CFA Financial Audit & Forensic Trails 2

Question 1

Which audit procedure is most effective for detecting fictitious vendor schemes?

Accepted Answer

Matching vendor addresses against employee addresses

Answer

Comparing vendor mailing addresses to employee addresses is a key detective control for identifying shell companies or fictitious vendors created by insiders.

Question 2

In forensic accounting, 'Benford's Law' is primarily used to:

Accepted Answer

Detect anomalies in the frequency distribution of leading digits

Answer

Benford's Law predicts that in naturally occurring datasets, leading digits follow a specific logarithmic distribution, and deviations can signal fabricated numbers.

Question 3

A 'ghost employee' scheme is best detected by:

Accepted Answer

Cross-referencing payroll records with HR personnel files and physical verification

Answer

Comparing payroll disbursements against active HR records and physically verifying employees can uncover payments made to nonexistent workers.

Question 4

Which document is most critical when tracing a wire transfer in a forensic investigation?

Accepted Answer

SWIFT message or wire transfer confirmation

Answer

SWIFT messages provide detailed originator and beneficiary information that creates a traceable audit trail for international wire transfers.

Question 5

The 'three-way match' internal control compares which three documents?

Accepted Answer

Invoice, receiving report, and purchase order

Answer

The three-way match verifies that the purchase order, receiving report, and vendor invoice all agree before payment is authorized.

CFA Practice Test

CFA Practice Test

CFA Financial Audit & Forensic Trails 2