CA Forensic Accounting & Fraud Detection Flashcards

What is 'check kiting'?

Answer: Exploiting the float time between banks by writing checks against insufficient funds

Check kiting exploits the time lag between when a check is deposited and when it clears, creating artificially inflated balances across multiple bank accounts.

In forensic accounting, 'asset misappropriation' is best described as:

Answer: The theft or misuse of an organization's assets by insiders

Asset misappropriation is the most common category of occupational fraud and involves employees stealing or misusing the company's resources for personal gain.

Which red flag most strongly indicates potential payroll fraud?

Answer: Multiple employees sharing the same bank account for direct deposit

Multiple employees sharing the same direct deposit bank account number is a strong indicator of ghost employee or payroll diversion schemes.

What is the purpose of a 'net worth analysis' in a fraud investigation?

Answer: To determine if a suspect's lifestyle and assets exceed their known legitimate income

Net worth analysis compares a suspect's assets and expenditures to their declared income to identify unexplained wealth that may represent fraud proceeds.

Which legislation established whistleblower protections for employees who report corporate fraud and securities violations?

Answer: Both the Sarbanes-Oxley Act and the Dodd-Frank Act

Both the Sarbanes-Oxley Act (2002) and the Dodd-Frank Act (2010) contain whistleblower protection provisions covering corporate fraud and securities law violations.

Which forensic technique examines hidden metadata within digital documents to verify their authenticity and detect tampering?

Answer: Digital forensics

Digital forensics involves the recovery and investigation of electronic data, including metadata that records when, where, and how a document was created or modified.