CFC Forensic Accounting & Fraud 5

Question 1

Benford's Law is most effectively applied in fraud detection to analyze:

Accepted Answer

The frequency distribution of first digits in naturally occurring datasets

Answer

Benford's Law predicts that in many naturally occurring datasets, smaller digits appear as the first digit more frequently, and deviations from this pattern can signal manipulation.

Question 2

A company's CEO directs the CFO to record revenue from a contract that has not yet been signed by the customer. This best illustrates which fraud theory element?

Accepted Answer

Pressure combined with opportunity

Answer

The CEO's pressure to record revenue creates the incentive element, while the CFO's access to the accounting system provides the opportunity in the Fraud Triangle.

Question 3

In a financial statement fraud case, the auditor's discovery of unusually large adjustments in the final days of the fiscal year is best described as:

Accepted Answer

Top-side journal entry manipulation

Answer

Top-side journal entries — large, often manual adjustments posted at period-end — are a common mechanism for manipulating reported financial results.

Question 4

Which document retention rule under the Sarbanes-Oxley Act is directly relevant to forensic accountants preserving evidence?

Accepted Answer

Section 802 — criminal penalties for altering documents

Answer

SOX Section 802 makes it a federal crime to alter, destroy, or falsify documents with intent to obstruct an investigation, directly impacting evidence preservation duties.

Question 5

A forensic accountant calculates that a company's accounts receivable increased by $5M while revenue grew only $500K. The most likely explanation consistent with fraud is:

Accepted Answer

Revenue was recorded but cash was never collected, suggesting fictitious sales

Answer

When receivables grow dramatically faster than revenue, it suggests fictitious sales are being booked with no real customer obligation to pay.

(CFC) Certified Forensic Consultant Practice Test

(CFC) Certified Forensic Consultant Practice Test

CFC Forensic Accounting & Fraud 5