Financial Audit & Forensic Trails Flashcards
7 cards from real CFA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Audit & Forensic Trails flashcards as text
Which audit procedure is most effective for detecting fictitious vendor schemes?
Answer: Matching vendor addresses against employee addresses
Comparing vendor mailing addresses to employee addresses is a key detective control for identifying shell companies or fictitious vendors created by insiders.
In forensic accounting, 'Benford's Law' is primarily used to:
Answer: Detect anomalies in the frequency distribution of leading digits
Benford's Law predicts that in naturally occurring datasets, leading digits follow a specific logarithmic distribution, and deviations can signal fabricated numbers.
A 'ghost employee' scheme is best detected by:
Answer: Cross-referencing payroll records with HR personnel files and physical verification
Comparing payroll disbursements against active HR records and physically verifying employees can uncover payments made to nonexistent workers.
Which document is most critical when tracing a wire transfer in a forensic investigation?
Answer: SWIFT message or wire transfer confirmation
SWIFT messages provide detailed originator and beneficiary information that creates a traceable audit trail for international wire transfers.
The 'three-way match' internal control compares which three documents?
Answer: Invoice, receiving report, and purchase order
The three-way match verifies that the purchase order, receiving report, and vendor invoice all agree before payment is authorized.
When an auditor identifies a journal entry posted late at night by a single employee to a round-dollar suspense account, this most likely indicates:
Answer: A potential fraudulent entry requiring further investigation
Unusual journal entry characteristics—odd timing, single preparer, round amounts, and vague accounts—are red flags for potential fraud.
In a forensic audit of financial statements, 'horizontal analysis' refers to:
Answer: Comparing financial data across multiple periods to identify unusual trends
Horizontal analysis examines changes in financial statement items over time, helping forensic accountants spot irregular fluctuations that may indicate manipulation.