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Financial Investigation & Fraud Detection Flashcards

7 cards from real CPI practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Investigation & Fraud Detection flashcards as text

  1. The 'fraud triangle' identifies three conditions that must be present for occupational fraud to occur. These are:

    Answer: Pressure, opportunity, and rationalization

    Developed by criminologist Donald Cressey, the fraud triangle identifies three elements present in occupational fraud: pressure (financial or personal), opportunity (ability to commit fraud), and rationalization (justifying the behavior).

  2. A forensic audit differs from a standard financial audit primarily because it:

    Answer: Is conducted specifically to gather evidence suitable for use in legal proceedings

    A forensic audit is designed to investigate potential fraud, misconduct, or disputes and to produce evidence that can withstand legal scrutiny and be used in litigation or criminal proceedings.

  3. Which professional certification is most directly relevant to an investigator specializing in financial fraud and forensic accounting?

    Answer: Certified Fraud Examiner (CFE)

    The Certified Fraud Examiner (CFE) credential, awarded by the Association of Certified Fraud Examiners (ACFE), is specifically designed for professionals who investigate and prevent occupational fraud.

  4. What is 'skimming' in the context of occupational fraud?

    Answer: Stealing cash from an organization before it is recorded in the books

    Skimming is an off-book fraud scheme where cash is stolen before it is recorded in the accounting system, making it particularly difficult to detect through standard accounting controls.

  5. When analyzing financial records for fraud, 'horizontal analysis' involves:

    Answer: Comparing financial figures across multiple time periods to identify unusual trends or changes

    Horizontal analysis compares financial data across multiple accounting periods to identify unusual fluctuations or trends that may indicate manipulation or fraudulent activity.

  6. A Currency Transaction Report (CTR) must be filed by financial institutions for cash transactions exceeding what threshold?

    Answer: $10,000

    Under the Bank Secrecy Act, financial institutions must file a Currency Transaction Report (CTR) for any cash transaction exceeding $10,000 in a single business day.

  7. Which practice, known as 'structuring' or 'smurfing,' is itself a federal crime under U.S. law?

    Answer: Breaking large cash deposits into smaller amounts to avoid CTR filing requirements

    Structuring (smurfing) is the illegal practice of breaking large cash transactions into smaller amounts specifically to avoid triggering the $10,000 Currency Transaction Report requirement, and is a federal crime under 31 U.S.C. § 5324.