CIA CIA Fraud Detection & Prevention 2

Question 1

Which financial statement manipulation technique involves recording revenue before it is earned?

Accepted Answer

Channel stuffing and premature revenue recognition

Answer

Channel stuffing involves pressuring distributors to accept excess inventory to record revenue prematurely before it is truly earned.

Question 2

Benford's Law is used in fraud detection to analyze:

Accepted Answer

The expected frequency distribution of leading digits in naturally occurring numbers

Answer

Benford's Law predicts the frequency of leading digits in datasets; deviations from this distribution can indicate manipulated or fabricated numbers.

Question 3

A 'fictitious vendor' scheme is best detected by:

Accepted Answer

Matching vendor addresses and bank accounts against employee records

Answer

Comparing vendor addresses, tax IDs, and bank accounts to employee data can reveal fictitious vendors set up by employees to divert company funds.

Question 4

Which of the following best describes 'tone at the top' in the context of fraud prevention?

Accepted Answer

The ethical culture and values modeled by senior leadership and the board

Answer

Tone at the top refers to the ethical environment established by leadership; a strong ethical culture is the most powerful deterrent to fraud.

Question 5

In a 'bill and hold' fraud scheme, a company records revenue for goods that:

Accepted Answer

Have been invoiced but not yet shipped or delivered to the customer

Answer

A bill and hold scheme records revenue when a sale is invoiced but the goods remain physically held at the seller's warehouse, violating revenue recognition standards.

CIA - Certified Internal Accountant Practice Test

CIA - Certified Internal Accountant Practice Test

CIA CIA Fraud Detection & Prevention 2