CFE Forensic Accounting & Financial Fraud Investigation 2

Question 1

Which scheme involves an employee creating fictitious vendors or ghost employees to divert company funds?

Accepted Answer

Disbursement fraud via fictitious payees

Answer

Fictitious payee schemes involve setting up fake vendors or employees in company systems so that fraudulent payments are issued and diverted to the perpetrator.

Question 2

What is 'check kiting' in the context of financial fraud?

Accepted Answer

Exploiting the float between banks by depositing checks before they clear to create artificial balances

Answer

Check kiting exploits the delay in check clearing by moving funds between accounts at different banks to create an artificial positive balance that enables fraudulent withdrawals.

Question 3

In forensic accounting, what does the 'expenditure approach' to estimating unreported income involve?

Accepted Answer

Calculating income by totaling known personal expenditures and comparing to reported income

Answer

The expenditure approach estimates unreported income by adding up a subject's known spending; spending that exceeds reported income suggests hidden income sources.

Question 4

Which accounting principle requires that revenue be recognized when it is earned and realizable, regardless of when cash is received?

Accepted Answer

Accrual basis accounting

Answer

Accrual basis accounting requires that revenue be recorded when earned and expenses when incurred, making it the standard most susceptible to timing-based financial statement fraud.

Question 5

When investigating embezzlement, which analytical procedure involves comparing current-period financial data to prior periods to identify unusual fluctuations?

Accepted Answer

Horizontal analysis

Answer

Horizontal analysis compares financial data across multiple time periods, making it effective for identifying anomalies or trends that may indicate fraudulent manipulation.

(CFE) Certified Forensic Examiner Practice Test

(CFE) Certified Forensic Examiner Practice Test

CFE Forensic Accounting & Financial Fraud Investigation 2