CERTIFIED FORENSIC FRAUD EXAMINER (CFFE) MODULE ONE
INTRODUCTION TO FORENSIC ACCOUNTING AND AUDIT
TUESDAY: 22 April 2025. Morning Paper. Time Allowed: 3 hours.
Answer ALL questions. This paper has two Sections. SECTION I consists of fifty (50) Multiple Choice Questions carrying fifty (50) marks. SECTION II has four (4) structured questions carrying fifty (50) marks. Marks allocated to each question are indicated at the end of the question.
1. Which one of the following statements is ACCURATE in regard to the results of improper recognition of revenue?
A. Fair representation of the financial position and performance of the entity
B. Misrepresentation of both the financial performance and position of the entity
C. Reliable opinion in relation to the going concern
D. Misrepresentation of the financial performance of the entity (1 mark)
2. Which one of the following is a financial item used to calculate the gross profit?
A. Revenue earned
B. Expenses incurred
C. Non-current assets
D. None of the above (1 mark)
3. Which one of the statements is NOT accurate in regard to current assets and current liabilities?
A. The above items are recorded in the in the statements of financial position and are used to calculate the current ratio to measure an organisation’s profit
B. A current ratio that is too favourable is a red flag of overstated receivables, inventories or understated current liabilities or both
C. A current ratio can fraudulently be affected overstated and understated receivables and payables respectively
D. None of the above (1 mark)
4. Which one of the following transactions would complete the double entry that conceals asset misappropriation?
A. Reducing an expense
B. Increasing an expense
C. Increasing a liability
D. Reducing an asset (1 mark)
5. Which one of the following statements is NOT accurate in regard to recognising deposit for services to be rendered in the subsequent year?
A. The transaction will understate the revenue earned during that financial year
B. The transaction will overstate the revenue earned during that financial year
C. The transaction is an example of a financial statement fraud scheme related to improper recognition of revenue
D. None of the above (1 mark)
6. Which one of the following model is ACCURATE in regard to the accounting model?
A. Assets = Liabilities – Owners’ Equity
B. Liabilities = Assets + Owners’ Equity
C. The accounting model is presented in the statement of performance
D. None of the above (1 mark)
7. Which one of the following financial items appears on the statement of owner’s equity?
A. Net profit
B. Gross profit
C. Retained earnings
D. None of the above (1 mark)
8. Which one of the following financial reporting items would NOT be fraudulently affected fictitious revenue?
A. The receivables
B. The current ratio
C. Net profit
D. None of the above (1 mark)
9. Which one of the following assignment should a company conduct on receiving a tip of fraud?
A. Forensic Accounting
B. Forensic audit
C. Fraud audit
D. Surprise audit (1 mark)
10. Which one of the following statements is ACCURATE regarding the statement of changes in owners’ equity?
A. It is not the same as the statement of retained earnings
B. It shows how amounts on the statement of profit or loss and other comprehensive income flow through to the statement of financial performance
C. It acts as the connecting link between the statement of financial position and the statement of profit or loss and other comprehensive income
D. None of the above (1 mark)
11. Which one of the following statements BEST describes the results of failure to record the cost of generating revenue in the same accounting period?
A. Expenses will be understated
B. The gross profit will be overstated
C. The net profit will be understated
D. None of the above (1 mark)
12. Which one of the following statements is NOT accurate with regard to net revenue and gross profit?
A. Net profit is recorded in the statement of financial performance
B. Net profit is equal to gross profit less operation costs
C. Gross margin is equal to revenue less cost of good
D. None of the above (1 mark)
13. Which one of the following fraudulent transaction would help to conceal a reduction of a liability in the books of account?
A. Reducing owners’ equity
B. Decreasing an expense
C. Increasing an asset
D. None the above (1 mark)
14. Which one of the following statements is NOT an objective of conducting accounting assignment for court purposes?
A. Forensic accounting can be conducted, to resolve allegations of fraudulent financial reporting
B. Forensic accounting can be conducted to establish the exact financial performance and position of an organisation
C. Forensic accounting can be conducted, for purposes of acquisition or mergers
D. Forensic accounting can be conducted to collect audit evidence in order to express an opinion
(1 mark)
15. Which one of the following statements is NOT accurate in regard to reporting of liabilities in the statement of financial position?
A. Liabilities are presented in the statement of financial position in order of liquidity
B. Liabilities are presented after assets in the statement of financial position
C. Liabilities are presented in order of maturity
D. Current liabilities are presented first followed long term liabilities (1 mark)
16. Which one of the following statements is ACCURATE in regard to ledger accounts?
A. Adjusting journal entries posted in the ledger accounts at the end of the financial year is a red flag of fraud
B. Adjusting journal entries posted in the ledger accounts at the end of the financial year are evidence of fraudulent financial transactions
C. Adjusting journal entries posted at the end of the financial year are all fraudulent
D. Adjusting journals do not require authorisation, like payments a senior accounting staff (1 mark)
17. Which one of the following financial statements fraud schemes can be detected comparing the two financial statements in a situation of unexplained rapid growth?
A. Overstatement of revenue scheme
B. Understatement of revenue scheme
C. Overstatement of expenses scheme
D. Inadequate disclosures (1 mark)
18. Which one of the following is a financial elements of the statement of owner’s equity?
A. Owner’s equity and the retained earnings during the financial year
B. Owner’s equity and net profit realised during the financial year
C. Owner’s equity and the revenue earned during the financial year
D. Owner’s equity and the gross profit earned during the financial year (1 mark)
19. Which one of the following statements is NOT accurate in regard to IFRS?
A. Departure from IFRS in recognising revenue would result in inflated net profit
B. Departure from IFRS in recognising revenue would result in overstated receivables
C. Departure from IFRS in recognising revenue would result in understated current ratio
D. Departure from IFRS in recognising revenue would result in inflated current ratio (1 mark)
20. Which one of the following activities BEST describes cash flow activities related to obtaining loans?
A. Financing activities
B. Operation activities
C. Investment activities
D. None of the above (1 mark)
21. Which one of the following accounting concepts BEST describes the basis of accounting for recognising expenses as payables?
A. Accrual basis of accounting
B. Cash basis of accounting
C. Double entry basis of accounting
D. Matching principle (1 mark)
22. Which one of the following statements is NOT accurate in regard to the current ratio?
A. Fictitious revenue would result to overstated current ratio
B. Omission of expenses would result to overstated current ratio
C. Omission of expenses would result to understated current ratio
D. None of the above (1 mark)
23. Which one of the following is the first item on the statement of financial performance?
A. Net revenue
B. Net profit
C. Gross profit
D. Gross revenue (1 mark)
24. Which one of the following financial elements is recorded first on the statement of financial position?
A. Current liabilities
B. Non-current asset
C. Liabilities
D. Current assets (1 mark)
25. Which one of the following statements is NOT accurate in regard to disclosure in financial statements?
A. All material information related to the reporting period must be disclosed
B. Subsequent events do not need to be disclosed in the current financial period
C. Failure to disclose subsequent events in the current financial year is a financial statement fraud
D. None of the above (1 mark)
26. Which one following financial statements fraud schemes can be detected calculating the receivable turnover ratio?
A. Overstated revenue scheme
B. Understated revenue schemes
C. Understated receivables
D. Fictitious revenue scheme (1 mark)
27. Which one of the following statements is the objective of a forensic fraud audit?
A. To prove the allegations of fraud
B. To disapprove the allegations of fraud
C. To prove or disapprove the allegations of fraud
D. To prove or disapprove issues of fraud (1 mark)
28. Which one of the following statements is NOT accurate in regard to auditor’s responsibility for fraud?
A. The auditor should detect in fraud and corruption schemes
B. The auditor should identify red flags of fraud and fraud risks
C. The auditor should make recommendation for further investigations of detected fraud
D. None of the above (1 mark)
29. Which one of the following engagements is NOT investigative in nature?
A. Forensic fraud audit
B. Special audit
C. Fraud examination
D. Fraud investigation (1 mark)
30. Which one of the following financial statements fraud schemes is associated with fictitious revenue?
A. Overstated receivables
B. Fictitious revenue
C. Understated revenue
D. Unearned revenue (1 mark)
31. Which one of the following transactions would overstate assets and understate expenditure?
A. Omission of expenses
B. Improper valuation of assets
C. Improper recognition of expenses
D. Capitalisation of expenditure (1 mark)
32. Which one of the following orders BEST describes presentation of current assets in the statement of financial position?
A. In order of maturity
B. In order of value
C. In order of liquidity
D. In order of realisable value (1 mark)
33. Which one of the following entries CANNOT help to conceal an asset misappropriation?
A. Increasing an asset
B. Increasing an expense
C. Decreasing a liability
D. None of the above (1 mark)
34. Which one of the following statements is NOT accurate in regard to revenue recognition?
A. Revenue should be recognised when it is earned
B. Revenue should only be recognised when it is received
C. Only revenue for services or goods delivered should be recognised
D. None of the above (1 mark)
35. Which one of the following actions BEST describes types of fraud schemes related to failure to write off bad debts?
A. Improper current assets valuation
B. Understating receivables
C. Inadequate disclosure
D. Overstating expenses (1 mark)
36. Which one of the following statements is NOT accurate in regard to financial statements?
A. Disclosure of related party transactions are financial statements elements
B. Unpaid expenses are financial statement element
C. Unearned revenue is not a financial statement element
D. None of the above (1 mark)
37. Which one of the following activities BEST describes proactive controls for detecting fraud in an organisation?
A. Fraud audit
B. Fraud investigation
C. Forensic audit
D. None of the above (1 mark)
38. Which one of the following fraud schemes would fraudulently overstate the financial position of an organisation?
A. Inadequate disclosure
B. Overstating expenditure
C. Failure to write off bad debts
D. Proportioning revenue based on completed work (1 mark)
39. Which one of the following is NOT a function of forensic accounting for court purposes?
A. Assisting in fraud prevention
B. Testifying in court as an expert witness
C. Collecting evidence
D. None of the above (1 mark)
40. All the following statements is accurate, EXCEPT .
A. forensic accountants do not need to have good knowledge of the rules of evidence
B. forensic accountants must have good knowledge of anti- fraud controls
C. forensic accountants must have good investigation reporting skills
D. forensic accountants must have good interviewing skills (1 mark)
41. Which of the following order BEST describes presentation of liabilities in the statement of financial position?
A. In order of maturity
B. In order of value
C. In order of liquidity
D. In order of realisable value (1 mark)
42. Which one of the following financial statements fraud schemes is NOT associated with overstatement of revenue?
A. Recognising fictitious revenue
B. Recognising unearned revenue
C. Recognising gross sales
D. Failure to write off bad debts (1 mark)
43. Which one of the following financial statement fraud schemes is associated with the omission of expenses?
A. Improper recognition of expenses
B. Concealment of expenses
C. Capitalisation of expenditure
D. None of the above (1 mark)
44. Which one of the following financial items is used to calculate the quick ratio of an organisation?
A. Revenue
B. Receivables
C. Inventory
D. None of the above (1 mark)
45. Which one of the following financial items is used to calculate receivable turnover ratio?
A. Net revenue
B. Receivables
C. Revenue
D. None of the above (1 mark)
46. Which one of the following financial items is used to calculate the liquidity ratio of an organisation?
A. Revenue earned
B. Expenses incurred
C. Current assets
D. None of the above (1 mark)
47. Which one of the following types of audit BEST describes the assignment an organisation should conduct after determining that fraud has occurred?
A. Fraud audit
B. Forensic audit
C. Special audit
D. None of the above (1 mark)
48. Which one of the following financial items is used to calculate the current ratio of an organisation?
A. Revenue
B. Expenses
C. Current assets
D. None of the above (1 mark)
49. Which one of the following assignments BEST describes the ratio that calculates the number of days it takes to collect a receivable?
A. Collection ratio
B. Receivable turnover ratio
C. Inventory turnover ratio
D. None of the above (1 mark)
50. Which one of the following assignments BEST describes an assignment that should be conducted a major potential investor in a company?
A. Forensic accounting
B. Forensic audit
C. External audit
D. None of the above (1 mark)
SECTION II (50 MARKS)
51. Describe the following accounting concepts in relation to financial reporting:
(i) Accrual basis of accounting. (5 marks)
(ii) Going concern. (5 marks)
(iii) Double entry theory. (5 marks)
(iv) Matching principle. (5 marks)
(Total: 20 marks)
52. Discuss THREE activities associated with a statement of cash flows. (Total: 15 marks)
53. Differentiate between “forensic audit” and “forensic accounting” in regard to the following:
(i) Objective. (2 marks)
(ii) Opinion or conclusion. (2 marks)
(iii) Scope. (2 marks)
(iv) Presumption. (2 marks)
(v) Timing. (2 marks)
(Total: 10 marks)
54. Identify FIVE fraudulent transactions that help to conceal asset misappropriation. (Total: 5 marks)
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