
c. Guilt and innocence are facts of matter and investigators will hand their findings over to
law enforcement.
d. None of the above are reasons.
23. What are some other services that may be provided during a fraud investigation?
a. Advice on guilt or innocence.
B. Advice on improving business processes or controls.
c. Advice on informing insurance carriers.
d. Advice on new markets to explore.
Difficulty: Easy
7-6
24. The scope of the investigation serves to:

a. Place limits on the objectives of the investigation.
b. Expand on the investigation if other fraud is found.
C. Place limits on the breadth of the investigation.
d. Contract the focus of the investigation.
25. Which of the following is NOT a method to be used in a fraud investigation?

A. Covert surveillance of employees at home
b. Reviews of documents
c. Interviews with employees
d. Surreptitious surveillance of employees
26. When using client employees to assist in the investigation, what must be considered?
a. That the employee is a part of the fraud being committed.
b. That the employee be placed on the payroll of the investigating firm.
C. That the employee themselves are not part of the fraud being committed.
d. That the employee should perform the investigation work from home or another office.
Difficulty: Easy
27. If an investigator is asked to provide a copy of their report to a 3rd party, such as law
enforcement, what should they do first?
a. Have company counsel review the documents to ensure no proprietary information is
being released.
B. Obtain written authorization from the company that hired them first.
c. Ensure law enforcement is going to arrest the fraudster first.
d. Ask the 3rd party to provide a written authorization from the company.
7-7
28. How are the professional fees typically billed during an investigation?
a. Weekly
b. As a percentage of potential fraud prevented.
c. When there has been an arrest.
D. Monthly
Difficulty: Easy
29. What are some other items that are acceptable to be billed as part of the investigation?
A. All of the below are acceptable.
b. Meals
c. Travel
d. Phone charges
Difficulty: Easy
30. Mediation and arbitration are conducted where and how are they disclosed?
a. In a U.S. District Court and do not enter into the public record.
B. In private and do not enter into the public record.
c. In a State Supreme Court and are entered into the public record.
d. In private and enter into the public record if there is an admission of guilt by the fraudster.
Essay Questions
31. Describe the fraud investigation process.
The fraud investigation process involves systematically gathering and reviewing evidence for
the purpose of documenting the presence or absence of fraud. Fraud investigations normally
commence as a result of some type of indication that fraud may have occurred. The fraud
investigation process involves a series of four steps: the engagement process, the evidence
collection process, the reporting process, and the loss recovery process.
7-8
32. Outline the fraud engagement process.
the fraud investigation engagement process is a series of steps that begins at the time of the
investigator’s first contact with the case and ends with a complete agreement regarding the
fraud-investigation services to be provided by the investigator.
33. What are the four types of evidence that are gathered in the evidence collection process?
Physical evidence, documentary evidence, observational evidence, and interview evidence.

The investigation process normally begins by examining physical and documentary evidence.
It then proceeds to observational and interview evidence, with interview evidence normally
being part of the final step.
34. Within the interview process, explain the steps involved and if the interviews should begin
or end with those farthest away from the fraud.
The initial interviews are conducted with those farthest away from any suspects. The
investigator then conducts additional interviews that are successively closer to the suspects,
with the prime suspect being the last person interviewed. Individual interviews also involve a
specific sequence of steps. The focus of this sequence is on obtaining a confession as the final
step, if the suspect is guilty
Difficulty: Easy
7-9
35. Who can become a fraud investigator within a company and what is their engagement
process?
In general, the professional fraud investigator can be an internal auditor; a staff accountant, an
independent fraud examiner, an internal security specialist, an external auditor, or a law-
enforcement official. Regardless of who performs the investigation, some initial
understanding must be reached regarding the services the investigator will perform and the
scope of the investigation.
The actual unfolding of the engagement process will vary, depending on which type of
investigative professional is involved. For example, the engagement process is often very
simple when the investigator is a law-enforcement official: One simply calls the authorities,
and a detective responds and begins gathering information and evaluating the case. The
simplicity of the process arises from the fact the “rules of the investigation” are governed by
procedures that are more or less dictated to the business. However, even in police
investigations there can be give and take between the business and the detective. Specifically,
the detective might express her willingness to fully investigate only if the company is willing
to support her with resources and information she may need.
The engagement process involves the following 6 steps: create an incident report;
conduct the initial notifications and evaluation; consider legal issues; evaluate and loss
mitigation and recovery considerations; define the scope, objectives, and costs of the
investigation; and produce an engagement letter or memorandum.
Difficulty: Hard
36. Explain what a Unified Case File is and its three main purposes.
A Unified Case File contains all of the documentation surrounding a fraud investigation. Its
three main purposes are: 1) It provides needed organization for administering and managing
the case as it unfolds. 2) It documents the investigation for future review and use in
optimizing the fraud management system. 3) It serves as a case information repository that
can be used in subsequent civil or criminal litigation.
7-10
37. While considering legal issues prior to beginning a fraud examination, what are three
considerations?
1. Rights of workers or other suspects under investigation.

2. The possibility of conducting the investigation under attorney-client privilege.
3. Whether there is sufficient evidence and legal justification to immediately fire a
worker, or to place the worker on administrative leave with or without pay.
4. Rights of investigating employers.
5. The extent to which a government entity may be directly or indirectly involved in the
investigation.
6. Reporting Obligations.
38. An initial decision must be made as to whether it is necessary to immediately intervene to

prevent the perpetrator from continuing with the fraud scheme. What is this concept called
and what are examples of ways to begin it?
Loss Mitigation. 1) immediately fire the employee, 2) change the employee’s job
responsibilities, 3) place the employee on administrative leave (with or without pay), and 4)
permit the employee to continue in her current position, possibly continuing the fraud, thus
giving the investigator the possibility of catching the fraudster in the act.
39. While considering reverse proof, what are four standards of defense that a fraudster may
counter charges with?
1. Someone else did it.

2. It was done before or after the suspect worked for the entity.
3. There’s something wrong with the computer software.
4. Had the fraud examiner reviewed 100% of the transactions, the apparent shortage
would be accounted for.
5. Those were simply errors and not fraudulent entries
6. That’s what suspect was told to do by the owner
7. A hacker did it
Difficulty: Easy
7-11
40. Describe the Objectives and Scope of the Investigation that may be stated in an
engagement letter.
An investigation of a treasury department could be limited to specific activities (such as bond

purchases) and to a specific time frame (e.g., between 2018 and 2020). The objectives of the
investigation can be any of the ones described above.
True / False Questions
41. There is a Constitutional Amendment that requires law enforcement to investigate all
fraud allegations.
FALSE
42. Fraud investigations can be time consuming and expensive.

TRUE
Difficulty: Easy
43. The investigator should never tell the fraudster to make restitution or she will report the
fraudster to law enforcement.
TRUE
Difficulty: Easy
44. The first and primary objective in a fraud investigation is to punish the fraudster.
FALSE
7-12
45. An investigator should always remain a part of the investigation, even if it means they will
have to commit an illegal act.
FALSE
Difficulty: Easy
46. The fraud engagement process is a part of the fraud investigation process.
TRUE
47. Part of the fraud investigation process involves filing charges with a District Attourney.
FALSE
48. The fraud investigation engagement process is a series of steps that begins at the time of
the investigator’s first contact with the case and ends with a conviction or plea bargin.
FALSE
49. An incident report and a unified case file are the same thing.
FALSE
50. Reverse proof means that the investigator must consider the evidence for both sides.
TRUE
Difficulty: Easy
7-13

Forensic Accounting and Fraud Examination 2nd Edition Hopwood Test Bank

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Forensic Accounting and Fraud Examination 2nd Edition Hopwood Test Bank

Uploaded by

Copyright:

Available Formats

Forensic Accounting and Fraud

Examination 2nd Edition Hopwood Test

Multiple Choice Questions

1. The fraud investigation process involves:

2. How many steps are there in the fraud investigation process?

3. Which of the following is NOT a step in the fraud investigation process?

4. When does the fraud investigation engagement process end?

5. When does the fraud investigation engagement process begin?

6. Which of the following is a step in the fraud-theory approach?

8. The reporting process involves:

9. If law enforcement is called during an investigation, then:

11. Which of the following is a part of the fraud engagement process?

12. During the fraud investigation process, it is important to remember:

13. The incident report contains:

16. An example of Loss Mitigation would be:

18. Some standard defenses include the following:

20. Recovery through litigation means:

21. Possible objectives of a fraud investigation might include:

24. The scope of the investigation serves to:

25. Which of the following is NOT a method to be used in a fraud investigation?

31. Describe the fraud investigation process.

32. Outline the fraud engagement process.

Physical evidence, documentary evidence, observational evidence, and interview evidence.

1. Rights of workers or other suspects under investigation.

38. An initial decision must be made as to whether it is necessary to immediately intervene to

1. Someone else did it.

An investigation of a treasury department could be limited to specific activities (such as bond

True / False Questions

42. Fraud investigations can be time consuming and expensive.

You might also like