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Which of the following statements is/are not examples of risk factors relating to misstatements arising from fraudulent financial reporting in regards to incentives/pressures?
The following are examples of risk factors relating to misstatements arising from fraudulent financial reporting.
INCENTIVES/PRESSURES
• Financial stability or profitability is threatened by economic, industry, or entity operating conditions.
• Excessive pressure exists for management to meet the requirements or expectations of third parties.
• Information available indicates that the personal financial situation of management or those charged with governance is threatened by the entity’s financial performance.
• There is excessive pressure on management or operating personnel to meet financial targets established by those charged with governance, including sales or profitability incentive goals.
The following are examples of risk factors relating to misstatements arising from fraudulent financial reporting.
INCENTIVES/PRESSURES
• Financial stability or profitability is threatened by economic, industry, or entity operating conditions.
• Excessive pressure exists for management to meet the requirements or expectations of third parties.
• Information available indicates that the personal financial situation of management or those charged with governance is threatened by the entity’s financial performance.
• There is excessive pressure on management or operating personnel to meet financial targets established by those charged with governance, including sales or profitability incentive goals.
Which of the following matters is/are not included in the auditor oversight & reviews?
An auditor oversight body should establish a process for performing regular reviews of audit procedures and practices of firms that audit the financial statements of listed public companies.
Matters to be considered include:
a) Independence, integrity and ethics of auditors
b) Objectivity of audits
c) Selection, training, and supervision of personnel
d) Acceptance, continuation, and termination of audit clients
e) Audit methodology
f) Audit performance, that is, compliance with applicable generally accepted auditing standards
g) Consultation on difficult, contentious or sensitive matters and resolution of differences of opinion during audits
h) Second partner reviews of audits
i) Communications with management, supervisory boards and audit committees of audit clients
j) Communications with bodies charged with oversight over the financial reporting process, for example, on matters such as regulatory inquiries, changes in auditors, or other matters as may be required
k) Provisions for continuing professional education.
An auditor oversight body should establish a process for performing regular reviews of audit procedures and practices of firms that audit the financial statements of listed public companies.
Matters to be considered include:
a) Independence, integrity and ethics of auditors
b) Objectivity of audits
c) Selection, training, and supervision of personnel
d) Acceptance, continuation, and termination of audit clients
e) Audit methodology
f) Audit performance, that is, compliance with applicable generally accepted auditing standards
g) Consultation on difficult, contentious or sensitive matters and resolution of differences of opinion during audits
h) Second partner reviews of audits
i) Communications with management, supervisory boards and audit committees of audit clients
j) Communications with bodies charged with oversight over the financial reporting process, for example, on matters such as regulatory inquiries, changes in auditors, or other matters as may be required
k) Provisions for continuing professional education.
Risk factors that relate to misstatements arising from misappropriation of assets are also classified according to the following conditions generally present when fraud exists except?
Risk factors that relate to misstatements arising from misappropriation of assets are also classified according to the three conditions generally present when fraud exists: incentives/pressures, opportunities, and attitudes/rationalisation.
Risk factors that relate to misstatements arising from misappropriation of assets are also classified according to the three conditions generally present when fraud exists: incentives/pressures, opportunities, and attitudes/rationalisation.
Which of the following is/are not the objectives of the International Organisation of Securities Commissions (IOSCO)?
The International Organisation of Securities Commissions (IOSCO) is an international association of securities regulators that was created in 1983.
The objectives of the Organisation’s members are:
• To cooperate together to promote high standards of regulation in order to maintain just, efficient, and sound markets;
• To exchange information on their respective experiences in order to promote the development of domestic markets;
• To unite their efforts to establish standards and an effective surveillance of international securities transactions;
• To provide mutual assistance to promote the integrity of the markets by a rigorous application of the standards and by effective enforcement against offenses.
The International Organisation of Securities Commissions (IOSCO) is an international association of securities regulators that was created in 1983.
The objectives of the Organisation’s members are:
• To cooperate together to promote high standards of regulation in order to maintain just, efficient, and sound markets;
• To exchange information on their respective experiences in order to promote the development of domestic markets;
• To unite their efforts to establish standards and an effective surveillance of international securities transactions;
• To provide mutual assistance to promote the integrity of the markets by a rigorous application of the standards and by effective enforcement against offenses.
The following statements are examples of the risk factors relating to misstatements arising from fraudulent financial reporting with regards to opportunities with the exception of?
The risk factors relating to misstatements arising from fraudulent financial reporting.
OPPORTUNITIES
• The nature of the industry or the entity’s operations provides opportunities to engage in fraudulent financial reporting.
• The monitoring of management is not effective.
• There is a complex or unstable organisational structure.
• Internal control components are deficient.
The risk factors relating to misstatements arising from fraudulent financial reporting.
OPPORTUNITIES
• The nature of the industry or the entity’s operations provides opportunities to engage in fraudulent financial reporting.
• The monitoring of management is not effective.
• There is a complex or unstable organisational structure.
• Internal control components are deficient.
Which of the following examples would not be considered as fraud in an organisation?
Fraud perpetrated to the detriment of the organisation is conducted generally for the direct or indirect benefit of an employee, outside individual, or another organisation. Some examples are:
• Acceptance of bribes or kickbacks.
• Diversion to an employee or outsider of a potentially profitable transaction that would normally generate profits for the organisation.
• Embezzlement, as typified by the misappropriation of money or property, and falsification of financial records to cover up an act, thus making detection difficult.
• Intentional concealment or misrepresentation of events, transactions, or data.
• Claims submitted for services or goods not actually provided to the organisation.
• Intentional failure to act in circumstances where action is required by the company or by law.
• Unauthorised or illegal use of confidential or proprietary information. Unauthorised or illegal manipulation of information technology networks or operating systems.
• Theft.
Fraud perpetrated to the detriment of the organisation is conducted generally for the direct or indirect benefit of an employee, outside individual, or another organisation. Some examples are:
• Acceptance of bribes or kickbacks.
• Diversion to an employee or outsider of a potentially profitable transaction that would normally generate profits for the organisation.
• Embezzlement, as typified by the misappropriation of money or property, and falsification of financial records to cover up an act, thus making detection difficult.
• Intentional concealment or misrepresentation of events, transactions, or data.
• Claims submitted for services or goods not actually provided to the organisation.
• Intentional failure to act in circumstances where action is required by the company or by law.
• Unauthorised or illegal use of confidential or proprietary information. Unauthorised or illegal manipulation of information technology networks or operating systems.
• Theft.
Amanda is a board member of the Public Interest Oversight Board, she is tasked to oversee the IFAC’s Public Interest Activity Committees which comprises of the following except?
The PIOB oversees IFAC’s Public Interest Activity Committees (PIACs) comprising the International Auditing and Assurance Standards Board, International Accounting Education Standards Board, International Ethics Standards Board for Accountants, their respective Consultative Advisory Groups, and the Compliance Advisory Panel (CAP).
The PIOB oversees IFAC’s Public Interest Activity Committees (PIACs) comprising the International Auditing and Assurance Standards Board, International Accounting Education Standards Board, International Ethics Standards Board for Accountants, their respective Consultative Advisory Groups, and the Compliance Advisory Panel (CAP).
Johnson who works in Company A suspects the organisation has committed fraud, which of the following actions would not be considered as evidence of fraud by the corporation?
Examples of fraud designed to benefit the organisation include:
• Improper payments, such as illegal political contributions, bribes, and kickbacks, as well
as payoffs to government officials, intermediaries of government officials, customers, or suppliers.
• Intentional and improper representation or valuation of transactions, assets, liabilities, and income, among others.
• Intentional and improper transfer pricing (e.g., valuation of goods exchanged between related organisations). By purposely structuring pricing techniques improperly, management can improve their operating results to the detriment of the other organisation.
• Intentional and improper related-party activities in which one party receives some benefit not obtainable in an arm’s-length transaction.
• Intentional failure to record or disclose significant information accurately or completely, which may present an enhanced picture of the organisation to outside parties.
• Sale or assignment of fictitious or misrepresented assets.
• Intentional failure to act in circumstances where action is required by the company or by law.
• Intentional errors in tax compliance activities to reduce taxes owed.
Examples of fraud designed to benefit the organisation include:
• Improper payments, such as illegal political contributions, bribes, and kickbacks, as well
as payoffs to government officials, intermediaries of government officials, customers, or suppliers.
• Intentional and improper representation or valuation of transactions, assets, liabilities, and income, among others.
• Intentional and improper transfer pricing (e.g., valuation of goods exchanged between related organisations). By purposely structuring pricing techniques improperly, management can improve their operating results to the detriment of the other organisation.
• Intentional and improper related-party activities in which one party receives some benefit not obtainable in an arm’s-length transaction.
• Intentional failure to record or disclose significant information accurately or completely, which may present an enhanced picture of the organisation to outside parties.
• Sale or assignment of fictitious or misrepresented assets.
• Intentional failure to act in circumstances where action is required by the company or by law.
• Intentional errors in tax compliance activities to reduce taxes owed.
The following statements regarding the Public Interest Oversight Board are all true with the exception of?
The objective of the international Public Interest Oversight Board (PIOB) is to increase the confidence of investors and others that the public interest activities of the International Federation of Accountants.
The PIOB was formally established in February 2005 to oversee IFAC’s auditing and assurance, ethics, and education standard-setting activities.
The establishment of the PIOB is the result of a collaborative effort by the international financial regulatory community, working with IFAC, to ensure that auditing and assurance, ethics, and educational standards for the accounting profession are set in a transparent manner that reflects the public interest.
The objective of the international Public Interest Oversight Board (PIOB) is to increase the confidence of investors and others that the public interest activities of the International Federation of Accountants.
The PIOB was formally established in February 2005 to oversee IFAC’s auditing and assurance, ethics, and education standard-setting activities.
The establishment of the PIOB is the result of a collaborative effort by the international financial regulatory community, working with IFAC, to ensure that auditing and assurance, ethics, and educational standards for the accounting profession are set in a transparent manner that reflects the public interest.
Which of the following is/are not considered to be the goals of the Survey on Regulation and Oversight of Auditors?
In 2004, IOSCO in cooperation with a group of other international organisations, developed a Survey on Regulation and Oversight of Auditors. The goal of the Survey was to obtain a point-in-time description of the structures and processes in place in 2004 for regulation and oversight of auditing around the world, to serve as baseline information for regulators and oversight bodies and other organisations that are working to enhance auditor oversight and international audit quality.
In 2004, IOSCO in cooperation with a group of other international organisations, developed a Survey on Regulation and Oversight of Auditors. The goal of the Survey was to obtain a point-in-time description of the structures and processes in place in 2004 for regulation and oversight of auditing around the world, to serve as baseline information for regulators and oversight bodies and other organisations that are working to enhance auditor oversight and international audit quality.
The INTOSAI Auditing Standards Committee produced a restructured version of the Auditing Standards in 2001 consisting of the following standards except?
The INTOSAI Auditing Standards Committee produced a restructured version of the Auditing Standards, which was approved by the XVIIth Congress of INTOSAI in Seoul 2001. The restructured INTOSAI auditing standards consist of five parts:
• Basic Principles
• General Standards
• Standards with Ethical Significance
• Field Standards
• Reporting Standards
The INTOSAI Auditing Standards Committee produced a restructured version of the Auditing Standards, which was approved by the XVIIth Congress of INTOSAI in Seoul 2001. The restructured INTOSAI auditing standards consist of five parts:
• Basic Principles
• General Standards
• Standards with Ethical Significance
• Field Standards
• Reporting Standards
Which of the following non-governmental organisation has special consultative status with the Economic and Social Council (ECOSOC) of the United Nations?
The International Organisation of Supreme Audit Institutions (INTOSAI) is an autonomous, independent, and non-political organisation. It is a non-governmental organisation founded in 1953, with special consultative status with the Economic and Social Council (ECOSOC) of the United Nations.
The International Organisation of Supreme Audit Institutions (INTOSAI) is an autonomous, independent, and non-political organisation. It is a non-governmental organisation founded in 1953, with special consultative status with the Economic and Social Council (ECOSOC) of the United Nations.
Where is the Public Interest Oversight Board based in?
The PIOB is based in Madrid, Spain, where it operates as La Fundación Consejo Internacional de Supervisión Público en Estándares de Auditoría, Ética Profesional y Materias Relacionadas, a non-profit Spanish foundation.
The PIOB is based in Madrid, Spain, where it operates as La Fundación Consejo Internacional de Supervisión Público en Estándares de Auditoría, Ética Profesional y Materias Relacionadas, a non-profit Spanish foundation.
Companies must establish an appropriate control environment that includes which of the following?
The following are some control elements of a fraud prevention program presented within the COSO control framework as an example.
1. Control environment. Companies must establish an appropriate control environment that includes:
• A code of conduct, ethics policy, or fraud policy to set the appropriate tone at the top.
• Ethics and whistleblower hotline programs to report concerns.
• Hiring and promotion guidelines and practices.
• Oversight by the audit committee, board, or other oversight body.
• Investigation of reported issues and remediation of confirmed violations.
The following are some control elements of a fraud prevention program presented within the COSO control framework as an example.
1. Control environment. Companies must establish an appropriate control environment that includes:
• A code of conduct, ethics policy, or fraud policy to set the appropriate tone at the top.
• Ethics and whistleblower hotline programs to report concerns.
• Hiring and promotion guidelines and practices.
• Oversight by the audit committee, board, or other oversight body.
• Investigation of reported issues and remediation of confirmed violations.
Which of the following sections is/are not included in the Treadway Commission’s Enterprise Risk Management—Integrated Framework?
The Committee of Sponsoring Organisations (COSO) of the Treadway Commission’s Enterprise Risk Management—Integrated Framework provides a useful model that includes sections on:
• Event identification, such as brainstorming activities, interviews, focus groups, surveys, industry research, and event inventories.
• Risk assessments that include probabilities and consequences.
• Risk response strategies, such as treating, transferring, tolerating, or terminating risk.
• Control activities, such as linking risks to existing anti-fraud programs and control activities, and validating their effectiveness.
• Monitoring, including audit plans and programs that consider residual fraud and risk due to misconduct.
The Committee of Sponsoring Organisations (COSO) of the Treadway Commission’s Enterprise Risk Management—Integrated Framework provides a useful model that includes sections on:
• Event identification, such as brainstorming activities, interviews, focus groups, surveys, industry research, and event inventories.
• Risk assessments that include probabilities and consequences.
• Risk response strategies, such as treating, transferring, tolerating, or terminating risk.
• Control activities, such as linking risks to existing anti-fraud programs and control activities, and validating their effectiveness.
• Monitoring, including audit plans and programs that consider residual fraud and risk due to misconduct.
Charlie is going to give a presentation to his colleagues in regards to monitoring and detection controls. Which of the following listed would he not consider to add into his presentation?
Monitoring and detection controls include:
• Installing alarm systems on facility doors and windows
• Installing surveillance cameras
• Designing edit checks into information systems
• Performing inventory counts
• Auditing
• Reviewing and approving invoices and cost centre charges
• Reconciling accounts
Monitoring and detection controls include:
• Installing alarm systems on facility doors and windows
• Installing surveillance cameras
• Designing edit checks into information systems
• Performing inventory counts
• Auditing
• Reviewing and approving invoices and cost centre charges
• Reconciling accounts
Internal auditors must exercise due professional care by considering the following with the exception of?
Internal auditors must exercise due professional care by considering the:
• Extent of work needed to achieve the engagement’s objectives;
• Relative complexity, materiality, or significance of matters to which assurance procedures are applied;
• Adequacy and effectiveness of governance, risk management, and control processes;
• Probability of significant errors, fraud, or noncompliance; and
• Cost of assurance in relation to potential benefits.
Internal auditors must exercise due professional care by considering the:
• Extent of work needed to achieve the engagement’s objectives;
• Relative complexity, materiality, or significance of matters to which assurance procedures are applied;
• Adequacy and effectiveness of governance, risk management, and control processes;
• Probability of significant errors, fraud, or noncompliance; and
• Cost of assurance in relation to potential benefits.
The Public Interest Oversight Board members are nominated by the following except?
The Public Interest Oversight Board comprises individuals from a number of professions and all branches of regulation. Its ten members were nominated by the International Organisation of Securities Commissions, the Basel Committee on Banking Supervision, the International Association of Insurance Supervisors, the World Bank, and the European Commission.
The Public Interest Oversight Board comprises individuals from a number of professions and all branches of regulation. Its ten members were nominated by the International Organisation of Securities Commissions, the Basel Committee on Banking Supervision, the International Association of Insurance Supervisors, the World Bank, and the European Commission.
Jerry is an investigator assigned to internal auditing and is developing an investigation plan. Which of the following methods would he not be considered helpful for his plan?
Investigator’s Role (Whether Assigned to Internal Auditing or Elsewhere)
The plan should consider methods to:
• Gather evidence, such as surveillance, interviews, or written statements.
• Document the evidence, considering legal rules of evidence and the business uses of the
evidence.
• Determine the extent of the fraud.
• Determine the scheme (techniques used to perpetrate the fraud).
• Evaluate the cause.
• Identify the perpetrators.
Investigator’s Role (Whether Assigned to Internal Auditing or Elsewhere)
The plan should consider methods to:
• Gather evidence, such as surveillance, interviews, or written statements.
• Document the evidence, considering legal rules of evidence and the business uses of the
evidence.
• Determine the extent of the fraud.
• Determine the scheme (techniques used to perpetrate the fraud).
• Evaluate the cause.
• Identify the perpetrators.
Which of the following is/are not the responsibilities of the PIOB?
Responsibilities of The PIOB:
• Reviews and approves Terms of Reference for these entities;
• Evaluates the boards’ due process procedures;
• Oversees the work of IFAC’s Nominating Committee and approves the committee’s nominations to the standard-setting boards and the CAP; and
• Suggests projects to be added to the boards’ work programs.
Responsibilities of The PIOB:
• Reviews and approves Terms of Reference for these entities;
• Evaluates the boards’ due process procedures;
• Oversees the work of IFAC’s Nominating Committee and approves the committee’s nominations to the standard-setting boards and the CAP; and
• Suggests projects to be added to the boards’ work programs.
Internal audit activity must assess and give recommendations for improving the organisation’s governance process in its accomplishment of which of the following objectives?
The internal audit activity must assess and make appropriate recommendations for improving the organisation’s governance process in its accomplishment of the following objectives:
• Promoting appropriate ethics and values within the organisation;
• Ensuring effective organisational performance management and accountability;
• Communicating risk and control information to appropriate areas of the organisation;
• Coordinating the activities of and communicating information among the board, external and internal auditors, and management.
The internal audit activity must assess and make appropriate recommendations for improving the organisation’s governance process in its accomplishment of the following objectives:
• Promoting appropriate ethics and values within the organisation;
• Ensuring effective organisational performance management and accountability;
• Communicating risk and control information to appropriate areas of the organisation;
• Coordinating the activities of and communicating information among the board, external and internal auditors, and management.
The internal audit activity must evaluate risk exposures relating to the organisation’s governance, operations, and information systems regarding the following except?
The internal audit activity must evaluate risk exposures relating to the organisation’s governance, operations, and information systems regarding the:
• Reliability and integrity of financial and operational information.
• Effectiveness and efficiency of operations.
• Safeguarding of assets; and
• Compliance with laws, regulations, and contracts.
The internal audit activity must evaluate risk exposures relating to the organisation’s governance, operations, and information systems regarding the:
• Reliability and integrity of financial and operational information.
• Effectiveness and efficiency of operations.
• Safeguarding of assets; and
• Compliance with laws, regulations, and contracts.
Which of the following statements is/are not true in regards to Certified Fraud Examiners?
Certified Fraud Examiners are not normally responsible for the initial detection of fraud; instead, Certified Fraud Examiners usually become involved after sufficient predication exists. Certified Fraud Examiners commonly supervise or direct a fraud examination or investigation.
Certified Fraud Examiners are not normally responsible for the initial detection of fraud; instead, Certified Fraud Examiners usually become involved after sufficient predication exists. Certified Fraud Examiners commonly supervise or direct a fraud examination or investigation.
Fraud in financial statements typically takes the form of which of the following?
Fraud in financial statements typically takes the form of:
• Overstated assets or revenue
• Understated liabilities and expenses
Fraud in financial statements typically takes the form of:
• Overstated assets or revenue
• Understated liabilities and expenses
Which of the following is/are the common reasons why people commit financial statement fraud?
Some of the more common reasons why people commit financial statement fraud include:
• To encourage investment through the sale of stock.
• To demonstrate increased earnings per share or partnership profits interest, thus allowing increased dividend/distribution payouts.
• To cover inability to generate cash flow.
• To dispel negative market perceptions.
• To obtain financing, or to obtain more favourable terms on existing financing.
• To receive higher purchase prices for acquisitions.
• To demonstrate compliance with financing covenants.
• To meet company goals and objectives.
• To receive performance-related bonuses.
Some of the more common reasons why people commit financial statement fraud include:
• To encourage investment through the sale of stock.
• To demonstrate increased earnings per share or partnership profits interest, thus allowing increased dividend/distribution payouts.
• To cover inability to generate cash flow.
• To dispel negative market perceptions.
• To obtain financing, or to obtain more favourable terms on existing financing.
• To receive higher purchase prices for acquisitions.
• To demonstrate compliance with financing covenants.
• To meet company goals and objectives.
• To receive performance-related bonuses.
Which of the following is/are not the classifications of financial statement schemes?
The five classifications of financial statement schemes are:
• Fictitious revenues
• Timing differences
• Improper asset valuations
• Concealed liabilities and expenses
• Improper disclosures
The five classifications of financial statement schemes are:
• Fictitious revenues
• Timing differences
• Improper asset valuations
• Concealed liabilities and expenses
• Improper disclosures
Which of the following is/are the responsibilities of Certified Fraud Examiners?
The responsibilities of Certified Fraud Examiners are to:
• Help resolve allegations of fraud, from inception to disposition
• Obtain evidence
• Take statements
• Write reports of fraud examinations
• Testify to findings
• Assist in fraud detection and prevention
The responsibilities of Certified Fraud Examiners are to:
• Help resolve allegations of fraud, from inception to disposition
• Obtain evidence
• Take statements
• Write reports of fraud examinations
• Testify to findings
• Assist in fraud detection and prevention
The following criteria should be satisfied in regards to the revenue in the accounting records with the exception of?
Revenue should generally be recognised in the accounting records when the following four criteria have been satisfied:
• Persuasive evidence of an arrangement exists;
• Delivery has occurred or services have been rendered;
• The seller’s price to the buyer is fixed or determinable; and
• Collectability is reasonably assured.
Revenue should generally be recognised in the accounting records when the following four criteria have been satisfied:
• Persuasive evidence of an arrangement exists;
• Delivery has occurred or services have been rendered;
• The seller’s price to the buyer is fixed or determinable; and
• Collectability is reasonably assured.
Richard is auditing for Company X, which of the following would he consider as possible improper asset valuations from company X?
Improper asset valuations usually take the form of one of the following classifications:
• Inventory valuation
• Accounts receivable
• Business combinations
• Fixed assets
Improper asset valuations usually take the form of one of the following classifications:
• Inventory valuation
• Accounts receivable
• Business combinations
• Fixed assets
The following are common methods for concealing liabilities and expenses except
Common methods for concealing liabilities and expenses include:
• Liability/expense omissions
• Capitalised expenses
Common methods for concealing liabilities and expenses include:
• Liability/expense omissions
• Capitalised expenses
Which of the following is not the main objective of the auditor as outlined in ISA 240?
The objectives of the auditor, as outlined in ISA 240, are:
a) To identify and assess the risks of material misstatement of the financial statements due to fraud;
b) To obtain sufficient appropriate audit evidence about the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and
c) To respond appropriately to identified or suspected fraud.
The objectives of the auditor, as outlined in ISA 240, are:
a) To identify and assess the risks of material misstatement of the financial statements due to fraud;
b) To obtain sufficient appropriate audit evidence about the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and
c) To respond appropriately to identified or suspected fraud.
Which of the following is false about false information?
A company employee might submit the following false information to obtain unlawful financial gain:
• Improper medical information to obtain a better insurable rate for the prospective policyholder (for example, standard to preferred rate)
• Improper date of birth to obtain a cheaper premium on the new policy
• Improper home address to obtain a cheaper premium for home or automobile insurance
• Improper driving history prior to purchasing automobile insurance to reduce the annual premium or obtain insurance where the individual would normally have to apply through the risk pool.
A company employee might submit the following false information to obtain unlawful financial gain:
• Improper medical information to obtain a better insurable rate for the prospective policyholder (for example, standard to preferred rate)
• Improper date of birth to obtain a cheaper premium on the new policy
• Improper home address to obtain a cheaper premium for home or automobile insurance
• Improper driving history prior to purchasing automobile insurance to reduce the annual premium or obtain insurance where the individual would normally have to apply through the risk pool.
Which of the following factor is not appropriate about Developer Overhead?
It is not uncommon in construction financing to have a budget line item for developer overhead (also called general conditions). This is a ripe area for abuse. The purpose of developer overhead is to supply the developer with operating capital while the project is under construction. This overhead allocation should not include a profit percentage, as the developer realizes profit upon completion. In essence, the overhead budget is as if the lender is making two types of loans: a real estate loan and a working capital loan for the overhead. Unfortunately, there is seldom, if ever, any separate underwriting for the overhead portion. The overhead is merely added as a construction cost, whose ultimate collateral is the property and not some other short-term collateral. Historically, troubled construction loans or foreclosures due to fraud have been totally disbursed in the developer overhead category.
It is not uncommon in construction financing to have a budget line item for developer overhead (also called general conditions). This is a ripe area for abuse. The purpose of developer overhead is to supply the developer with operating capital while the project is under construction. This overhead allocation should not include a profit percentage, as the developer realizes profit upon completion. In essence, the overhead budget is as if the lender is making two types of loans: a real estate loan and a working capital loan for the overhead. Unfortunately, there is seldom, if ever, any separate underwriting for the overhead portion. The overhead is merely added as a construction cost, whose ultimate collateral is the property and not some other short-term collateral. Historically, troubled construction loans or foreclosures due to fraud have been totally disbursed in the developer overhead category.
Which of the following factor is not true about Consumer Fraud?
Complaints of consumer fraud can be found as far back as the first century when Pliny the Elder told of the adulterated honey being sold in Rome and the mixing of wine with gypsum, lime, pitch, rosin, wood ashes, salt, sulfur, and other artificial additives. Schemes against consumers range from home repair frauds to more sophisticated scams. Fraud is notably common in the repair and service industries. Home repair fraud, frequently perpetrated against the elderly, ranges from the sale or use of substandard materials—such as roofing—to securing payment without doing any work at all. Automobile repairs often involve fraudulent acts. One study maintained that 53 cents of every “repair” dollar were wasted because of unnecessary work, overcharging, services never performed, or incompetence.
Complaints of consumer fraud can be found as far back as the first century when Pliny the Elder told of the adulterated honey being sold in Rome and the mixing of wine with gypsum, lime, pitch, rosin, wood ashes, salt, sulfur, and other artificial additives. Schemes against consumers range from home repair frauds to more sophisticated scams. Fraud is notably common in the repair and service industries. Home repair fraud, frequently perpetrated against the elderly, ranges from the sale or use of substandard materials—such as roofing—to securing payment without doing any work at all. Automobile repairs often involve fraudulent acts. One study maintained that 53 cents of every “repair” dollar were wasted because of unnecessary work, overcharging, services never performed, or incompetence.
Which of the following factor is untrue about journal entry review of Skimming?
Skimming can sometimes be detected by reviewing and analyzing all journal entries made to the cash and inventory accounts. Journal entries involving the following topics should be examined:
• False credits to inventory to conceal unrecorded or understated sales
• Write-offs of lost, stolen, or obsolete inventory
• Write-offs of accounts receivable accounts
• Irregular entries to cash accounts
Skimming can sometimes be detected by reviewing and analyzing all journal entries made to the cash and inventory accounts. Journal entries involving the following topics should be examined:
• False credits to inventory to conceal unrecorded or understated sales
• Write-offs of lost, stolen, or obsolete inventory
• Write-offs of accounts receivable accounts
• Irregular entries to cash accounts
Which of the following factor is true for financial statements?
The following is a list of typical financial statements:
1. Statement of financial position (“balance sheet”).
2. Statement of profit or loss and other comprehensive income for the period (“income statement”).
3. Statement of changes in owners’ equity or statement of retained earnings.
4. Statement of cash flows.
The following is a list of typical financial statements:
1. Statement of financial position (“balance sheet”).
2. Statement of profit or loss and other comprehensive income for the period (“income statement”).
3. Statement of changes in owners’ equity or statement of retained earnings.
4. Statement of cash flows.
Which of the following are correct regarding shell entities?
Shell Entities:
Money launderers often use shell entities to purchase real estate with illicit funds. Generally defined, shell entities are organizations without active business or significant assets, and they can take the form of limited liability companies, trusts, business trusts, corporations, and other legal entities. Because there is a lack of transparency in the formation of shell entities, money launderers often use them to hide the identity of the true owner, the source of the money, or the destination of the money.
Shell Entities:
Money launderers often use shell entities to purchase real estate with illicit funds. Generally defined, shell entities are organizations without active business or significant assets, and they can take the form of limited liability companies, trusts, business trusts, corporations, and other legal entities. Because there is a lack of transparency in the formation of shell entities, money launderers often use them to hide the identity of the true owner, the source of the money, or the destination of the money.
Which of the following conditions stay close to front business money laundering?
Using a Front Business to Launder Funds:
One of the most common methods of laundering funds is to filter the money through a seemingly legitimate business, otherwise known as a front business. A front business can be a very effective way to launder money for a number of reasons. Front businesses provide a safe place for organizing and managing criminal activity, where the comings and goings of large numbers of people will not arouse undue suspicion. In addition, a front that conducts legitimate business provides cover for delivery and transportation related to illegal activity. The expenses from illegal activity can be attributed to the legitimate enterprise, and the illegal revenues can be easily placed into the enterprise.
Using a Front Business to Launder Funds:
One of the most common methods of laundering funds is to filter the money through a seemingly legitimate business, otherwise known as a front business. A front business can be a very effective way to launder money for a number of reasons. Front businesses provide a safe place for organizing and managing criminal activity, where the comings and goings of large numbers of people will not arouse undue suspicion. In addition, a front that conducts legitimate business provides cover for delivery and transportation related to illegal activity. The expenses from illegal activity can be attributed to the legitimate enterprise, and the illegal revenues can be easily placed into the enterprise.
Select the correct internal control options from the given choices.
Internal Controls:
Management must also analyze their organization’s internal controls and enhance them as necessary to eliminate procurement risks. Key internal controls include, but are not limited to:
Internal Controls:
Management must also analyze their organization’s internal controls and enhance them as necessary to eliminate procurement risks. Key internal controls include, but are not limited to:
Which of the following are correct in Direct Labor charges?
Labor costs are made up of direct labor charges to the contract and indirect labor charges allocated to the contract through a factor or rate. Direct labor charges are contract costs identified specifically with a contract. In general, direct labor costs are calculated by multiplying all project hours with the labor rates, which are based on actual employee wages or represent wages paid, and they are summarized for all employees within the applicable allocation unit. Indirect labor costs are those identified in two or more cost objectives.
Labor costs are made up of direct labor charges to the contract and indirect labor charges allocated to the contract through a factor or rate. Direct labor charges are contract costs identified specifically with a contract. In general, direct labor costs are calculated by multiplying all project hours with the labor rates, which are based on actual employee wages or represent wages paid, and they are summarized for all employees within the applicable allocation unit. Indirect labor costs are those identified in two or more cost objectives.
When does a basic skimming scheme occur?
Sales Skimming
The most basic skimming scheme occurs when an employee sells goods or services to a customer and collects the customer’s payment, but makes no record of the sale. The employee simply keeps the money received from the customer instead of turning it over to his employer. (See the “Unrecorded Sales” flowchart.)
Sales Skimming
The most basic skimming scheme occurs when an employee sells goods or services to a customer and collects the customer’s payment, but makes no record of the sale. The employee simply keeps the money received from the customer instead of turning it over to his employer. (See the “Unrecorded Sales” flowchart.)
Which is the correct detection method to identify fictitious refunds or voided sales?
Fictitious Refunds or Voided Sales
Fictitious refunds or voided sales can often be detected when closely examining the documentation submitted with the cash receipts.
Fictitious Refunds or Voided Sales
Fictitious refunds or voided sales can often be detected when closely examining the documentation submitted with the cash receipts.
Select the correct statements regarding the Current Ratio.
The current ratio—current assets to current liabilities—is probably the most commonly used ratio in financial statement analysis. This comparison measures a company’s ability to meet present obligations from its liquid assets. The number of times that current assets exceed current liabilities has long been a quick measure of financial strength.
In detecting fraud, this ratio can be a prime indicator that the accounts involved have been manipulated. Embezzlement will cause the ratio to decrease, and liability concealment will cause a more favorable ratio.
The current ratio—current assets to current liabilities—is probably the most commonly used ratio in financial statement analysis. This comparison measures a company’s ability to meet present obligations from its liquid assets. The number of times that current assets exceed current liabilities has long been a quick measure of financial strength.
In detecting fraud, this ratio can be a prime indicator that the accounts involved have been manipulated. Embezzlement will cause the ratio to decrease, and liability concealment will cause a more favorable ratio.
Which statement best describes mobile forensic investigations?
Mobile phone forensics refers to procedures used to capture mobile data in order for the data to be admissible in court. Companies use forensics on the mobile phone to determine if a client system has been used in breach of its policies of use.
Mobile phone forensics refers to procedures used to capture mobile data in order for the data to be admissible in court. Companies use forensics on the mobile phone to determine if a client system has been used in breach of its policies of use.
If a device is powered on during a mobile fraud investigation, which of the following should not considered while seizing it?
The following considerations should be made:
. The fraud investigator should not move through the system quickly because this will probably change the information of the system.
. If a computer is secured by password or locked, it could be stopped from subsequent access.
. A computer that is switched on could connect with the network, which will cause data changes, should be disconnected from the network by the fraud examiner.
The following considerations should be made:
. The fraud investigator should not move through the system quickly because this will probably change the information of the system.
. If a computer is secured by password or locked, it could be stopped from subsequent access.
. A computer that is switched on could connect with the network, which will cause data changes, should be disconnected from the network by the fraud examiner.
How many types are there of evidence?
Two basic types of evidence are available: direct and circumstantial. The facts at the problem are shown prima facie (based on the first impression) by direct evidence; it directly demonstrates the facts.
Circumstantial evidence is proof that tends to indirectly, by inference, demonstrate or disprove facts in question.
Two basic types of evidence are available: direct and circumstantial. The facts at the problem are shown prima facie (based on the first impression) by direct evidence; it directly demonstrates the facts.
Circumstantial evidence is proof that tends to indirectly, by inference, demonstrate or disprove facts in question.
What does the term litigation hold refer to?
A litigation holding relates to the measures that an organization takes to notify employees when they need to maintain data occurs to stop the destruction of possibly appropriate documents.
A litigation holding relates to the measures that an organization takes to notify employees when they need to maintain data occurs to stop the destruction of possibly appropriate documents.
When the structural pressure to commit fraud exists, a firm often cannot unite its agents in such activities. Which of the following factors should prevent this unity,
When the structural pressure to commit fraud exists, a firm often cannot unite its agents in such activities. At least three factors prevent such unity.
First, the pressure to commit fraud might not affect departments in a company equally.
Second, even in high-pressure departments, some employees will not know the difficulty of obtaining needed resources.
In other words, an employee usually needs a high degree of responsibility for a company’s success, as well as the ability to bring about those goals, before a chance to engage in misbehavior can occur.
When the structural pressure to commit fraud exists, a firm often cannot unite its agents in such activities. At least three factors prevent such unity.
First, the pressure to commit fraud might not affect departments in a company equally.
Second, even in high-pressure departments, some employees will not know the difficulty of obtaining needed resources.
In other words, an employee usually needs a high degree of responsibility for a company’s success, as well as the ability to bring about those goals, before a chance to engage in misbehavior can occur.
Which of the following is not true about risk assessment in the COSO framework?
Risk assessment involves a risk management plan, ethical adaptation, management services to the organization’s requirements, and identification and review of operational financial and regulatory threats.
Which of the following is least likely to be an example of a data analysis query that can be performed to detect fraud through the examination of sales information?
The following are examples of data analysis queries that can be performed to detect fraud through the examination of sales information:
– Create a report of all system overrides and sales exceptions.
– Analyze returns and allowances by store, department, or other areas.
– Summarize trends by customer type, products, salesperson, etc.
– Compare ratios of current sales to outstanding receivables or other variables.
– Generate reports on a correlation between product demand or supply and sales prices.
The following are examples of data analysis queries that can be performed to detect fraud through the examination of sales information:
– Create a report of all system overrides and sales exceptions.
– Analyze returns and allowances by store, department, or other areas.
– Summarize trends by customer type, products, salesperson, etc.
– Compare ratios of current sales to outstanding receivables or other variables.
– Generate reports on a correlation between product demand or supply and sales prices.
What is the term used to refer to the investigation technique designed to obtain evidence by the use of agents whose true intentions are not communicated to the target?
An investigation technique designed to obtain evidence by the use of agents whose true intentions are not communicated to the target is known as a covert operation. With proper planning and precautions, a covert operation can prove very beneficial to an investigation.
An investigation technique designed to obtain evidence by the use of agents whose true intentions are not communicated to the target is known as a covert operation. With proper planning and precautions, a covert operation can prove very beneficial to an investigation.
Bill who is an agent has been employed to observe and monitor a suspect from afar while he meets with a potential co-conspirator. What type of covert operation is Bill carrying out?
In surveillance operations, the agent makes use of observation to gather information about individuals suspected of misconduct. Bill would be carrying out a surveillance operation when he observes a suspect from afar while he meets with a potential co-conspirator.
In surveillance operations, the agent makes use of observation to gather information about individuals suspected of misconduct. Bill would be carrying out a surveillance operation when he observes a suspect from afar while he meets with a potential co-conspirator.
In which of the following phases that make up a proper data analysis process, does the phrase “garbage in, garbage out” apply?
The phrase “garbage in, garbage out” is applicable in the preparation phase. Before running tests on the data, the fraud examiner must make certain the data being analyzed are relevant and reliable for the objective of the engagement. This is done during the preparation phase.
The phrase “garbage in, garbage out” is applicable in the preparation phase. Before running tests on the data, the fraud examiner must make certain the data being analyzed are relevant and reliable for the objective of the engagement. This is done during the preparation phase.
What is the term used to refer to a transaction identified by a data analysis test as an anomaly within the data set even though it is not actually a fraudulent transaction?
A transaction identified by a data analysis test as an anomaly within the data set even though it is not actually a fraudulent transaction is known as a false positive. Such results can occur for various reasons.
A transaction identified by a data analysis test as an anomaly within the data set even though it is not actually a fraudulent transaction is known as a false positive. Such results can occur for various reasons.
What name is given to the part of the cognitive interview in which the investigator seeks to track down who was involved and obtain specific details about the suspect?
The portion of the cognitive interview in which the investigator seeks to track down who was involved and obtain specific details about the suspect is known as the specific-detail phase. In this phase, the investigator seeks to get additional information about the event by asking the witness to describe the suspect with specific details.
The portion of the cognitive interview in which the investigator seeks to track down who was involved and obtain specific details about the suspect is known as the specific-detail phase. In this phase, the investigator seeks to get additional information about the event by asking the witness to describe the suspect with specific details.
What is the form that documents the fact that permission was given to the fraud examiner by an individual to record specific conversations called?
The form that documents the fact that permission was given to the fraud examiner by an individual to record specific conversations is known as the consent to record form. The consent to record form must be signed and witnessed.
The form that documents the fact that permission was given to the fraud examiner by an individual to record specific conversations is known as the consent to record form. The consent to record form must be signed and witnessed.
What statement best describes the type of digital forensic experts known as operating and file system experts?
Operating and file system experts are proficient in certain operating systems and the various file systems they employ. Operating and file systems experts also have the ability to convey operational characteristics and observe artifacts.
Operating and file system experts are proficient in certain operating systems and the various file systems they employ. Operating and file systems experts also have the ability to convey operational characteristics and observe artifacts.
Digital forensic experts can recover data from deleted files, both those that have been purposefully deleted and those that were accidentally deleted. When will a deleted file no longer be recoverable from a computer’s hard drive?
Deleted files are recoverable until they are overwritten because data is not erased from a computer’s hard drive until it is overwritten. A deleted file will remain present on a hard drive until the operating system overwrites all or some part of the file. So, deleted files are generally no longer recoverable when they have been overwritten.
Deleted files are recoverable until they are overwritten because data is not erased from a computer’s hard drive until it is overwritten. A deleted file will remain present on a hard drive until the operating system overwrites all or some part of the file. So, deleted files are generally no longer recoverable when they have been overwritten.
Which of the following types of digital forensic experts are proficient in certain operating systems (e.g., Windows Vista, Windows 7, Windows 10, Linux) and the various file systems they employ?
Operating and file system experts are proficient in certain operating systems (e.g., Windows Vista, Windows 7, Windows 10, Linux) and the various file systems they employ (e.g., Joliet, NTFS, FAT, VFS, Ext2). Operating and file systems experts also have the ability to convey operational characteristics and observe artifacts.
Operating and file system experts are proficient in certain operating systems (e.g., Windows Vista, Windows 7, Windows 10, Linux) and the various file systems they employ (e.g., Joliet, NTFS, FAT, VFS, Ext2). Operating and file systems experts also have the ability to convey operational characteristics and observe artifacts.
What statement best describes the term “Spoliation” in the context of evidence?
Spoliation is broadly defined as the act of intentionally or negligently destroying documents relevant to litigation.
Spoliation is broadly defined as the act of intentionally or negligently destroying documents relevant to litigation.
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