CFA Fraud Detection & Prevention Techniques 2

Question 1

Which data analytics technique is most effective for detecting duplicate payments in accounts payable?

Accepted Answer

Duplicate transaction testing

Answer

Duplicate transaction testing directly compares payment records for matching vendor, amount, and date fields to identify fraudulent double payments.

Question 2

A fraud examiner notices that a company's financial data does not conform to Benford's Law. What does this most likely indicate?

Accepted Answer

Possible manipulation or fabrication of financial data

Answer

Significant deviation from Benford's Law distribution suggests numbers may have been artificially created or manipulated rather than occurring naturally.

Question 3

Which internal control is the PRIMARY preventive measure against payroll fraud involving ghost employees?

Accepted Answer

Segregation of payroll processing and HR duties

Answer

Segregating HR functions (hiring/termination) from payroll processing prevents one person from both creating fictitious employees and issuing payments to them.

Question 4

During a fraud investigation, an examiner discovers unusually high sales returns just after quarter-end. This pattern most likely suggests:

Accepted Answer

Channel stuffing or premature revenue recognition

Answer

High post-period returns are a red flag for channel stuffing, where revenue is prematurely recognized by shipping product that customers later return.

Question 5

What is the purpose of a 'surprise audit' as a fraud prevention technique?

Accepted Answer

To deter fraud by creating uncertainty about when scrutiny will occur

Answer

Surprise audits deter fraud because employees cannot conceal or temporarily reverse fraudulent transactions before the audit begins.

CFA Practice Test

CFA Practice Test

CFA Fraud Detection & Prevention Techniques 2