Forensic Accounting & Fraud Flashcards
7 cards from real CFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Forensic Accounting & Fraud flashcards as text
Which financial ratio is most useful in detecting revenue overstatement through fictitious sales?
Answer: Days sales outstanding (DSO)
An abnormally low or declining DSO relative to peers may indicate fictitious sales that are never actually collected.
In a check tampering scheme, an employee intercepts and cashes a company check made out to a vendor. This is best described as:
Answer: Forged endorsement scheme
A forged endorsement scheme involves stealing a legitimately issued check and forging the payee's endorsement to divert funds.
The 'net worth method' used in fraud investigations estimates unreported income by:
Answer: Calculating the increase in net worth plus non-deductible living expenses
The net worth method computes the change in net worth during a period and adds known living expenses to estimate total income, revealing unreported amounts.
Which of the following best describes 'channel stuffing' as a form of financial statement fraud?
Answer: Shipping excess product to distributors to recognize revenue prematurely
Channel stuffing involves pushing excess inventory onto distributors near period-end to book revenue that will likely be returned, artificially inflating reported sales.
A forensic accountant discovers that a company's cost of goods sold margin has decreased significantly while revenue remained flat. This pattern most likely suggests:
Answer: Inventory theft or shrinkage
A declining gross margin with stable revenue often signals inventory shrinkage, theft, or unrecorded cost of goods sold.
Under the ACFE Fraud Tree, which category encompasses embezzlement of company funds through manipulation of payroll records?
Answer: Asset misappropriation
Payroll fraud — including ghost employees, inflated salaries, and falsified hours — falls under asset misappropriation in the ACFE Fraud Tree.
Which document is most critical when tracing the proceeds of fraud through multiple bank accounts in a money laundering investigation?
Answer: Currency Transaction Report (CTR)
CTRs are filed for cash transactions over $10,000 and create a documented trail that investigators use to follow large cash movements between accounts.