CERTIFIED FORENSIC FRAUD EXAMINER (CFFE) MODULE ONE
INTRODUCTION TO FORENSIC ACCOUNTING AND AUDIT
MONDAY: 18 August 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 disclosures?
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. None of the above (1 mark)
2. Which one of the following financial items is used to calculate the net profit?
A. Revenue earned
B. Capital expenditure
C. Gross profit
D. Net sales (1 mark)
3. Which one of the following statements is NOT accurate in regard to the statement of profit or loss?
A. The first item in the statement is net revenue
B. The first item in the statement is revenue
C. The first item in the statement is the gross profit
D. The first item in the statement is the net profit (1 mark)
4. Which one of the following transactions would help to cover misappropriated fund?
A. Reducing an expense
B. Increasing a liability
C. Reducing a liability
D. Reducing an asset (1 mark)
5. Which one of the following statements is ACCURATE in regard to recognising long term project in the first year of performance?
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 will not affect the financial performance reporting
D. The transaction is not an improper recognition of revenue (1 mark)
6. Which one of the following summaries is ACCURATE in regard to the summary of the financial position of an organisation?
A. Assets = Liabilities – Owners’ Equity
B. Liabilities = Assets + Owners’ Equity
C. The accounting model is presented in the statement of performance
D. Assets = liabilities + owner’s equity (1 mark)
7. Which one of the following financial items appears on the statement of cash flows from investment activities?
A. Cash from sales
B. Received dividends
C. Cash purchase of an asset
D. Paid dividends (1 mark)
8. Which one of the following financial items would NOT be fraudulently affected fictitious revenue?
A. The receivables
B. The current ratio
C. Net profit
D. Liabilities (1 mark)
9. Which one of the following engagements should a company conduct after establishing that fraud has occurred?
A. Forensic accounting
B. Forensic audit
C. Fraud audit
D. Surprise audit (1 mark)
10. Which one of the following statements BEST describes the financial item that is misrepresented failure to recognise all direct expenses in the same accounting period?
A. Expenses will be overstated
B. The gross profit will be overstated
C. The net profit will be understated
D. Current ratio will be understated (1 mark)
11. Which one of the following statements is NOT accurate in regard to profits?
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. Net profit is equal to revenue less direct cost (1 mark)
12. Which one of the following fraudulent transactions would help to hide a reduction of a liability in the books of account?
A. Reducing owners’ equity
B. Decreasing an expense
C. Increasing an asset
D. Increasing an expense (1 mark)
13. Which one of the following statements is an objective of conducting forensic accounting assignment for litigation purposes?
A. Forensic accounting conducted to collect evidence to prove or disapprove allegations
B. Forensic accounting conducted to establish the true financial performance and position of an organisation
C. Forensic accounting conducted for purposes of acquisition or mergers
D. Forensic accounting conducted to collect audit evidence to express an opinion (1 mark)
14. Which one of the following statements is NOT accurate in regard to reporting of the financial position?
A. Assets 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. Assets are presented in order of maturity
D. Current liabilities are presented first followed long term liabilities (1 mark)
15. Which one of the following statements is ACCURATE in regard to journal entries?
A. Adjusting journal entries posted in the ledger accounts at the end of the financial period are red flags 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 proper authorisation (1 mark)
16. Which one of the following financial statements fraud schemes COULD be detected comparing financial items in the statement of profit and loss?
A. Overstatement of revenue scheme
B. Concealment of expenses
C. Overstatement of expenses scheme
D. Inadequate disclosures (1 mark)
17. Which one of the following are financial items of the statement of retained earnings?
A. Owner’s equity and net profit realised during the financial year
B. Owner’s equity and the revenue earned during the financial year
C. Owner’s equity and the gross profit earned during the financial year
D. Owner’s equity and retained profit realised during the financial year (1 mark)
18. Which one of the following statements is not ACCURATE in regard to departure from 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 not result in overstated revenue
D. Departure from IFRS, in recognising revenue would result in inflated current ratio (1 mark)
19. Which one of the following statements BEST describes cash flow activities related to payment of dividends?
A. Financing activities
B. Operating activities
C. Investment activities
D. Cash activities (1 mark)
20. Which one of the following BEST describes the basis of accounting for recognising earned but unpaid revenue?
A. Accrual basis of accounting
B. Cash basis of accounting
C. Double entry basis of accounting
D. Matching principle (1 mark)
21. Which one of the following statements is NOT accurate in regard to the liquidity ratio?
A. Fictitious revenue would result to overstated liquidity ratio
B. Omission of expenses would result to overstated liquidity ratio
C. Omission of expenses would not result to understated liquidity ratio
D. Capitalisation of expenses would understate the liquidity ratio (1 mark)
22. Which one of the following is the first item in the statement of financial position?
A. Net revenue
B. Current assets
C. Non-current assets
D. Current liabilities
(1 mark)
23. Which one of the following is NOT a financial element of statement of financial position?
A. Current liabilities
B. Non-current asset
C. Liabilities
D. Net profit
(1 mark)
24. Which one of the following statements is NOT accurate in regard to disclosure in financial reporting?
A. All material information related to the reporting period must be disclosed
B. Subsequent events that would affect the financial position in the near future need to be disclosed in the financial period
C. Failure to disclose subsequent events in the current financial year is a financial statement fraud scheme
D. All information relate to the financial year must be disclosed (1 mark)
25. Which one of the following financial statements fraud scheme can be detected through horizontal analysis?
A. Overstated revenue scheme
B. Inadequate disclosure
C. Unearned revenue
D. Improper asset valuation (1 mark)
26. Which one of the following statements is the objective of forensic accounting that ends up in litigation?
A. To prove the allegations of accounting fraud
B. To disapprove the allegations of accounting fraud
C. To prove or disapprove the allegations of accounting fraud
D. To prove or disapprove issues of accounting fraud (1 mark)
27. Which one of the following statements is NOT accurate in regard to auditor’s role in fraud management?
A. The auditor should detect fraud schemes
B. The auditor should identify red flags of fraud
C. The auditor should make recommendation for further investigations of detected fraud
D. The auditor should investigate detected fraud during the audit (1 mark)
28. Which one of the following engagements is NOT forensic in nature?
A. Forensic fraud audit
B. Forensic accounting for purposes of acquisition
C. Fraud examination
D. Fraud investigation (1 mark)
29. Which one of the following financial statements fraud schemes is NOT associated with overstated revenue fraud scheme?
A. Overstated receivables
B. Fictitious revenue
C. Timing differences
D. Accrual of revenue (1 mark)
30. Which one of the following transactions would fraudulently affect assets and expenditure?
A. Omission of expenses
B. Improper valuation of assets
C. Improper recognition of expenses
D. Capitalisation of expenditure (1 mark)
31. Which one of the following orders BEST describes presentation of non-current assets in the statement of financial position?
A. In order of maturity
B. In order of value
C. In order of realisable value
D. They are presented before the current assets (1 mark)
32. Which one of the following entries CANNOT help to conceal embezzlement of funds?
A. Increasing an asset
B. Increasing an expense
C. Decreasing a liability
D. Decreasing an expense (1 mark)
33. Which one of the following statements is NOT accurate in regard to unearned revenue recognition?
A. Unearned revenue should not be recognised as revenue during the financial period
B. Unearned revenue should be recognised as receivables
C. Only revenue for services or goods delivered should be recognised
D. Recognising revenue that is not earned would result to inflated receivables (1 mark)
34. Which one of the following items BEST describes types of fraud scheme associated with improper current asset valuation?
A. Understated receivable
B. Writing off bad debts
C. Failure to write off bad debts
D. Overstated revenue (1 mark)
35. Which one of the following statements is NOT accurate in regard to financial statements items in the current financial period?
A. Unpaid expenses are financial statement elements
B. Unearned revenue is not a financial statement element
C. Unearned revenue is a disclosure in the financial statement
D. None of the above (1 mark)
36. Which one of the following control activities is NOT similar to forensic audit?
A. Fraud audit
B. Fraud investigation
C. Forensic examination
D. Fraud examination (1 mark)
37. Which one of the following fraud schemes would fraudulently overstate the net worth of an entity?
A. Inadequate disclosure
B. Understated revenue
C. Understated liabilities
D. Overstated expenses (1 mark)
38. Which one of the following actions is NOT a function of a fraud investigation?
A. Assisting in fraud prevention
B. Testifying in court as an expert witness
C. Collecting evidence
D. Determining fraud issues (1 mark)
39. Which one of the following statements is NOT accurate in regard to forensic accountants and auditors?
A. Forensic accountants do not need to have knowledge of the basic principles of evidence
B. Forensic accountants must have good knowledge of anti- fraud controls
C. Forensic auditors must have good knowledge of the basic principles of evidence
D. Forensic auditors can also be non-accountants (1 mark)
40. Which one of the following orders BEST describes presentation of current 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)
41. Which one of following financial statements fraud schemes is NOT associated with improper revenue recognition?
A. Recognising long term projects revenue
B. Recognising unearned revenue
C. Recognising gross revenue
D. Failure to write off bad debts (1 mark)
42. Which one of following financial statement fraud schemes is NOT associated with expenses?
A. Improper recognition of expenses
B. Concealment of expenses
C. Capitalisation of expenditure
D. None of the above (1 mark)
43. Which one of the following financial items is used to calculate the quick ratio in an organisation?
A. Revenue
B. Securities
C. Inventory
D. Overdue receivables (1 mark)
44. Which one of the following financial items is used to calculate the average number of days it takes to collect receivables?
A. Net revenue
B. Average receivables
C. Revenue
D. Receivables (1 mark)
45. Which one of the following financial items is used to calculate the current ratio of a public entity?
A. Revenue
B. Expenses
C. Financial securities
D. Liabilities (1 mark)
46. Which one of the following terms BEST describes the initial assignment an organisation should conduct to resolve fraud issues?
A. Fraud audit
B. Forensic audit
C. Special audit
D. Internal audit (1 mark)
47. Which one of the following terms is NOT a financial item used to calculate the gross revenue of an organisation?
A. Net revenue
B. Cost of revenue
C. Revenue
D. Operation expenses (1 mark)
48. Which one of the following statements BEST describes the ratio that calculates the number of times inventory is turned over?
A. Collection ratio
B. Receivable turnover ratio
C. Inventory turnover ratio
D. Inventory receivable ratio (1 mark)
49. Which one of the following terms BEST describes an assignment that should be conducted for purposes of entities merger?
A. Forensic accounting
B. Forensic audit
C. External audit
D. Special audit (1 mark)
50. Which one of the following BEST describes payables?
A. Incurred expenses
B. Paid expenses
C. Debtors
D. Creditors (1 mark)
SECTION II (50 MARKS)
51. Explain the following financial elements of financial reporting:
(a) Gross revenue. (5 marks)
(b) Net profit. (5 marks)
(c) Gross profit. (5 marks)
(d) Net sales. (5 marks)
(Total: 20 marks)
(Total: 20 marks)
52. Explain the THREE financial statements of a public entity. (Total: 15 marks)
53. Explain FIVE types of forensic accounting engagements. (Total: 10 marks)
54. Identify FIVE fraudulent transactions that cannot be used to conceal asset misappropriation. (Total: 5 marks)
……………………………………………………….