CFA Financial Investigations & Data Analysis 3

Question 1

What is 'link analysis' primarily used for in fraud investigations?

Accepted Answer

Identifying relationships and connections between entities, accounts, and individuals

Answer

Link analysis maps relationships between people, organizations, accounts, and transactions to uncover hidden networks involved in fraud schemes.

Question 2

A company's accounts payable balance has grown 40% while revenue only grew 5%. In fraud analysis, this discrepancy most likely indicates:

Accepted Answer

Possible fictitious vendor schemes or duplicate payments

Answer

A disproportionate increase in accounts payable relative to revenue growth can signal fictitious vendor invoices or unauthorized duplicate payments.

Question 3

Which of the following is an example of 'parallel simulation' in computer-assisted fraud examination?

Accepted Answer

Reprocessing actual transaction data through an independently developed program to verify results

Answer

Parallel simulation independently reprocesses actual production data through an auditor-created program and compares the output to the client's results.

Question 4

In financial fraud investigations, what does 'stratification' of data accomplish?

Accepted Answer

Divides data into meaningful groups or ranges for targeted analysis

Answer

Stratification divides large datasets into subgroups (e.g., invoice amounts by range) to focus investigation on the highest-risk segments.

Question 5

A bank investigator detects multiple wire transfers just below $10,000 from the same account over several days. This pattern is associated with:

Accepted Answer

Structuring (smurfing) to evade currency transaction reporting requirements

Answer

Structuring involves breaking large transactions into smaller amounts below the $10,000 CTR threshold to avoid mandatory bank reporting requirements.

CFA Practice Test

CFA Practice Test

CFA Financial Investigations & Data Analysis 3