Data-driven Fraud Detection

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Question 1
Free
Multiple Choice

Which statement is false?

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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.

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Question 2
Free
Multiple Choice

Which of the following is NOT a red flag for fraud committed by purchasing employees to purchase goods for personal use?

Choose correct answer/s
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

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Question 3
Free
Multiple Choice

Which of the following is not a step in the deductive fraud detection approach?

Choose correct answer/s
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

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Question 4
Free
Multiple Choice

ACL stands for:

Choose correct answer/s
A

Account coverage level.

B

Audit command language.

C

Actuarial confidence level.

D

Auditors can't learn

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Question 5
Free
Multiple Choice

Sampling is an effective analysis procedure for finding _________ :

Choose correct answer/s
A

Routine accounting anomalies

B

Fraud

C

All of the above

D

None of the above

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Question 6
Multiple Choice

Which of the following is the most direct method of focusing on changes in a company's balance sheet and income statement?

Choose correct answer/s
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
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Question 7
Multiple Choice

Which of the following illustrates the proactive approach to fraud detection?

Choose correct answer/s
A
Using data-mining software to identify fraud
B
Using Benford's law to identify fraud
C
Locating accounting anomalies and investigating for possible fraud
D
Learning about the business or operations to be studied prior to investigating for fraud
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Question 8
Multiple Choice

All of following are methods of gathering information about a business except:

Choose correct answer/s
A
Become familiar with competitor processes
B
Interview key personnel
C
Observe employees performing their duties
D
Analyze financial statements and other accounting information
E
All of the above are acceptable methods of gathering information about a business
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Question 9
Multiple Choice

Which of the following types of software is commercial data-mining software?

Choose correct answer/s
A
Audit command language (ACL)
B
QuickBooks
C
Peachtree
D
Excel
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Question 10
Multiple Choice

Which of the following proactive fraud detection methods uses Benford's Law to detect fraud?

Choose correct answer/s
A
Commercial data-mining software
B
Digital analysis of company databases
C
Deductive fraud detection
D
None of the above
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Question 11
Multiple Choice

All of the following are symptoms of vendor fraud except:

Choose correct answer/s
A
Short shipping
B
Billing for goods not ordered or shipped
C
Providing poor quality goods
D
All of the above are symptoms of vendor fraud
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Question 12
Multiple Choice

The data-driven method of fraud detection does not include which of the following characteristics:

Choose correct answer/s
A
Determining symptoms that the most likely frauds would generate
B
Understanding the business
C
Understanding and using Benford's law to analyze company databases
D
Understanding what kinds of frauds could occur
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Question 13
Multiple Choice

What is the major disadvantage of using the data-driven approach?

Choose correct answer/s
A
More expensive than the traditional reactive approach
B
Limited when databases are large
C
Leads to excessive leads of possible frauds
D
None of the above
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Question 14
Multiple Choice

All of the following are red flags of the existence of kickbacks except:

Choose correct answer/s
A
The purchaser gains greater control over the vendor
B
Prices increase
C
Volume with the kickback vendor increases
D
Quality from the kickback vendor decreases
E
All of the above are red flags of the existence of kickbacks
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Question 15
Multiple Choice

When identifying possible frauds that may exist, the auditor should ask all of the following questions except?

Choose correct answer/s
A
Who are the key players in the business?
B
Does management demonstrate principles of integrity?
C
How could customers or vendors acting alone commit fraud?
D
What types of fraud have occurred or been suspected in the past?
E
All of the above are questions an auditor should ask.
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Question 16
Multiple Choice

Each of the following is true about Benford's Law except:

Choose correct answer/s
A
Benford's law broadly identifies the possible existence of fraud, but does not identify promising leads.
B
Benford's law states that each digit (from 1 to 9) will be the first digit in a number approximately the same amount of times as every other digit.
C
A major advantage of using Benford's law to detect fraud is that it is the least expensive method to implement and use.
D
Fraud perpetrators are less likely to learn that you are analyzing data according to Benford's law because it does not involve extensive data mining queries.
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Question 17
Multiple Choice

Benford's Law states that the most likely first digit of any randomly selected number will be which of the following?

Choose correct answer/s
A
1
B
7
C
3
D
4
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Question 18
Multiple Choice

True or false: Spreadsheets are not very useful in analyzing large amounts of data.

Choose correct answer/s
A
True
B
False
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Question 19
Multiple Choice

The quick ratio is calculated as:

Choose correct answer/s
A
Current assets/Current Liabilities
B
Current Assets (minus Inventory)/Current Liabilities
C
Net Income/ Net Sales
D
Inventory/Total Assets
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Question 20
Multiple Choice

ACL is to a database as:

Choose correct answer/s
A
Google is to the Internet
B
Monitor is to a computer
C
Phone number is to a Phone Company
D
None of the above
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