CFC Forensic Accounting & Fraud 4 — Questions and Answers
Question 1: Which analytical procedure would best detect fictitious employees on a payroll?
- Recalculating gross-to-net payroll
- Matching employee Social Security numbers against the Social Security Death Index (Correct answer)
- Comparing total payroll to prior year
- Reviewing W-2 forms for accuracy
Correct answer: Matching employee Social Security numbers against the Social Security Death Index
Matching SSNs against the Death Index reveals ghost employees whose identities are based on deceased individuals, a common payroll fraud technique.
Question 2: In an accounts payable fraud investigation, the auditor finds multiple vendors sharing the same P.O. Box address. This is most indicative of:
- A legitimate shared business center arrangement
- A shell company or fictitious vendor scheme (Correct answer)
- An accounts payable system configuration error
- A tax reporting consolidation practice
Correct answer: A shell company or fictitious vendor scheme
Multiple vendors sharing a P.O. Box is a classic red flag for shell companies created by insiders to submit fictitious invoices and divert company funds.
Question 3: The 'three-way match' internal control in accounts payable compares which three documents?
- Invoice, bank statement, and general ledger entry
- Purchase order, receiving report, and vendor invoice (Correct answer)
- Check request, approval form, and cancelled check
- Vendor contract, payment history, and credit report
Correct answer: Purchase order, receiving report, and vendor invoice
Three-way matching verifies that the purchase order, receiving report, and vendor invoice all agree before approving payment, detecting unauthorized purchases.
Question 4: Which phase of the money laundering process involves disguising the source of illicit funds by moving them through complex transactions?
- Placement
- Layering (Correct answer)
- Integration
- Structuring
Correct answer: Layering
Layering involves creating a complex trail of financial transactions to obscure the audit trail and distance the funds from their illegal origin.
Question 5: A forensic accountant reviewing a company's journal entries notices numerous round-number manual entries posted just below the approval threshold late on Friday afternoons. This pattern suggests:
- Normal end-of-week accounting close procedures
- An automated accrual system generating round amounts
- Structuring to avoid management review controls (Correct answer)
- Routine adjustments for immaterial differences
Correct answer: Structuring to avoid management review controls
Entries consistently just below authorization thresholds on low-oversight days suggest deliberate structuring to circumvent management approval controls.
Question 6: Under the Foreign Corrupt Practices Act (FCPA), which of the following payments to a foreign official is explicitly permitted?
- Payments to secure a government contract
- Facilitating payments to expedite routine government actions (Correct answer)
- Gifts intended to influence business decisions
- Payments disguised as consulting fees
Correct answer: Facilitating payments to expedite routine government actions
The FCPA contains a narrow exception for facilitating payments (grease payments) made to expedite routine, non-discretionary government actions such as customs clearance.
Question 7: Which element distinguishes embezzlement from ordinary theft under the law?
- The amount of money involved
- The perpetrator's lawful possession of property before converting it (Correct answer)
- Whether the act was premeditated
- The use of deception to obtain the property
Correct answer: The perpetrator's lawful possession of property before converting it
Embezzlement requires that the perpetrator initially had lawful possession or custody of the property before converting it to personal use, unlike theft where possession is never authorized.
CFC Forensic Accounting & Fraud 4
Which analytical procedure would best detect fictitious employees on a payroll?