CFA CFA Asset Misappropriation & Embezzlement 2 — Questions and Answers
Question 1: Which analytical technique is most useful for identifying duplicate vendor payments in a large accounts payable dataset?
- Regression analysis
- Data matching and duplicate detection using ACL or IDEA (Correct answer)
- Benford's Law analysis
- Trend analysis
Correct answer: Data matching and duplicate detection using ACL or IDEA
Data matching tools like ACL or IDEA can flag duplicate invoice numbers, amounts, or vendor details across thousands of transactions quickly.
Question 2: An employee who approves vendor invoices AND receives goods creates which type of internal control weakness?
- Lack of physical security
- Inadequate audit trail
- Failure of segregation of duties (Correct answer)
- Insufficient background checks
Correct answer: Failure of segregation of duties
Segregation of duties requires that authorization, custody, and recordkeeping functions be assigned to different individuals to prevent single-person fraud.
Question 3: Benford's Law is most useful in fraud investigations for:
- Identifying forged signatures on checks
- Detecting fabricated or manipulated numbers in financial data (Correct answer)
- Verifying employee identity documents
- Analyzing interview statements for deception
Correct answer: Detecting fabricated or manipulated numbers in financial data
Benford's Law predicts the natural frequency distribution of leading digits in large datasets, and deviations can indicate manipulated or invented figures.
Question 4: A purchasing agent who approves invoices from a company secretly owned by their spouse is committing:
- Asset misappropriation
- Financial statement fraud
- A conflict of interest corruption scheme (Correct answer)
- Check kiting
Correct answer: A conflict of interest corruption scheme
A conflict of interest exists when an employee has an undisclosed personal financial interest in a vendor and uses their position to benefit that vendor.
Question 5: Which document is a fraud examiner most likely to review first when investigating suspected inventory theft?
- Employee benefit records
- Inventory count sheets and shrinkage reports (Correct answer)
- Customer complaint logs
- Marketing expenditure reports
Correct answer: Inventory count sheets and shrinkage reports
Inventory count sheets and shrinkage reports reveal discrepancies between recorded stock and physical quantities, which is the primary indicator of inventory theft.
Question 6: The ACFE's Fraud Tree classifies asset misappropriation schemes into which two main branches?
- Cash schemes and non-cash schemes (Correct answer)
- Skimming and lapping
- Theft and embezzlement
- Internal fraud and external fraud
Correct answer: Cash schemes and non-cash schemes
The ACFE Fraud Tree divides asset misappropriation into cash schemes (skimming, larceny, fraudulent disbursements) and non-cash schemes (misuse and larceny of assets).
CFA CFA Asset Misappropriation & Embezzlement 2
Which analytical technique is most useful for identifying duplicate vendor payments in a large accounts payable dataset?