06 - Chapter 6 Data-Driven Fraud Detection MULTIPLE CHOICE...

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Chapter 6 Data-Driven Fraud Detection MULTIPLE CHOICE 1. Which statement is false? a. In recent years there have been many cases of financial statement fraud. b. Proactive fraud detection methods are in their infancy. c. Fraud investigation involves identifying symptoms that often indicate fraud is being or has been committed. d. Fraud investigation involves determining who committed the fraud, the schemes used and how much money or assets were taken. ANS: C A: True statement B: True statement C: This is the definition of fraud detection. D: True statement 2. Which of the following is NOT a red flag for fraud committed by purchasing employees to purchase goods for personal use? a. Invoices without valid purchase order b. Employee and vendor telephone numbers are the same c. Invoices exceeding purchase order dollar amount ranked by dollar difference d. Purchase orders with zero dollar amounts by buyer ANS: B A: It is a red flag that the purchasing employee purchases something for herself or himself without au- thorization B: This is usually a symptom of setting up a dummy company C: The employee may over purchase for himself or herself. D: It is a red flag 3. Which of the following is not a step in the deductive fraud detection approach? a. Understanding the business or operations to be studied b. Understanding what kinds of frauds could occur c. Determining the most likely symptoms d. Performing digital analysis of company databases e. Gathering data about symptoms ANS: D A: Because it is a step in the deductive approach B: Because it is a step C: Because it is a step E: Because it is a step 4. ACL stands for: a. Account coverage level. b. Audit command language. c. Actuarial confidence level. d. Auditors can't learn ANS: B A: Incorrect.
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B: Correct. ACL is data-mining software that is often used by auditors, etc. to audit and to detect fraud. C: Incorrect. D: Incorrect. 5. Sampling is an effective analysis procedure for finding _________: a. Routine accounting anomalies b. Fraud c. All of the above d. None of the above ANS: A A: Correct B: Incorrect; sampling is not effective at finding fraud 6. Which of the following is the most direct method of focusing on changes in a company's balance sheet and income statement? a. Comparing key ratios from one period to the next b. Comparing account balances from one period to the next c. Vertical analysis d. Horizontal analysis ANS: D A: Although comparing key ratios from one period to a next is one way to focus on changes in a com- pany's financial statement, it is not the most direct method. B: Comparing balances is probably the least effective way to analyze changes. C: Vertical analysis converts the statements to common size statements for industry and other compar- ison. D: Horizontal analysis is the most direct method to focus on changes.
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This note was uploaded on 01/31/2011 for the course ACCT 345 taught by Professor N/a during the Spring '10 term at Mountain State.

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06 - Chapter 6 Data-Driven Fraud Detection MULTIPLE CHOICE...

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