Ch16 Remediation and Litigation Advisory Complete Test Bank

CHAPTER 16

1. James (Jimmy) J. Vaughn is a Certified Public Accountant who worked as a forensic auditor with the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) for 32 years. He retired as the Deputy Division Chief of the Financial Investigative Services Division, responsible for all ATF financial investigations on the east coast of the United States. In the text, Jimmy offered the following key points of advice for those testifying in a court of law. These included: Be alert as to how you answer questions about your qualifications posed by the opposition while qualifying as an expert witness, offer fact-based testimony, be prepared, be objective, be truthful, avoid technical jargon, be aware of your body language, and __________________________.

A. Be unequivocal in opining as to the guilt or innocence of the defendant

B. Give only yes or no answers during cross-examination by opposing counsel

C. Know the law (i.e., the provisions applicable to the case)

D. Maintain your composure

2. ____________ is characterized as the steps necessary to “clean up the mess” after a fraud, financial crime, or civil dispute has been discovered, examined, and the examination results have been prepared.

A. Remediation

B. Predication

C. Mitigation

D. Propitiation

3. Antifraud and forensic accounting professionals would like ______________ to be a resource that the client can use to obtain the largest recovery allowed by the evidence and the law.

A. Employee dishonesty insurance coverage

B. Their work product

C. The U.S. Justice System

D. The convicted party

4. Money stolen, other assets stolen, value lost interest, fines and penalties, and punitive damages are listed in the text as examples of:

A. Types of monetary values that can be converted to Bitcoin

B. Types of monetary losses attributable to white collar crimes

C. Types of monetary remuneration that may be available to victims and plaintiffs

D. Types of monetary losses that have to be investigated before a case goes to trial

5. Normally some of the issues to consider when attempting to recover assets include the following: (1) Amounts stolen and amounts that may be recovered, (2) the prospect of winning the case, (3) the value of the assets held by the defendant and whether they are sufficient, and (4) ______________________________________________.

A. Specificity, whereby the investigator can track the exact assets in question from the plaintiff to the defendant

B. The difficulties associated with trying to recover assets under many foreign jurisdictions

C. The cost of converting assets back into cash (e.g., selling stolen real estate or auctioning stolen art)

D. The legal costs involved in pursuing the financial claim and subsequent collection

6. The first step to successfully recover money and other assets is to ______________.

A. Identify them during the examination process

B. Petition a federal court to issue a 45-day freeze on the account where the funds are residing immediately upon successfully locating it

C. Work with counsel to submit a Section 803 filing for the plaintiff

D. File for disgorgement under Sarbanes-Oxley § 304

7. To prove fraud, the investigator needs to provide evidence that _________________ in the act, the concealment, and the conversion.

A. The perpetrator was involved

B. Intent was clearly demonstrated

C. Predication exists

D. Specific laws were violated

8. Generally, in order to be in a position to recover money from a civil suit, the injured party must prove two points: (1) Liability: the defendant was responsible for all or part of the damages claimed, and (2) ________________________________________.

A. Misconduct: the actions leading to the loss by the claimant were the result of someone acting outside the scope of their agency

B. Intent: the defendant could reasonably foresee that his or her actions, or lack thereof, were likely to result in damages to the plaintiff

C. Losses or damages: the claimant suffered damages as a result of the actions or inactions of the offending party

D. Reasonable certainty: the amount of damages claimed are reasonable (to a jury)

9. The types of losses available for recovery in a civil suit include (a) compensatory damages and restitution of losses such as value, cash, and other assets; (b) economic losses (e.g., wages, incremental expenses, or profits); (c) reliance, intended to restore the claimants back to where they would have been but for the action of the defendant; and (d) ___________________________________.

A. Legal costs, to pursue the financial claim and subsequent collection

B. Punitive damages, to punish the defendant

C. Intangible asset losses, for example, losses to an organization’s goodwill value

D. Pain and suffering losses, arising from the victimization of the claimant by the perpetrator’s actions (or inactions)

10. In a civil framework, the plaintiff must demonstrate three attributes: (1) That the defendant was the proximate cause of any damages, meaning that the plaintiff caused or contributed to the lost amounts as a direct result of the conduct at issue, (2) __________________________, and (3) that the defendant could reasonably foresee that his or her actions, or lack thereof, were likely to result in damages to the plaintiff.

A. Intent was clearly demonstrated by the concealment phase of the fraud

B. Conversion resulted in assets that can be located and returned or liquidated

C. Specificity, whereby the investigator can track the exact assets in question from the plaintiff to the defendant

D. Reasonable certainty as to the amounts (damages) claimed

11. ____________ the money assumes an ability to directly track funds from the victim to the alleged perpetrator and involves specificity, whereby the investigator can track the exact assets in question from the plaintiff to the defendant.

A. Recovering

B. Following

C. Tracing

D. Locating

12. In contrast to __________ the money, _________ is a process of identifying both its present location and its current form of value relevant to the claim brought by the plaintiff.

A. Following; tracing

B. Tracing; following

C. Tracking; tracing

D. Following; tracking

13. In theory, complex financial crimes, fraud, organized crime, drug trafficking, money laundering, and terrorism financing can be ____________ by _____________ the money.

A. Investigated; tracing

B. Remediated; following

C. Prosecuted; following

D. Prevented; safeguarding

14. A _________________ that “money” is no longer cash and coin; it can be anything of value that can be traded, transferred, or sold, such as cash, coin, certificates of deposit, stocks, bonds, money orders, cashier’s checks, cyber currencies, airline tickets, gift certificates, gift cards, prepaid credit and debit cards, diamonds, jewels, minerals, mineral rights, or deeds.

A. Fraud perpetrator understands better than most

B. Complicating factor is

C. Valuable commodity in the global economy is

D. Consumer benefit of 21st century technology is

15. Once illegal money has been combined with money from legitimate sources, one can no longer _________ the money; the money must be __________.

A. Recover; returned legally through the judicial system

B. Investigate the source of; written off as a loss in most cases

C. Follow; traced

D. Hide; taxed

16. One of the issues related to tracing money involves assets that _____________. Generally, the courts have held that the perpetrator was acting to make an investment on behalf of the victims or plaintiff and any increases accrue to the victim or plaintiff; however, that may not always be the case in every jurisdiction.

A. Have been converted in back into cash and moved offshore

B. Are concealed in shell companies where the beneficial owner cannot be determined

C. Have have depreciated or have little to no residual value

D. Have increased in worth

17. Freezing orders, restraining orders, and _______________ are used early in a legal action to secure funds so that they do not disappear prior to obtaining a favorable verdict or negotiated settlement.

A. Ex parte orders

B. Lockout orders

C. Search warrants

D. Judicial injunctions

18. Preferably, freezing orders are obtained ex parte so that _____________________.

A. They can surprise the defendant and prevent assets from disappearing before the resolution of the case

B. The claimant’s team can immediately confiscate cash, assets, or property

C. The judge has time to consider all the facts supporting the claim

D. The claimant is caught off-guard

19. A ____________ is a formal and final decision made by a court of law.

A. Judicial injunction

B. Petition

C. Freeze order

D. Judgment

20. When a defendant does not pay amounts owed to victims and plaintiffs as outlined in a ____________, the claimant may return to court to obtain various types of orders for the seizure and sale of specific property, usually at auction. In some jurisdictions, these court orders are referred to as confiscation orders, and in others they are called compensation orders or ______________.

A. Judicial injunction; freeze orders

B. Freeze order; judicial injunctions

C. Judgment; forfeiture orders

D. Petition; damage awards

21. ___________________ is similar to a garnishment and requires that the defendant’s debtors pay the claimant (the victim or plaintiff) instead of remitting the money to the defendant.

A. An ex parte order

B. A third-party debt order

C. A claimant judicial bypass order

D. A judicial assignment

22. Providing consultations, periodic communication of findings and investigative issues, wiring reports, attendance at opposing party depositions, being deposed, testifying in hearings, being present during settlement negotiations, and testifying in court are all examples in the text of:

A. Supporting the plaintiff or prosecuting attorney through the second major area of the remediation process

B. Common activities of fraud examiners and forensic accountants while building a case against a target

C. Costly support activities that the investigator should avoid when possible

D. Strategies used by opposing counsel with the intent of disqualifying the fraud examiner from becoming an expert witness in a case

23. No matter what the engagement, the professional should remember that he or she __________________________.

A. Must maintain their independence from counsel

B. Is not an advocate for any side

C. Will be expected to express an opinion of guilt or innocence grounded in the evidence

D. May only charge what the market will bear for their services

24. Generally, ____________ must testify to firsthand facts and knowledge. They are not permitted to offer opinions unless those views are based on specialized knowledge required as part of their normal responsibilities.

A. Fact witnesses

B. Expert witnesses

C. Fraud examiners and forensic accountants

D. Claimants/defendants

25. A/an _________ witness may be permitted to offer “everyday” opinions under three conditions: (1) The opinion must be based on the witnesses personal perceptions (as opposed to hearsay), (2) The opinion must be helpful to the trier-of fact, and (3) __________________________________.

A. Expert; the opinion must not be confusing to the average person in everyday life

B. Expert; the opinion must be based on specialized knowledge of the witness, for example, a mine supervisor

C. Fact; the opinion must be the product of reasoning processes familiar to the average person in everyday life

D. Fact; the opinion must pertain to something not already known to the trier-of-fact

26. An expert witness is one who, by virtue of education, profession, publication, or experience, is believed to have special knowledge of his or her subject beyond that of the average person, ______________________________________________.

A. And is willing to use that knowledge in the pursuit of justice without thought of personal gain

B. In order to explain technical information to judges, juries, and opposing counsel

C. So that the truth in a case can be knowledgeably and objectively established

D. Sufficient that others may officially (and legally) rely upon the opinion

27. To educate counsel, reconstruct cash flows and performance from records, guide additional investigation and discovery, make connections, determine whether evidence supports theories of the case, provide objective evaluations of the information data and evidence, draft reports and exhibits, and offer deposition and trial testimony are all examples of _________________________________________:

A. The role of fact witnesses in a case

B. The role of the fraud examiner or forensic accountant when working with attorneys and other persons related to legal matters

C. Responsibilities that only qualified law enforcement personnel should engage in

D. Fraud examiner or forensic accountant independence

28. An expert’s opinion is subject to two types of challenges:

A. Disqualification and overruled

B. Opinion v fact and hearsay v firsthand knowledge

C. During deposition and cross-examination

D. The Daubert Rule and The Frye Rule

29. Jim DiGabriele, CPA, PhD, CVA, shared an anecdote in the text where a forensic accountant offered a different answer during a deposition than the one he gave on direct examination. The lesson learned as shared by Jim urges professionals to:

A. Avoid contradicting yourself (and thereby impair or destroy your credibility).

B. Always tell the truth.

C. Read your deposition transcript before trial testimony and remember the details.

D. Avoid taking sides or agreeing to be an advocate.

30. The professional should ensure that all conclusions and opinions are grounded in the evidence, supportable, and _______________.

A. Cost-effective

B. Objective

C. Defensible

D. Relevant

31. The analyses and central issues in a case should be presented in a coherent storyline—clear, accurate, precise, and relevant to the issues under consideration; presented in reasonable depth to establish credibility; and logical. The fraud examiner or forensic accountant could have vulnerability where the storyline is supported by______________________.

A. Weak evidence or the logical leap is rather large

B. Expert opinion v fact

C. Circumstantial evidence

D. Conclusions that are dependent on one’s “interpretation” of accounting procedures

32. ____________ are positions grounded in the evidence, whereas ___________ are based on the fraud examiner’s or forensic accountant’s interpretation of the facts.

A. Facts; conclusions

B. Conclusions; opinions

C. Depositions; answers to cross-examination questions

D. Fact-based options; storyline elements

33. For the fraud examiner or forensic accountant, ____________ is essential—in substance and in appearance.

A. Preparation

B. Professionalism

C. Tone

D. Credibility

34. The essence of criminal and civil litigation is ______________—both sides get the opportunity to present the facts and circumstances from their opposing perspectives.

A. Fairness and balance

B. Predicated on a presumption of goodwill until proven otherwise

C. Managed mediation

D. Controlled confrontation

35. _______________ is a pretrial process during which the parties to a civil litigation are allowed to examine the other side’s fact and expert witnesses.

A. The preliminary phase

B. A mediated arbitration

C. A deposition

D. An ex parte injunction

36. Essentially, based on discovery in civil litigation (including depositions), each side knows the other side’s theory of the case and what the witnesses are expected to say. As such, the civil trial becomes, to some extent, ________________________.

A. A cruel game in which the fraud examiner is the court jester

B. A fait accompli where the verdict is concerned

C. An act of presentation and choreography

D. An anachronistic ritual to establishing liability

37. Direct examination is the intersection of ____________ and ____________.

A. Credibility; preparation

B. The law; accounting

C. Facts; opinions

D. Attorneys (on both sides); witnesses (on both sides)

38. The first goal of the opposing attorney during cross-examination is to ____________________.

A. Discover what the expert knows and to assess their level of preparation

B. Prove that there is some other reasonable explanation for the missing money

C. Present an alternative narrative (i.e., a different interpretation) of the facts

D. Challenge the expert’s credibility, if possible

39. The Primrose Path, The Nodding Chicken, Ask Until You Admit, You’ve Got to Be Kidding, This Means Nothing, and You Really Didn’t Mean to Say, are all examples of what?

A. Techniques used in cross-examinations

B. Scenarios in which the defendant is extremely vulnerable

C. Diversions directed at the jury which are employed by attorneys when the facts are not in their client’s favor

D. Chapters in a book titled, The Expert Testimony Game: How to Win Big While Maintaining Your Credibility

40. A good system of internal controls has four separate areas of responsibility: one person is responsible for safeguarding the assets; another person has authority over transactions associated with the asset; a third person is responsible for recording transactions for assets; and a fourth person should _____________________.

A. Prepare the financial statements

B. Orchestrate a system of audits, physical inventories, and reconciliations

C. Perform criminal background checks on people with access to the assets

D. Investigate allegations of fraud, waste, and abuse

41. At the inception of an examination, the fraud examiner or forensic accountant needs to develop an understanding of:

A. How most fraud occurs within that particular industry

B. The players involved

C. The control environment

D. Red flags in order to establish the scope

42. At a minimum, corporate governance should address three issues: (1) creating and maintaining a culture of honesty and high ethics, (2) evaluating fraud risks and implementing programs and controls to mitigate them, and (3) _____________________.

A. Keeping sound meeting minutes that reflect that the board reasonably performed its duty of care

B. Engaging in strategic planning as a means of ensuring appropriate company goals

C. Hiring a capable CEO and maintaining robust oversight of that individual

D. Developing an appropriate antifraud oversight process

43. The following is a five-step approach to fraud prevention, deterrence, and detection: (1) know the exposures, (2) translate exposure into likely symptoms, (3) always be on the lookout for these symptoms, (4) build supervisory, review and audit programs to look for symptoms, and (5) ________________________________________.

A. Maintain defensible documentation on all investigations

B. Establish a proper tone at the top in both words and actions

C. Follow up on these issues to their logical, evidence-based conclusions

D. Train employees to be able to identify and report these issues

44. According to the AICPA’s Statement on Auditing Standard (SAS) No. 99, “Risk Factors Relating to Misstatements Arising from Fraudulent Financial Reporting,” high turnover of senior management, counsel, or board members may be evidence of:

A. A complex or unstable organizational structure

B. Ineffective monitoring of management

C. Internal controls are deficient

D. Excessive pressure on management or operating personnel to meet financial targets set by the board of directors or management, including sales or profitability incentive goals.