Fraud Detection Analytics Flashcards
7 cards from real ADA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Fraud Detection Analytics flashcards as text
What is the 'fraud triangle' and how is it applied in audit data analytics?
Answer: A framework identifying pressure, opportunity, and rationalization as conditions enabling fraud
The fraud triangle identifies three conditions that typically accompany fraud: pressure (motivation), opportunity (weak controls), and rationalization (justification), helping auditors prioritize analytics on high-risk areas.
In journal entry testing for fraud detection, which pattern is considered a significant red flag?
Answer: Journal entries posted by senior management after the period-end close
Journal entries posted by senior management after the accounting period closes, particularly those lacking adequate supporting documentation, are red flags associated with financial statement manipulation.
What does 'round dollar' analysis in fraud detection examine?
Answer: An abnormal concentration of transactions with suspiciously even dollar amounts
Round dollar analysis identifies an abnormal frequency of transactions with even dollar amounts such as $1,000 or $5,000, which may indicate fabricated or estimated transactions rather than legitimate arm's-length transactions.
Which analytical technique establishes a normal behavioral baseline used to compare against current activity for fraud detection purposes?
Answer: Baseline analysis
Baseline analysis establishes what 'normal' looks like for a given process or entity using historical data, enabling auditors to flag deviations that may signal fraudulent activity.
How is cluster analysis most effectively used in fraud detection analytics?
Answer: To group similar transactions and identify those that do not fit any natural cluster
Cluster analysis groups similar data points together, and transactions that don't fit into any natural cluster or form their own isolated small cluster may represent anomalous or potentially fraudulent activity.
Which red flag in expense reimbursement data most likely indicates coordinated or fabricated fraudulent claims?
Answer: Multiple employees submitting identical dollar amounts for the same date and expense type
Multiple employees submitting identical expense amounts for the same event or date is a red flag for coordinated fraud, fabricated expenses, or a single fraudster submitting claims under multiple employee identities.
Which automated control test is most effective for detecting unauthorized changes to the vendor master file?
Answer: Comparing the current vendor master file to a prior period snapshot and investigating all changes
Comparing current and prior period vendor master files identifies all additions, deletions, and modifications, allowing auditors to verify that each change was properly authorized and legitimate.