Fraud Examination & Financial Investigations? Flashcards

Which indirect method of proving income compares a subject's assets, liabilities, and living expenses at the start and end of a period?

Answer: Net worth method

The net worth method estimates unreported income from the increase in net worth plus living expenses, minus known income.

In the fraud triangle, which element is the one the organization can most directly reduce?

Answer: Opportunity

Internal controls mainly reduce the opportunity to commit fraud and hide it.

An employee writes off a customer's account as uncollectible and keeps the customer's later payment. This scheme is best classified as:

Answer: Skimming concealed through a false write-off

The employee takes receivables payments before they are recorded and hides the theft by writing off the account.

During a fraud examination, which interview is generally conducted LAST?

Answer: The primary suspect

Examiners usually interview the suspect last, once enough evidence has been gathered to put to them.

An admission-seeking interview should normally begin with:

Answer: A direct accusation stated with confidence

Admission-seeking interviews open with a direct accusation, which signals that the examiner is confident.

Under Benford's Law, roughly what share of naturally occurring numbers would be expected to have a leading digit of 1?

Answer: 30.1%

Benford's Law predicts that about 30.1% of naturally occurring numbers begin with the digit 1.

A shell company scheme is MOST likely to be detected by:

Answer: Comparing vendor master file addresses with employee addresses

Matching vendor addresses, bank accounts, or tax IDs against employee records often uncovers fictitious vendors set up by insiders.