Fraud Auditing Exam 1

American Association of Public Accountants 

The first major accounting body was the ___________ (later became AICPA)

True

T/F: Forensic accounting focuses on the past

forensic accounting

________________ is performed for a specific legal forum or in anticipation of presentation before a legal forum

financial forensics

____________ is the art and science of the study of people and money and involves applying financial techniques to matters of law

fraud auditor

An accountant especially skilled in auditing who is generally engaged in auditing with a view toward fraud discovery, documentation, and prevention is a _____________

False

T/F: A fraud auditor will have a more broad skillset and legal knowledge in order to aid in litigation support

True

T/F: Forensic audit does not use materiality or sampling

Forensic accounting, audit and fraud examination

___________ involves a future and historical time perspective while ________ focuses on historical information

Frank J. Wilson

___________ is the pioneer of modern-day forensic accounting; IRS agent who caught Al Capone

Foreign Corrupt Practices Act

The _____________ was passed to combat corrupt business practices such as bribes and kickbacks; requires keeping accurate books

investigative accounting and litigation support

The two broad areas of forensic accounting according to the AICPA are _______________

Panel on Audit Effectiveness

The ______________ issued a 200-page report, Report and Recommendations, which included a recommendation that auditors should perform forensic-type procedures during every audit to enhance the prospect of detecting material financial statement fraud

Sarbanes-Oxley Act

The ___________ established the PCAOB

Dodd-Frank Act (2010)

The ______________ provides financial incentives for employees and others to report to SEC suspected securities violations; whistleblowers may receive awards equal to 10% to 40% of monetary sanctions imposed by SEC

contingent

The AICPA Standards for Forensic Services states that a __________ fee cannot be charged on arrangements

True

T/F: Forensic accountants provide expert opinions on fraud situations, but cannot conclude that fraud occurred

fraud

____________ is the intentional misrepresentation of a material fact, either orally or in writing, with the intent to induce another to rely on the misrepresentation and to act (or refrain from acting) upon the misrepresentation causing damage to the party relying on the misrepresentation

manipulation, misrepresentation, and misapplication

The three M’s of financial reporting fraud are _________________

earnings management

____________ is the “purposeful intervention in the external financial reporting process, with the intent of obtaining some private gain.”

preventive, detective, and corrective

Three types of internal controls are ____________

preventive

______________ internal controls include segregation of duties, drug testing, job rotation, and document control numbers

detective

______________ internal controls include reconciliations, reviews, and counting inventory

corrective

______________ internal controls include training, process redesign, and budget to actual comparisons

internal control testing phase and account balance testing phase

For external audits, evidence is gathered in two fieldwork stages _______________

control risk

____________ is the risk that a material error in the balance or transaction class will not be prevented or detected

inherent risk

_____________ is the risk that an account or transaction contains material misstatements before the effects of the controls

detection risk

____________ is the risk that audit procedures will not turn up a material error when it exists

embezzlement

Fraudulent appropriation of money or property lawfully in one’s possession to be used personally is called ___________

skimming

______________ is the technique to remove cash before a company records the receipts

lapping

___________ is a type of skimming scheme where cash stolen is covered with the receipt from another customer.  The process repeats time after time.