ADA Fraud Detection Analytics

Question 1

What is Benford's Law primarily used for in fraud detection analytics?

Accepted Answer

To identify unusual digit frequency distributions in numerical data

Answer

To test the statistical significance of audit samples

Answer

To calculate the expected error rate in financial statements

Answer

To measure the correlation between financial ratios

Question 2

Which statistical technique is most effective for identifying transactions that fall outside normal patterns and may indicate fraud?

Accepted Answer

Outlier detection

Answer

Regression analysis

Answer

Chi-square testing

Answer

Stratification

Question 3

What does a 'ghost employee' scheme in payroll fraud typically involve?

Accepted Answer

Payroll payments made to fictitious or terminated employees

Answer

Employees clocking in for absent coworkers

Answer

Employees receiving unauthorized overtime pay

Answer

Managers approving their own expense reports

Question 4

Which analytical technique compares actual financial results against established expectations to identify potential fraud indicators?

Accepted Answer

Expectation-based analysis

Answer

Horizontal analysis

Answer

Variance analysis

Answer

Ratio analysis

Question 5

In fraud detection analytics, what does 'transaction velocity' testing examine?

Accepted Answer

The frequency and volume of transactions within a given time period

Answer

The speed at which financial reports are produced

Answer

How quickly auditors can process large data sets

Answer

The rate of change in account balances quarter-over-quarter

Question 6

Which type of financial statement fraud involves recording revenues before the earnings process is complete?

Accepted Answer

Premature revenue recognition

Answer

Round-tripping

Answer

Accounts payable manipulation

Answer

Inventory write-down fraud

Question 7

What is the primary purpose of duplicate payment analysis in accounts payable fraud detection?

Accepted Answer

To detect instances where the same invoice or payment was processed more than once

Answer

To identify payments made to unauthorized vendors

Answer

To verify that payment amounts match original purchase orders

Answer

To confirm that vendor banking details are current and accurate