Forensic Final Back of Book Questions

The practitioner should ____________.

a. Destroy all records, except formal reports, at the end of litigation.

b. Immediately destroy all records, except formal reports, as they are contained in reports.

c. Adopt a formal policy for retaining records.

d. None of the above.

Adopt a formal policy for retaining records.

The professional is ____________ personally direct and supervise the work performed in support of his or her.

expert opinions.

a. Required by law to.

b. Required by AICPA authoritative standards to.

c. Is not required to.

d. Is required in criminal cases only to.

Required by AICPA authoritative standards to.

The practitioner should closely supervise staff and be ready to testify that the work, exhibits, analyses, and other items were prepared under ____________.

a. The direct control of the attorney.

b. The practitioner’s direct control.

c. The client’s direct control.

d. None of the above.

The practitioner’s direct control.

In planning and preparing for engagements, paramount considerations include ____________.

a. Understanding the client and the client’s needs.

b. Establishing a clear understanding regarding the scope and nature of the services to be provided and the

responsibilities of both the member and the client.

c. Establishing a clear understanding regarding any issues relating to confidentiality of materials and possible

conflicts of interest.

d. All of the above.

All of the above

Which of the following is not a litigation service?

a. Expert witness.

b. Litigation consulting.

c. Special master.

d. All of the above are litigation services.

All of the above are litigation services.

Calculation of judgments would be most applicable to which of the following parts of the litigation process?

a. Discovery.

b. Interrogatories.

c. Trial.

d. Post-trial.

Post-trial

Which of the following is not a general standard that applies to CPA client services?

a. Client interest.

b. Due professional care.

c. Professional competence.

d. All of the above are general standards applicable to CPA client services.

Client interest.

VS section 100, Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset in AICPA Professional Standards does not apply ____________.

a. To cases in which the value of a subject interest is provided to the member by the client or a third party, and

the member does not apply valuation approaches and methods, as defi ned by VS section 100.

b. To cases of internal-use assignments from employers to employee members not in the practice of public ac-

counting.

c. When it is not practical or reasonable to obtain or use relevant information, and as a result the member is

unable to apply valuation approaches and methods that are described in VS section 100.

d. All of the above situations.

All of the above situations.

The concept of career risk is most applicable to ____________.

a. Expert consulting services.

b. Expert testimony services.

c. Investigative services

d. All of the above

All of the above.

With respect to an engagement to provide expert testimony, contingency fees are ____________.

a. Not a problem if disclosed under Rule 26.

b. Not a problem if disclosed under FRE 702, 703, 704, 705, or 706.

c. A problem even if disclosed.

d. Never a problem.

A problem even if disclosed.

Verbal reports from a testifying expert to retaining counsel are ____________.

a. Exempt from discovery under the work-product doctrine.

b. Exempt from discovery under the work-product privilege.

c. Exempt from discovery under attorney-client privilege.

d. None of the above.

Exempt from discovery under the work-product doctrine.

Generally speaking, testifying experts may be liable to ____________.

a. The retaining party.

b. The opposing party.

c. The opposing attorney.

d. None of the above.

The retaining party.

Which of the following may be an element of spoliation?

a. Accidental destruction of evidence.

b. Intentional destruction of evidence.

c. Both (a) and (b) may be elements of spoliation.

d. Neither (a) nor (b) may be elements of spoliation.

Both (a) and (b) may be elements of spoliation.

Conflicting out an expert means ____________.

a. Firing an expert due to a conflict of interest.

b. The court removal of an expert for a conflict of interest.

c. The loss of an expert due to a failure to consider conflicts of interest in the engagement letter.

d. None of the above.

The loss of an expert due to a failure to consider conflicts of interest in the engagement letter.

Which type of question seeks to assess the interviewee’s honesty?

a. Informational.
b. Assessment.
c. Admission-seeking.
d. Introductory.

Assessment

Only suspects who show deception are asked ____________.

admission seeking questions

Which type of question is used to calibrate the subject’s response?

informational

Repeating an interviewer’s questions may be best described as a sign of ____________.

deception

Subjects who show deception ____________.
a. Are asked concluding or closing questions after admission-seeking questions.
b. Are asked concluding or closing questions after assessment questions.
c. Are asked concluding or closing questions depending on the results of the admission-seeking questions.
d. None of the above.

Are asked concluding or closing questions after admission-seeking questions.

From an organizational standpoint, fraud is managed as part of the ____________.
a. Enterprise risk management strategy.
b. Audit and review process.
c. CFOs’ and CFEs’ explicit obligation under SOX.
d. None of the above.

ERM strategy

In an effective corporate governance structure, ____________ should be responsible for implementing an effective business ethics system.
a. The CEO.
b. The CFO or controller.
c. The board of directors.
d. None of the above.

The CEO

The board typically delegates its fraud risk management responsibilities to the audit committee. The committee should regularly meet ____________.
a. With the internal auditor alone.
b. With the internal auditor and a designated representative of management.
c. With the internal auditor and the controller or CFO.
d. With the internal auditor and the controller.

With the internal auditor alone.

The primary person the audit committee should consult when fraud is suspected is ____________.
a. The external auditor.
b. Legal counsel.
c. The controller.
d. None of the above.

Legal counsel

Red flags indicating fraud should be understood by ____________.
a. Top management.
b. Top management and middle management.
c. All levels of management and staff.
d. None of the above.

All levels of management and staff

____________ should provide assurances to the board (via the audit committee) that fraud controls are sufficient.
a. The CEO.
b. The CFO or controller.
c. The internal auditor.
d. None of the above.

The internal auditor

The focus should be on effective processes for ____________.
a. Enterprise risk management.
b. Fraud auditing.
c. Fraud risk assessment.
d. None of the above.

Fraud risk assessment

To identify fraud risks, the team must understand ____________.
a. The likelihood of each relevant fraud.
b. The population of fraud risks.
c. A reasonable sample of fraud risks.
d. None of the above.

The population of fraud risks

When estimating significance of a given fraud risk, the team should consider ____________.
a. The significance to operations, brand value, and reputation.
b. Legal liability.
c. Both (a) and (b).
d. None of the above.

Both (a) and (b)

Which of the following is not an option for management in dealing with residual fraud risk?
a. Simply accept a given risk.
b. Increase the level of control.
c. Both (a) and (b) are options.
d. None of the above.

None of the above

Normally, it is adequate to assign ____________ likelihoods to each identified inherent risk.
a. Two.
b. Three.
c. Four.
d. Many.

Three

The first line of defense in minimizing fraud risk is ____________.

Fraud prevention

Which of the following is not a standard area of fraud preventive control?
a. Human resources.
b. Antifraud training.
c. Authority limits.
d. All of the above are standard areas.

All of the above are standard areas

Generally speaking, which of the following is most likely to detect fraud?
a. Internal audits.
b. External audits.
c. Hotlines.
d. None of the above.

Hotlines

Fraud detection is furthered by process controls designed to detect ____________.
a. Fraud only.
b. Errors only.
c. Both fraud and errors.
d. None of the above.

Both fraud and errors

The correct sequence for evidence collection is ____________.
a. Review documents, then conduct interviews.
b. Conduct interviews, then review documents.
c. Do both simultaneously.
d. None of the above.

Review documents, then conduct interviews.

If a suspect confesses to fraud, it would ____________.
a. Be appropriate to indicate guilt.
b. Be appropriate if a written confession exists.
c. Not be appropriate to indicate guilt.
d. None of the above.

Not be appropriate to indicate guilt.

In which of the following roles is the practitioner not permitted to serve in bankruptcy proceedings?
a. Consultant.
b. Trustee.
c. Examiner.
d. The practitioner is permitted to serve in all the above roles.

The practitioner is permitted to serve in all the above roles.

Generally speaking, if the practitioner provides bankruptcy services in some other role besides that of a consultant, ____________.
a. CS section 100 applies.
b. CS section 100 applies to roles other than trustee.
c. CS section 100 never applies.
d. CS section 100 applies in some districts

CS section 100 applies in some districts

Individual debtors who possess sufficient means as determined by a means test must file under ____________.
a. Chapter 13 instead of Chapter 7.
b. Chapter 7 instead of Chapter 11.
c. Chapter 13 instead of Chapter 11.
d. None of the above.

Chapter 13 instead of chapter 7

Means testing individuals is a central part of the most recent reforms in bankruptcy laws and has made it more difficult for individuals to have their debts ____________.
a. Totally dismissed.
b. Subjected to a payment plan.
c. Exempt from an IRS review.
d. None of the above.

Totally dismissed

If a consumer debtor’s current median income (adjusted for certain IRS-allowed deductions) exceeds specific maximum-income thresholds, ____________ may request that the case be dismissed.
a. Only the trustee.
b. Only the creditors.
c. Only the court.
d. Any party of interest.

Any party of interest

The bankruptcy law requires ____________ to investigate the client’s filing.
a. Practitioners.
b. Attorneys.
c. The bankruptcy magistrate.
d. None of the above.

Attorneys

Withholding documents related to the debtor’s property or financial affairs from the standing trustee or other officer of the court is an example of ____________.
a. A discovery violation.
b. A violation of the Sarbanes-Oxley Act of 2002.
c. Fraud.
d. None of the above.

Fraud

Secretly transferring assets and selling assets below market value refers to ____________.
a. A fraudulent conveyance.
b. A filing scheme.
c. Undocumented transfers.
d. None of the above.

A fraudulent congeyance

Which of the following schedules and statements is not typically included with a bankruptcy filing?
a. Statement of financial affairs.
b. Creditors holding standard unsecured claims.
c. Co-debtor.
d. All of the above are normally included.

All of the above are normally included.

Rule 2004 of the Federal Bankruptcy Code permits ____________ to obtain a court order to examine any entity involved with the case.
a. The trustee only.
b. Creditors only.
c. The court only.
d. Any party in interest.

Any party in interest

In business bankruptcies, audited financial reports ____________.

Are a reliable source of information in identifying assets subject to bankruptcy proceedings, except in involuntary filings.

Depleted pension funds would most likely be associated with ____________.

A bleed out scheme.

Which of the following situations does not involve concealed-assets frauds?
a. Divorces.
b. Partnership dissolutions.
c. Estates.
d. All of the above involve concealed-asset frauds.

All of the above involve concealed-asset frauds

Debtor-creditor schemes are most likely to occur in cases of ____________.
a. The debtor having been barred from filing for bankruptcy.
b. The creditor having recently acquired a new company.
c. The debtor having recently acquired a new company.
d. None of the above.

None of the above

1. All of the following are true about arbitration in a marital setting except.
a. Arbitration can be binding.
b. Arbitration can be nonbinding.
c. Most arbitration is nonbinding.
d. Most arbitration cannot be appealed.

Most arbitration is nonbinding.

Before a practitioner accepts a matrimonial forensics engagement, he or she considers whether he or she .
a. Can be objective.
b. Is competent in the area of matrimonial forensics.
c. Is a good communicator.
d. All of the above.

All of the above

In divorce, state law.
a. Always takes precedence over federal law.
b. Usually takes precedence over federal law.
c. Never takes precedence over federal law.
d. Does not take precedence over federal law, except in the area of pensions and certain other retirement assets.

Usually takes precedence over federal law.

Debt secured by an asset and considered a marital asset in a non-community state will be divided.
a. Equally.
b. According to the proportion of assets that are divided.
c. According to the distribution of the asset that is used as security for the debt.
d. According to a plan drawn up by a disinterested party other than the judge or jury.

According to the distribution of the asset that is used as security for the debt.

The valuation date in a divorce engagement can be any of the following except .
a. Date of separation.
b. Date of trial.
c. Date of marriage.
d. All of the above dates are dates on which assets can be valued in a divorce setting.

All of the above dates are dates on which assets can be valued in a divorce setting.

If an equalization note does not have a stated interest rate, .
a. A rate must be imputed.
b. A rate need not be imputed for equalization notes used in divorce actions.
c. A rate must be imputed only if the rate is below the market rate at the time the note was created.
d. A rate must be imputed if the due date of the note is unreasonable.

A rate must be imputed

In which of the following settings is the intrinsic value standard most likely to be applied?
a. Local ownership of a national restaurant franchise.
b. Automobile repair shop.
c. Physician.
d. Computer programmer.

Computer programmer

A court order has been issued to divide retirement benefits in the divorce action of Pam and Jerry. The court order has not yet been approved by the trustee of the retirement plan. The court order, at this time, is a .
a. Qualified domestic relations order.
b. Domestic relations order.
c. Decree
d. Benefit separation order

Domestic relations order

The reason tax consequences related to subsequent events (for example, exercise of options) are considered is that .
a. Receipt of these assets pursuant to a distribution of the marital estate should be avoided.
b. Inadequate consideration of tax consequences can create an inequality that may be overlooked by the court and create a hardship on a party to the divorce action.
c. The tax consequences must be disclosed to the IRS by the date the divorce is finalized.
d. The court should determine whether one or both parties have not complied with tax law.

Inadequate consideration of tax consequences can create an inequality that may be overlooked by the court and create a hardship on a party to the divorce action.

According to federal income tax laws, to be includible in the income of the recipient and deductible by the payer, alimony payments pursuant to a divorce or separation agreement executed prior to January 1, 2019, must meet all but which of the following?
a. The payments must be pursuant to a written divorce or separation agreement.
b. At the time the payments are made, the recipient and payer are not members of the same household.
c. If a requirement exists to make payments after the recipient’s death, the payments must be to a qualified individual (for example, a child of the payer).
d. The payments must be in cash or its equivalent

If a requirement exists to make payments after the recipient’s death, the payments must be to a qualified individual (for example, a child of the payer).

Brenda is married to Tom. Three years ago, Tom confided in Brenda that he had overstated certain expenses of his unincorporated business in order to lower the amount of taxes to be paid. Brenda knows that Tom has consistently done this for the last three years. Can Brenda avail herself of the innocent spouse rules contained in IRC Section 6015 for the amount owing for last year?

No

Evidentiary laws generally require injured parties to prove they suffered lost profits by what standard?

a. Certainty.

b. Reasonable certainty.

c. Beyond a reasonable doubt.

d. More likely than not.

Reasonable certainty

In U.S. federal courts, Daubert-type evidentiary rules on the admissibility of expert testimony explicitly address the expert’s .
I. Qualifications
II. Methodology
III. Application of the case facts
a. I only.
b. II only.
c. I and II.
d. II and III

d. II and III

General kinds of damages include which of the following?
a. Causal damages.
b. Liability damages.
c. Compensatory damages.
d. Mitigation damages.

Compensatory damages

Which of the following characteristics about punitive damages is FALSE?
a. Makes an injured party whole.
b. Awarded in addition to compensatory damages.
c. Could be based on a wrongdoer’s net worth.
d. Could be based on a wrongdoer’s liquidity.

Makes an injured party whole.

In case law, “profits” in the term lost profits generally means .
a. Net income.
b. Pretax income.
c. Cash flow.
d. Whatever measure is appropriate given the facts and circumstances of a particular case.

Whatever measure is appropriate given the facts and circumstances of a particular case.

When a mature injured firm has a sudden and permanent impairment of profits, the best compensatory damage measure is most likely .
a. Lost profits.
b. Diminution of value.
c. Unjust enrichment.
d. Punitive.

Diminution of value

When a mature injured firm has a temporary impairment of profits, the best compensatory damage measure is most likely .
a. Lost profits.
b. Diminution of value.
c. Unjust enrichment.
d. Extra out-of-pocket costs.

Lost profits.

Damage models using yardstick (or benchmark) methodologies might use all of the following observations EXCEPT .
a. Injured firm’s performance at another location.
b. Industry average performance.
c. Injured firm’s performance before the injury.

Injured firm’s performance before the injury.

Unjust enrichment is a damage remedy applying which general damage model?
a. Before-and-after methodologies.
b. Yardstick (or benchmark) methodologies.
c. Market share methodologies.
d. Wrongdoer’s ill-gotten profits methodologies

Wrongdoer’s ill-gotten profits methodologies

When measuring lost profits damages, avoided costs are best described as .
a. Variable costs.
b. Fixed costs.
c. Extra out-of-pocket costs.
d. Costs not incurred.

Costs not incurred

Practical constraints that may limit an injured firm’s lost profits include all of the following EXCEPT .
a. Managerial capacity.
b. Legal capacity.
c. Production capacity.
d. Financing capacity

Legal capacity

In terms of calculations of prejudgment interest and present values of lost profits, an ex post approach generally applies .
I. All lost profits—discount to the date of injury
II. Future lost profits—discount to the date of trial
III. Prejudgment interest—calculated on the present value of all lost profits as of the date of injury to the date of trial
IV. Prejudgment interest—calculated on past lost profits to the date of trial
a. I and III.
b. I and IV.
c. II and III.
d. II and IV.

II and IV

Using an ex ante approach, what is the amount of damages for the theft of a high school yearbook having Janis Joplin’s signature using the following information?
• Date of theft : January 1, 1961
• Date of thief’s trial: January 1, 1971
• Yearbook’s value as of date of theft : $5
• Yearbook’s value as of date of trial: $1,000
a. $5.
b. $5 plus prejudgment interest to date of trial.
c. $1,000.
d. Present value of $1,000 as of date of theft.

$5 (date of the theft)

Using an ex post approach, what is the amount of damages for the theft of a high school yearbook having Janis Joplin’s signature using the following information?
• Date of theft : January 1, 1961
• Date of thief’s trial: January 1, 1971
• Yearbook’s value as of date of theft : $5
• Yearbook’s value as of date of trial: $1,000
a. $5.
b. $5 plus prejudgment interest to date of trial.
c. $1,000.
d. Present value of $1,000 as of date of theft.

$1,000 (date of the trial)

The 1933 U.S. Supreme Court opinion that viewed circumstances using the “book of wisdom” is best explained as
a. Use all information up to the present time .
b. Use only information known as of the time of injury.
c. Use present lost profits discounted back to the date of injury.
d. Use past lost profits and prejudgment interest up to the present.

Use all information up to the present time

In civil litigation, mitigation is best explained as .
a. A wrongdoer has the duty to minimize harm.
b. An injured party has the burden of proving that its damages were caused by the wrongdoer.
c. A wrongdoer must have violated some law.
d. An injured party has a responsibility to act in a way that minimizes its losses to the extent it is reasonable.

An injured party has a responsibility to act in a way that minimizes its losses to the extent it is reasonable.

In most jurisdictions, which of the following factors is the most important difference between business litigation and personal injury litigation?
a. Time horizon for estimating losses.
b. Prejudgment interest.
c. Discount rate for present-value calculations.
d. Preference of ex ante versus ex post approaches.

Preference of ex ante versus ex post approaches.

Which of the following statements about damages related to personal physical injuries is FALSE?
a. Mitigation does not apply to parties with personal physical injuries.
b. Damages are not taxable.
c. Lost wages should be measured from after-tax wages, rather than gross wages.
d. Future lost wages should be discounted using a rate of return on a safe investment.

Mitigation does not apply to parties with personal physical injuries.

An asset’s value is best described as .
a. An exchange between buyers and sellers.
b. The discounted expected future cash flows.
c. The amount a person offers to pay.
d. The trade-off between risk and return.

The discounted expected future cash flows

Which of the following is NOT a general valuation model?
a. Relative value.
b. Option pricing.
c. Absolute value.
d. Restrictive value.

Restrictive value

One principle underlying the income approach is that investors .
a. Are adverse to risk.
b. Minimize their risk.
c. Seek to maximize their returns.
d. Are subject to investor sentiment.

Seek to maximize their returns

The standard discounted cash flows model includes all of the following components EXCEPT .
a. Amount of cash flows.
b. Timing of cash flows.
c. Return on assets.
d. Required return.

Return on assets

Firm capital structures consist of .
a. Debt and equity.
b. Assets and liabilities.
c. Current and noncurrent assets.
d. Current and noncurrent liabilities.

Debt and equity

All of the following items describe a firm’s cost of capital EXCEPT .
a. Risk-free rate plus equity risk premium.
b. Equal to the required return of investors.
c. Consists of costs for debt and equity capital.
d. Influenced by changes in the capital markets.

Risk free rate plus equity risk premium

Which of the following items about the equity risk premium (ERP) is FALSE?
a. The ERP in cost of capital estimates is expectational in nature.
b. A proxy for the ERP is the average historical differences between stocks and risk-free assets.
c. An ERP measurement depends on which risk-free asset is selected.
d. Risk-free assets for ERP estimates are commonly AAA-rated corporate bonds

Risk-free assets for ERP estimates are commonly AAA-rated corporate bonds

The market approach .
a. Is mathematical in nature.
b. Is observational in nature.
c. Is not forward looking.
d. Observes market returns

Is observational in nature.

Using the market approach, all of the following might be a comparable to something being priced EXCEPT .
a. Municipal bond.
b. Benchmark rates of return.
c. Tomatoes.
d. Piece of furniture.

Benchmark rates of return

In observing the prices of comparable firms having different sizes, we will likely .
a. Use only comparable firms having the same size of what we are valuing.
b. Adjust the prices by the Consumer Price Index to make the prices comparable over time.
c. Use the observed prices as is.
d. Scale the prices using some common characteristic.

Scale the prices using some common characteristic.

When valuing a privately-owned business, all of the following might be a comparable EXCEPT .
a. The S&P 500 stock portfolio.
b. Earlier sale of some of the business’s stock.
c. Stock of a publicly-registered company.
d. Business unit sold by a publicly-registered company.

The S&P 500 stock portfolio.

When valuing a privately-owned business, we might assess all of the following firm characteristics to identify comparable firms EXCEPT .
a. Total assets.
b. Market capitalization.
c. Financial ratios.
d. Industry.

Market capitalization

All of the following statements about the asset approach are generally true EXCEPT .
a. For a large operating business that is highly profitable, the asset approach is more costly than the income or market approaches on average.
b. For a successful operating business with $10 million in sales, all assets that the firm owns are likely to appear in its audited financial statements.
c. The asset approach shares general valuation models with the income and market approaches.
d. A holding company’s unrecognized taxes on capital assets that have appreciated in value may be a liability for valuation purposes.

For a successful operating business with $10 million in sales, all assets that the firm owns are likely to appear in its audited financial statements.

What is the present value of a bond paying annual interest payments of $80, having a face amount of $1,000, and five years remaining to maturity when the market interest return is 8 percent .

1,000

The Capital Asset Pricing Model specifies how many risk factors .
a. None.
b. One.
c. Two.
d. Three.

One

The beta parameter in the Capital Asset Pricing Model is best described as .
a. A measure of a market portfolio, such as the S&P 500 stock index.
b. The relationship between a risk-free asset and the market portfolio.
c. The absolute riskiness of a particular asset.
d. The sensitivity of an asset’s returns relative to the returns of a market portfolio.

The sensitivity of an asset’s returns relative to the returns of a market portfolio.

For valuation purposes, discount cash flow models discount future cash flows using the .
a. Actual return.
b. Average return.
c. Expected return.
d. Historical return.

Expected return

When an investor holds relatively few assets in their portfolio, they are exposed to all of these kinds of risks EXCEPT .
a. Gamma risk.
b. Idiosyncratic risk.
c. Market risk.
d. Unique risk.

Gamma risk

When applying absolute value models, constant growth models tend to be used when .
a. There is no need to forecast future cash flows.
b. Required returns are constant.
c. Expected cash flows are uneven.
d. A firm is in a steady state.

A firm is in a steady state

The denominator of constant growth models of r–g is known as the .
a. Capital asset pricing model.
b. Required return.
c. Capitalization rate.
d. Discount rate.

Capitalization rate

In the standard two-stage absolute value model, the numerator of the second stage is .
a. A constant growth model.
b. The discounting factor for the terminal period.
c. The present value of the terminal period.
d. A form of the capital asset pricing model.

A constant growth model