Chapter 15 Test Bank Docx Consulting & Expert Witnessing

CHAPTER 15

1. The association of Certified Fraud Examiners (ACFE) offers the Fraud Examiners Manual, a virtual encyclopedia of information that addresses four major topics: Financial Transactions and Fraud Schemes, Law, Investigation, and ________________.

A. Report writing

B. Valuation and calculation

C. Ethics

D. Fraud Prevention and Deterrence

2. Although testifying professionals ___________________ themselves, they are expected to be able to describe the nature, extent, and timing of all work performed.

A. Need not complete the work

B. Need to complete the work

C. Must not complete the work

D. May not testify about the work done by others, but only work done by

3. Given the ________________ of fraud examination, litigation support, and forensic accounting engagements, practicing professionals should expect their work product to be scrutinized closely, and they should be prepared to describe and defend all choices made.

A. Complexity

B. Adversarial nature

C. Scope

D. Importance

4. The fraud examiner can have no opinion about the _______________________.

A. The accounting choices made by the client if they are GAAP compliant

B. The accuracy of prior financial statements unless he/she was involved in the audit

C. Guilt or innocence of alleged fraudsters

D. The conditions or causes within an organization that created the opportunity for fraud

5. General standards require professional competence, due professional care, ____________________, and the collection and analysis of sufficient relevant data to support (provide a reasonable basis for) the conclusions and opinions offered.

A. Professional cynicism

B. Proper engagement planning and supervision

C. Proper disclosures to be made if he/she is not independent

D. An ongoing commitment to improve one’s professional mastery of essential skills

6. ____________________ is a methodology for resolving fraud allegations—from inception to disposition.

A. Properly authorized surveillance

B. Interviewing/confession seeking interview

C. Valuation and calculation

D. Fraud examination

7. The ultimate decision to qualify a witness as an expert is _________________.

A. At the judge’s discretion

B. Based on whether or not they are certified and otherwise appropriately credentialed

C. A 2/3 majority jury vote

D. Determined by a Daubert challenge

8. Generally, ____________ of the designated expert _______________. Work product includes not only the expert’s report and main analyses but also all notes, work papers evidentiary materials collected as part of the case, supporting analyses, research, documents, and data reviewed or relied upon by the expert as part of their engagement. Drafts of reports, handwritten notes, and marginalia are all considered part of the expert witness’s work product.

A. Only publicly disclosed portions of the work product; are discoverable by the other party

B. Only small portions of the work product; may be discoverable by the other party

C. The entire work product; is discoverable by the other party

D. None of the work product; is discoverable by the other party

9. The term ____________ is generally defined as used in or suitable to courts of law or public debate

A. Forensic

B. Judicial discoverability

C. Daubert challenge

D. Expert witness

10. The typical fraud examination, forensic accounting, or litigation support engagement usually requires __________________________ of the business models, operational procedures, and other aspects unique to the organization and industry under examination.

A. A thorough level of expertise

B. The examiner to question the assumptions

C. The examiner to accept the assumptions

D. The development of at least some knowledge

11. AICPA Practice Aid 07-1 describes seven forensic investigative techniques and compares and contrasts them with similar evidence gathering activities of auditors. These seven are: public document reviews and background investigations, interviews of knowledgeable persons, confidential sources of information and evidence, laboratory analysis of physical and electronic evidence, physical and electronic surveillance, undercover operations, and ________________________________.

A. A commitment to nothing less than persuasive evidence

B. Development and analysis of competing hypotheses (e.g., use of an H-E Matrix or similar tool)

C. Graphical display tools such as link charts, flow diagrams, and timelines

D. Analysis of financial transactions, financial performance, financial condition and relevant non-financial evidence

12. The act, concealment, and conversion provide ___________________ for evaluating the participation, intention, and actions of a party to litigation.

A. A workable alternative to reliance upon Cressey’s fraud triangle

B. A powerful investigative basis

C. Largely unassailable predication

D. Compelling evidence grounded in a story

13. The purpose of an interview is to ______________________.

A. Obtain an admission of guilt without the use of coercion or inducements

B. Demonstrate objectivity in full view of the trier-of-facts

C. Gather testimonial evidence

D. Ultimately express an opinion as to who is guilty/innocent

14. In litigation-type engagements, forensic accountants and fraud examiners acting as consultants and experts ______________________ in order to obtain admission of guilt.

A. Generally do not conduct interrogations

B. Are expected to participate in interviews

C. May offer inducements but may not coerce targets

D. Sometimes directly cross-examine witnesses

15. Forensic professionals understand that skilled fraudsters _______________ by altering documents or limiting the amount and timing of data made available to the opposing side.

A. Often move their gains offshore

B. Often manipulate data

C. Use shell companies created

D. Try to appear innocent and will not generally interfere with investigations

16. Similar to fraud examinations, forensic accounting engagements are ____________.

A. Regulated by the PCAOB

B. Highly specialized affairs

C. Expensive to conduct

D. An iterative process

17. Examinations, in essence, are where _________ intersects with _____________ of the antifraud and forensic accounting profession.

A. Justice; the integrity

B. Convicting white-collar criminals; the professional standards

C. Evidence; the tools and techniques

D. The fraudster’s skill; the skill

18. The ability to ___________ is both an art and a science.

A. Estimate damages

B. Develop a compelling storyline even if not completely grounded in the evidence

C. Create demonstrative evidence such as link charts

D. Interrogate cybercriminals

19. The forensic accountant as an independent, objective professional must examine the ________________ and compare each side’s position to the evidence.

A. Relevant non-financial data

B. Differing storylines

C. Accounting anomalies in the case

D. Past and present performance of the organization

20. Generally, to successfully pursue a claim for legal damages, the allegedly injured party must prove two points: (1) liability, and (2) ________________.

A. Intent

B. Conversion

C. Damages

D. Tortious harm

21. _____________ is central to the issue of damages.

A. Intent

B. Substantiality

C. Causality

D. Harm

22. _________________ are those amounts designed to compensate the injured party for some specific loss.

A. Compensatory damages

B. Punitive awards

C. Special awards

D. Clawback provisions

23. Economic loss or restitution damages compensate for a specific loss and recognize that the damages _______________________.

A. May carry into future periods

B. Arose out of intentional or negligent causality

C. Awarded are intended to punish the defendant as a financial deterrent

D. Put the injured parties back where they would have been if the cause of action had not happened

24. One of the first steps in measuring commercial damages is determining _____________.

A. The loss period

B. How much of the evidence will be available through the discovery process

C. Whether opposing counsel’s “storyline” is more compelling than your side’s

D. Causality

25. The measurement period for commercial damages related to torts can be more difficult because, unlike breach of contract claims, _________________________.

A. A relationship between the parties can’t always be proved

B. A preliminary starting point is not available

C. The liability may include punitive damages

D. Causality is not always clear-cut

26. The accepted concept for measuring lost revenues, excess expenses, and/or lost profits is to project these incremental changes _________________.

A. Into the future

B. As having been directly caused by the adversarial party regardless of intent

C. Based on industrywide norms

D. Over a loss period

27. The method of quantifying lost revenues and increased expenses whereby some data exist that can be used to demonstrate how the revenues, expenses, and/or profits related to the liability claim for the loss period would have been performed “but for” the actions, or lack thereof, of the adversarial party, is referred to as the _______ method.

A. Standard industrial classification (SIC)

B. Before and after

C. Benchmark

D. Calculating lost profits

28. Although the liability claim alleged by the plaintiff against the defendant is often centered on lost revenues and/or incremental expenses, the actual amount of damages is ___________________.

A. A function of lost profits

B. Determined by whatever a jury considers “reasonable”

C. Can include punitive multipliers

D. Virtually limitless

29. Regardless of the choices made and the underlying assumptions, the “tire hits the road” for antifraud professionals and forensic accountants when they ___________________.

A. Maintain their commitment to persuasive evidence

B. Communicate and defend their work

C. Abide by the ethical standards of their professional association(s)

D. Name the guilty party clearly and compellingly

30. _____________ engagements are created to value a business, business ownership interest, security, or intangible asset. Similar to the estimates associated with commercial damages, in the case of these engagements, the work of the forensic accountant requires professional ___________________.

A. Valuation; competence and judgment

B. Before and after; communication

C. Yardstick; certification

D. Loss period; skepticism

31. In assessing what is necessary to complete a valuation engagement with professional competence, one should consider the ability to identify, gather, and analyze the relevant data; apply the appropriate valuation methodologies; incorporate critical thinking, objectivity, and professional judgment in the decision-making process that will ultimately determine _______________.

A. One’s credibility/reputation within the profession

B. The amount of value

C. One’s likely success in any given engagement

D. The causality underlying the claim

32. AICPA Statement on Standards for Valuation Services No. 1 describes two types of engagements:

A. Civil and criminal

B. Commercial and individual

C. Valuation and calculation

D. Contractual and tortious

33. Essentially, two considerations ultimately determine the market and fair market value of an asset: the future income stream that can be derived and the difference between that and ___________________________.

A. The income stream from alternative investment options

B. The present value of a lump sum

C. The future value of an annuity

D. The best-case scenario based on industry norms

34. Generally, at least four methodologies can be used to develop the risk-adjusted discount rate and its related cash flows (income): CAPM, the bond-equity additive method, the build-up method, and the _____________________.

A. Loss-period average

B. Risk and return weighted future value

C. “Pin the tail on the donkey” method

D. Weighted average cost of capital

35. One of the most challenging issues associated with the discounted income and cash flows model is ______________ income and cash flows ___________.

A. Establishing; for the loss period

B. Projecting; into the future

C. Auditing; during similar historical periods

D. Benchmarking; based on industry norms

36. The asset valuation model starts with the assumption that the organization’s _______________ does a reasonably good job of identifying the company’s assets and liabilities

A. Management audit disclosure notes

B. P&L

C. Earnings management strategy

D. Balance sheet

37. The three types of damages that ensue in personal injury cases are losses to the individual, losses to survivors, and losses to _______________.

A. Future earnings

B. The estates of decedents

C. The income of antecedents

D. Alternative investments

38. One of the major challenges in calculating losses in personal injury cases arises from _______________.

A. Incomplete data

B. Foreseeable risks

C. Inflation

D. Establishing causality

39. The primary circumstance with court actions and related loss claims is that the injured person survived the incident and ________________________.

A. Was not the cause of it

B. Subsequently lost income

C. Suffered as a result

D. Has financial obligations to minor children

40. An injured person may suffer up to five types of losses, both past and future. Which of the following is NOT one of the five losses listed in the text?

A. Losses from pain and suffering

B. Losses associated with the ability to perform “non-market” services

C. Loss of employment benefits associated with earnings

D. Medical costs

41. The estimate of earning losses requires the evaluation of five examination areas. Which of the following is NOT one of the five areas listed in the text?

A. Analysis of employment history and related past earnings

B. Projection of probable career paths: before and after the loss

C. Benchmark of mobility freedom: before and after the loss

D. Consideration of other factors on earnings losses such as age and experience

42. The fundamental premise in a wrongful death examination is that _____________________.

A. The loss must be sustained by the survivors

B. The decedent was not at fault

C. The loss can be calculated or valued only if sufficient data exist

D. The plaintiff was either willful or reckless