CFS Financial Transactions & Reporting 3

Question 1

Which of the following is the primary purpose of FinCEN Form 8300?

Accepted Answer

To report cash transactions over $10,000 received in a trade or business

Answer

IRS/FinCEN Form 8300 must be filed by non-bank businesses when they receive more than $10,000 in cash in a single transaction or related transactions.

Question 2

A company inflates its inventory balance by recording phantom inventory at year-end. What is the direct financial statement effect?

Accepted Answer

Understated cost of goods sold and overstated net income

Answer

Phantom inventory reduces COGS (because ending inventory is overstated), which directly inflates gross profit and net income.

Question 3

What is the primary anti-money laundering control known as 'KYC'?

Accepted Answer

Know Your Customer due diligence processes

Answer

Know Your Customer (KYC) requires financial institutions to verify client identity and assess money laundering risk before establishing a relationship.

Question 4

Which phase of money laundering involves converting illicit cash into another asset such as real estate or luxury goods?

Accepted Answer

Placement

Answer

Placement is the first stage, where illegal cash is introduced into the financial system, often through asset purchases or cash deposits.

Question 5

An auditor notices that a company's gross margin has declined while revenue has grown. Which fraud scheme is LEAST consistent with this pattern?

Accepted Answer

Channel stuffing without cost manipulation

Answer

Pure channel stuffing inflates revenue without altering costs, which would increase gross margin, not decrease it.

(CFS) Certified Fraud Specialist Practice Test

(CFS) Certified Fraud Specialist Practice Test

CFS Financial Transactions & Reporting 3