Financial Investigations & Data Analysis 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 Investigations & Data Analysis flashcards as text
What is 'link analysis' primarily used for in fraud investigations?
Answer: Identifying relationships and connections between entities, accounts, and individuals
Link analysis maps relationships between people, organizations, accounts, and transactions to uncover hidden networks involved in fraud schemes.
A company's accounts payable balance has grown 40% while revenue only grew 5%. In fraud analysis, this discrepancy most likely indicates:
Answer: Possible fictitious vendor schemes or duplicate payments
A disproportionate increase in accounts payable relative to revenue growth can signal fictitious vendor invoices or unauthorized duplicate payments.
Which of the following is an example of 'parallel simulation' in computer-assisted fraud examination?
Answer: Reprocessing actual transaction data through an independently developed program to verify results
Parallel simulation independently reprocesses actual production data through an auditor-created program and compares the output to the client's results.
In financial fraud investigations, what does 'stratification' of data accomplish?
Answer: Divides data into meaningful groups or ranges for targeted analysis
Stratification divides large datasets into subgroups (e.g., invoice amounts by range) to focus investigation on the highest-risk segments.
A bank investigator detects multiple wire transfers just below $10,000 from the same account over several days. This pattern is associated with:
Answer: Structuring (smurfing) to evade currency transaction reporting requirements
Structuring involves breaking large transactions into smaller amounts below the $10,000 CTR threshold to avoid mandatory bank reporting requirements.
Which forensic accounting method reconstructs income by analyzing bank deposits when direct evidence of income is unavailable?
Answer: Bank deposits method
The bank deposits method reconstructs taxable income by totaling all deposits and adjusting for non-income items to prove unreported income.
What is the significance of 'gap testing' in financial fraud examination?
Answer: Identifying missing sequential numbers in invoices, checks, or receipts that may indicate destroyed records
Gap testing identifies missing numbers in sequential documents like checks or invoices, which may reveal destroyed evidence or skimmed transactions.