Mixed Deck — All CRFA Topics Flashcards

Which deposition tactic by opposing counsel is the forensic accountant most likely to face when counsel tries to show bias?

Answer: Asking about the share of the expert's income that comes from testifying for one side

Questions about how much of an expert's income comes from litigation, and for which side, are a common way to suggest bias.

Under Chapter 8 of the U.S. Sentencing Guidelines, how can an effective compliance and ethics program affect an organization convicted of a federal offense?

Answer: It can reduce the organization's culpability score and resulting fine

An effective compliance and ethics program can lower the culpability score, reducing the fine range.

When forensic accountants calculate damages in a breach of contract case, they typically measure:

Answer: Expectation damages that place the plaintiff in the position they would have occupied had the contract been performed

Expectation damages aim to give the non-breaching party the economic benefit of their bargain by recreating the financial position they would have achieved.

What regulatory compliance requirement applies to estate planning?

Answer: Full compliance with all applicable federal, state, and industry regulations

Full regulatory compliance is mandatory regardless of practice size, ensuring market integrity and client protection.

During e-discovery in a forensic accounting investigation, metadata is important because it can reveal:

Answer: When a document was created, modified, or accessed

File metadata such as creation date, last modified date, and author information can help establish timelines and detect document tampering.

How should conflicts of interest be managed in investment analysis?

Answer: Identify, disclose, and mitigate all actual and potential conflicts of interest

All actual and potential conflicts of interest must be identified, disclosed to clients, and mitigated to maintain trust and compliance.

Which valuation multiple is most useful when comparing companies with different capital structures in a forensic business valuation?

Answer: Enterprise value-to-EBITDA (EV/EBITDA)

EV/EBITDA eliminates the effects of leverage and non-cash charges, making it a capital-structure-neutral multiple suitable for comparing businesses with varying debt levels.

A residual fraud risk is best defined as the risk that:

Answer: Remains after considering the effectiveness of anti-fraud controls

Residual risk is the inherent risk that remains after controls are applied.

A bank detects suspicious activity and has identified a suspect. Within what period must it generally file a Suspicious Activity Report (SAR)?

Answer: 30 calendar days of initial detection

SARs are due within 30 calendar days of initial detection, extendable to 60 days only when no suspect has been identified.

How should conflicts of interest be managed in regulatory compliance?

Answer: Identify, disclose, and mitigate all actual and potential conflicts of interest

All actual and potential conflicts of interest must be identified, disclosed to clients, and mitigated to maintain trust and compliance.

When normalizing earnings in a business valuation, a forensic accountant would most likely adjust for:

Answer: Above-market compensation paid to owner-employees

Owner-officer compensation that exceeds what an arm's-length replacement would require is added back and replaced with market-rate compensation to reflect true economic earnings.

A party fails to disclose a testifying expert's information as required by Rule 26(a). What is the default sanction under FRCP 37(c)(1)?

Answer: The party may not use that information or witness unless the failure was substantially justified or harmless

Rule 37(c)(1) bars use of undisclosed information or witnesses unless the failure was substantially justified or harmless.

How should client relations performance be reported to clients?

Answer: Provide accurate, complete, and timely performance reporting with appropriate benchmarks

Accurate, complete, and timely reporting with appropriate benchmarks enables informed decision-making by clients.

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.

In a commercial damages case, the mitigation doctrine requires that the plaintiff:

Answer: Take reasonable steps to reduce losses caused by the defendant's wrongful act

Plaintiffs have a legal duty to make reasonable efforts to minimize their damages; failure to mitigate can reduce the recoverable amount.

The IRS Whistleblower Program under Section 7623(b) generally awards what share of collected proceeds?

Answer: 15% to 30%

Qualifying whistleblowers may receive 15% to 30% of collected proceeds in cases exceeding the statutory thresholds.

What fiduciary duty applies to regulatory compliance?

Answer: Act in the client's best interest with loyalty, care, and full disclosure

Fiduciary duty requires acting in the client's best interest with loyalty, care, and full disclosure of all material facts.

What is inherent risk in internal control assessments?

Answer: Risk of having outdated software

Inherent risk refers to the susceptibility of an assertion or an account balance to a material misstatement, assuming there are no related internal controls. The risk of having outdated software is an example of inherent risk because it exists independently of any specific controls. Outdated software can lead to vulnerabilities, errors, or inefficiencies that could result in financial misstatements or data breaches if not addressed.

Since the 2010 amendments to the Federal Rules of Civil Procedure, which of the following is generally protected from discovery as work product?

Answer: Draft versions of the testifying expert's report

FRCP 26(b)(4)(B) protects drafts of expert reports, while facts considered and compensation remain discoverable.

A car dealer receives $12,500 in cash from a single buyer. Which filing obligation applies?

Answer: IRS/FinCEN Form 8300 within 15 days

Non-financial trades or businesses receiving more than $10,000 in cash must file Form 8300 within 15 days.