Questions and Answers
What type of fraud involves the theft of funds or assets by an individual or group of individuals?
What type of fraud occurs when an individual or group of individuals create a new account in someone else's name?
What type of fraud involves the use of stolen or fake identification to obtain loans or credit?
What type of fraud involves the theft of funds or assets through fraudulent means, such as forged checks or documents?
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What is a common red flag associated with fictitious revenues?
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What is a technique used to detect cash larceny?
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What is a type of fraud scheme that involves concealing liabilities and expenses?
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What is a qualitative characteristic of useful financial information?
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What is a type of asset misappropriation?
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What is a technique used to prevent cash larceny?
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What is a type of financial statement fraud?
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What is a step in the fraud examination methodology?
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What is a type of ratio analysis used in financial statement analysis?
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What is a technique used in forensic accounting?
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What is a key component of fraud investigation planning?
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Which skill is most critical for testifying as an expert witness in fraud cases?
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What is a characteristic of fraud examination methodology?
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In forensic accounting, which of the following is a primary objective?
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What is a common technique used for fraud detection?
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Which type of fraud is commonly associated with vulnerabilities in electronic claims?
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What distinguishes consumer fraud schemes from business-related fraud?
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Which characteristic is NOT typically associated with cyberfraud?
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Study Notes
Accounting Concepts
- Accounting basics: accounts and the accounting cycle, journal entries, accounting methods (cash-basis and accrual-basis)
- Financial statements: balance sheet, income statement, statement of changes in owners' equity, and statement of cash flows
- Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS)
- Key characteristics of useful financial information: qualitative characteristics, recognition, measurement, and materiality
Financial Statement Fraud
- Definition: fraudulent activities that alter financial statements to deceive stakeholders
- Cost: significant financial losses and damage to reputation
- Why committed: pressures to meet expectations, opportunities, and rationalization
- Trends: fictitious revenues, timing differences, improper asset valuation, concealed liabilities and expenses, and improper disclosures
- Schemes:
- Fictitious revenues: false sales, channel stuffing, and premature revenue recognition
- Timing differences: improper revenue recognition, and recording expenses in the wrong period
- Improper asset valuation: inventory valuation, accounts receivable, business combinations, and fixed assets
- Concealed liabilities and expenses: liability/expense omissions, improperly capitalized costs, and unrecorded warranty costs
- Improper disclosures: contingent liabilities, subsequent events, management fraud, related-party transactions, and accounting changes
Detection of Financial Statement Fraud
- Red flags: unusual transactions, inconsistencies, and anomalies in financial statements
- Financial statement analysis: vertical, horizontal, and ratio analysis
- Tax return review: review of tax returns to identify inconsistencies
- Interviews: techniques for interviewing individuals involved in fraudulent activities
- Prevention: strengthening internal controls, reducing situational pressures, and promoting ethical behavior
Asset Misappropriation: Cash Receipts
- Skimming: theft of cash receipts, often through manipulation of sales records or cash handling procedures
- Cash larceny: theft of cash from the register or deposits
- Detection: receipt-level detection, journal entry review, and analytical review
- Prevention: separation of duties, assignment rotation, surprise cash counts, and physical security of cash### Financial Institutions Fraud
- Embezzlement schemes involve stealing of money or assets by an individual who has access to them
- Loan fraud occurs when an individual or entity misrepresents information to obtain a loan
- Real estate fraud involves illegal activities such as property flipping and mortgage fraud
- New account fraud schemes involve the creation of new accounts with false information
- Money transfer (wire) fraud schemes involve the theft of money through fraudulent wire transfers
- Automated teller machine (ATM) fraud involves the use of stolen card information to withdraw money
- Account takeover involves gaining unauthorized access to an individual's account information
- Advance-fee fraud involves charging individuals for services that are not provided
Healthcare Fraud
- Agent fraud occurs when an agent misrepresents information to obtain benefits
- Electronic claims fraud involves the submission of false claims electronically
- Healthcare compliance programs aim to prevent fraud and ensure compliance with regulations
Consumer Fraud
- Consumer fraud schemes involve deceptive business practices that result in financial losses
- Elder fraud targets elderly individuals, often through telemarketing or email scams
- Telemarketing fraud involves fraudulent activities conducted over the phone
- Ponzi and pyramid schemes are investment scams that promise high returns with little risk
Cyberfraud
- Cyberfraud involves the use of technology to commit fraudulent activities
- Recognizing computer intrusion is crucial to preventing cyberfraud
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Description
Fraud Examiners Manual is a comprehensive guide for fraud examiners. This 2022 edition provides expert knowledge on fraud examination.
