Multiple Choice Questions

1. 
   Bolton and Hand suggest the concept of _______ scores where higher scores are associated with records that are unusual or more like previous fraudulent values.
   

f.Diagnostic

g.Statistical

h.Suspicion

28.________ are numerical measures that describe a specific characteristic of a population.

a.Diameters

b.Parameters

c.Mantissas

d.Significance levels

29.The test used to test for a significant difference between the means is the ______ .

a.Z-statistic

b.Mean Absolute Deviation

c.Two-sample t-test

d.Two-sample d-test

30.The _____ measure tells us whether the numbers are evenly distributed around the mean.

a.Skewness

b.Interquartile range

c.Standard deviation

d.Median

31.A ______ is a graph consisting of vertical bars constructed on a horizontal line that is marked off with intervals.

a.Upper bound

b.Pie chart

c.Final exam

d.Histogram

1. 
   Run the Nigrini parallel scan on the 2000 and 2010 population numbers using Table 9.1 as your guide. Start with the sum and include all the statistics in the list down to the standard deviation. All these calculations can be done using Excel's functions and the Data→Analysis→Data Analysis tools. For the purposes of the analysis change all the blank cells in column D to zeros (0). Prepare the table in Excel. Save your file as Case_9_16.xlsx.
   
2. 
   Based on the results does it appear that there are errors of fraud?
   

1. 
   Prepare a histogram of the 2010 population numbers using a histogram with 10 intervals. Save the file as Case_9_17a.xlsx.
   
2. 
   Run the My Law test by comparing the 2010 first-two digits graph to the 2000 first-two digits graph. Use the Nigrini Cycle template and change the second-order graph to be another first-two digits graph. Delete all unneeded tabs and tables. Is there a significant difference between the two periods? Use the MAD criterion and Table 9.2. Save the file as Case_9_17b.xlsx.
   

1. 
   With respect to Case 9-17 data (county populations), what subset variable could be used to run the largest subsets test? What would the results be telling us?
   
2. 
   Why is it inefficient for an airline company headquartered in Chicago to receive 12,000 invoices from the printer down the road for business cards?
   
3. 
   How could a credit card refund issued by a company be fraudulent?
   
4. 
   Are we always only interested in the largest subsets? Are there cases when we might be interested in the smallest subsets?
   
5. 
   When looking at subset growth, is the dollar amount or the dollar percentage amount the only way that we can measure an increase? How else can we measure an increase from period to period?
   

6. 
   The goal of the largest subsets test is to find subsets that are highly _____ (deflated/inflated/upflated) due to error or fraud.
   
7. 
   The largest subset test sometimes also requires a review of the medium-sized totals when looking for suspicious items (true/false).
   
8. 
   The audit recommendation in the case of the erroneous $620,000 employee reimbursement was that the system flag potential high dollar errors ______ (before/immediately after/at the same time as) the employee reimbursement checks are printed.
   
9. 
   Running the largest subsets test in Access uses the ____ (IIF/Sort/Group By), Count, and Sum functions to identify the largest subsets.
   
10. 
    We have a problem in calculating a percentage change when the _____ (prior period/current period) has a sum of zero dollars.
    

1. 
   The largest subsets test is useful because experience has shown that fraudsters (at least the ones that were caught) generally ________ .
   

f.Do not know how to print an authentic looking invoice

g.Do not know when to stop

h.Prefer to commit a fraud on a Friday

32.Running the largest subsets test is quite straightforward using Excel's ________ capabilities.

a.Pivot table

b.Line chart

c.Formula function

d.Pivot label

33.To change a null (blank or missing) value for either period 1 or period 2 in Access we would use the following two Access functions,

a.If, Is Null

b.IIf, Is Null

c.If, Is Blank

d.IIf, Is Blank

34.When running the largest subsets test in Access, the usual last step is to,

a.Graph the results in Excel

b.Use the Top Values property to display only the top values

c.Choose your subset field

d.Select the table that contains the transaction data

35.To run the largest subsets test we need a data set with at least ______ field(s).

a.One

b.Two

d.N/A, we need at least two rows of data.

1. 
   Run the largest subsets test in Excel using vendors as the subset variable and Excel's pivot table capabilities. Your result should look like Figure 10.13. The results should be formatted as a table using table style medium 2. Save your result as Case_10_16.xlsx.
   
2. 
   Run the largest subsets test in Access and calculate the total sums and counts for 2010. Sort by the sum descending. Use the Top Values property to limit the results to the top 100 vendors measured by total dollars. Your result should look like Figure 10.4. Save your query as qryLargestVendors.
   

1. 
   Run the largest growth test in Excel by calculating the percentage change for each state from 2000 to 2010. Your final result should look like Figure 10.17. Save the Excel file as Case_10_17.xlsx.
   
2. 
   Do the results for any of the states seem anomalous?
   

1. 
   What types of anomalies does the RSF test aim to identify?
   
2. 
   Does the RSF formula always have to use the second largest record in the denominator? If not, what other options are there?
   
3. 
   What is the decimal point error?
   
4. 
   Why do we delete negative numbers before calculating the RSF?
   
5. 
   Is it always more work to run the RSF test in Access, as opposed to Excel?
   

6. 
   The RSF test was developed as a result of a company wiring $600,000 in _____ (earnest/terror/error) to the bank account of a charity.
   
7. 
   Large RSFs are more indicative of error when the subset has _____ (few/zero/many) records.
   
8. 
   The second largest record for a subset is identified in Access by using the 2NDLARGEST function (true/false).
   
9. 
   In both Access and Excel the RSF is calculated to ____ (zero, one, two, four) decimal places.
   
10. 
    The two largest invoices listed for a vendor could actually be the same invoice (true/false).
    

1. 
   The numerator of the RSF formula is ________ .
   

f.The smallest record in the subset

g.The second largest record in the subset

h.The largest record in the subset

36.When running the RSF test, subsets with only ______ are deleted.

a.Small records

b.Large records

c.One record

d.Two records

37.When the largest and second largest items are equal, the RSF is equal to _____ .

a.Zero

b.-1.00

d.Infinity

38.The second largest amount in the subset acts as a(n) ______ or norm.

a.Benchmark

b.Equation

c.Subset

39.The query to select the transactions for a specified vendor is called a _____ query. This query prompts the user for the vendor number.

a.Join

b.Make Table

d.Parameter.

1. 
   Run the RSF test in Access. Sort by the RSF descending. Your results should match those of qryRSF11 in the book (however, only the results of qryRSF10 are shown in the book).
   
2. 
   Show the transactions for vendor 3653.
   

1. 
   Run the RSF test in Excel using the states as the subset variable and the 2010 population numbers as the numeric amounts. Use the usual RSF formula as shown in equation 11.1. Do not delete any records since the minimum population number for any county is 82 people. Your final result should look like Figure 11.27. Save the Excel file as Case_11_17.xlsx.
   
2. 
   Do the results for any of the states seem anomalous?
   
3. 
   Is it possible to get a RSF result that is less than 1.00?
   

1. 
   Companies usually have checks built in to their systems to prevent duplicate payments. Is it not then a waste of the auditor's time to test for duplicate payments when the system has a check built in to prevent duplicate payments?
   
2. 
   How does a company end up paying the same amount, on the same date, against the same invoice number, to different vendors?
   
3. 
   Does the same-same-different test work best with data for a short period of time, or with data from a long period of time?
   
4. 
   Is a regular payment to a vendor (say $6,000 per month) always an indicator of fraud or error?
   
5. 
   Can the subset number duplication test be run on the 2010 census data?
   

6. 
   Excel's pivot table capabilities are well-suited to running the SSS test (true/false).
   
7. 
   The "D" in the SSD test stands for _____ (divergent/distant/different).
   
8. 
   The number duplication factor is calculated using a _______ (graph/formula/trend).
   
9. 
   If an investigation shows many duplicate payments, the forensic report should suggest system improvements to _____ (increase/reduce) the chances of this happening again.
   
10. 
    Running the SSD test in Access uses a series of five ____ (tables, reports, forms, queries).
    

1. 
   The SSS, SSD, and NFF tests are all aimed at finding ______ .
   

f.Outliers

g.Correlations

h.Trends

a.0

c.100

41.The SSD test is well-suited to identifying cases where the wrong vendor is paid ______ and the correct vendor is paid _______ .

a.In cash, by check

b.By check, in cash

c.First, second

d.Second, first

42.Access has ______ that can perform an adequate, but not perfect, job for the SSS and SSD tests.

a.Experts

b.Modules

c.Gurus

43.To keep the SSS and SSD results to a manageable size we could _________ .

a.Delete all subsets with just one or two records

b.Delete all records below a dollar threshold

c.Run the tests twice, once on the first six months and once on the last six months

d.Combine the SSS and SSD results into one table

1. 
   Run the SSS test in Access to identify cases of the same vendor, the same date, and the same amount. Limit your results to amounts that are greater than or equal to $50. Sort the results by Count descending and then by Amount descending.
   
2. 
   Does any particular vendor seem to warrant a closer look?
   
3. 
   Run the SSD test in Access to identify cases of the same date, the same amount, and different vendors. Limit your results to amounts that are greater than or equal to $50. Sort the results by Count descending and then by Amount descending.
   
4. 
   Do any transactions warrant a closer look?
   
5. 
   Run the subset number duplication test. Limit your results to amounts that are greater than or equal to $50. Sort the results by NFF descending and then by Sum descending.
   
6. 
   Does any particular vendor seem to warrant a closer look?
   

1. 
   Run the appropriate test in Excel to identify cases where a state has two or more counties with the same 2010 populations. For example, Texas might have ABC county and DEF county that each have 1,146 people. Save the Excel file as Case_12_17.xlsx.
   
2. 
   Do the results for any of the states seem anomalous?
   

1. 
   Describe what is meant by preventive controls, detective controls, and corrective controls?
   
2. 
   Describe the concept of correlation.
   
3. 
   Explain what is meant by the statement that correlation does not imply causation.
   
4. 
   Do we encounter more positive correlations or negative correlations in real world data? That is, which of the two occurs most often in the real world?
   
5. 
   Is it ever useful to calculate the correlation between one variable and another variable where the first variable is subject to measurement error?
   

6. 
   Correlation measures how well two sets of data are _____ (geometrically/linearly/proportionally) related.
   
7. 
   A calculated correlation of zero is ____ (possible/impossible/the norm).
   
8. 
   It is reasonably easy to estimate the calculated correlation by looking at the data on a graph (true/false).
   
9. 
   A correlation of 0.80 says that the association is ____ (weak/negative/strong).
   
10. 
    If the world total for carbon dioxide emissions shows a strong increase from 1989 to 2008, then a country with a correlation of 0.98 _____ (also showed a strong increase/showed no change/showed a decrease) in its emissions for the period.
    

1. 
   Correlation is used on a proactive basis as a(n) ________ .
   

f.Detective control

g.Internal control

h.Corrective control

44.The most efficient route is to design systems so as to _____ errors or fraud from occurring through tight preventive controls.

a.Augment

b.Invent

c.Repent

45.The lowest possible value for a calculated correlation is,

a.-100.00

b.-1.00

d.Minus infinity

46.The use of correlation is well suited to situations where there are a large number of _______ units.

a.Measurement

b.Forensic

c.Inventory

d.Cohesive

47.Correlation can be calculated in Excel by using its _____ function.

a.FORENSIC

b.CALC

d.CORREL
Cases

1. 
   Create a new table tblInvoicesPos (for invoices that are positive) that includes only positive (greater than zero) amounts and only the transactions for those vendors that have more than one positive invoice amount. This table only needs the Amount and the Vendor fields. Use a series of queries that ends with a Make Table query to create your table with 35,855 records. Use this table for the questions that follow.
   
2. 
   Calculate the average invoice amount for each vendor. Round the result to the nearest cent. Your query should include the vendor number, the average invoice amount for each vendor, and the count of the invoices for each vendor. Your result should have 2,309 records.
   
3. 
   Calculate the correlation between the count and the average amount. What does the result tell you?
   

1. 
   Calculate the correlation between the 2000 and the 2010 population numbers for each state. For the analysis change the blank (null) values in 2010 to zeroes. Use the correlation function in Excel. Your final result should be a table of 51 correlations similar to Figure 13.18 except that the names will be the names of states and not countries. Save the Excel file as Case_13_17.xlsx.
   
2. 
   What conclusions do you draw from your results?
   

1. 
   What are the two main goals of time-series analysis in a forensic context?
   
2. 
   Can time-series analysis take into account a change in conditions in the current period?
   
3. 
   What is the equivalent of the MAPE measure in linear regression?
   
4. 
   Since linear regression is easily done in Excel, and since linear regression would also extrapolate the past, why don't we just use linear regression for the revenue or expense forecasts?
   
5. 
   If we were using forecasts for 2013 as a continuous monitoring technique, would we have to wait until the end of 2013 before we could compare the actual numbers to the forecast numbers?
   

6. 
   A time-series is a sequence of the successive values of an expense or revenue stream in units or dollars over unequally spaced time intervals (true/false).
   
7. 
   On a time-series graph the dates or time units are plotted on the y-axis (the vertical axis) (true/false).
   
8. 
   When running time-series in Excel the seasonal factors need to be calculated before the forecasts can be calculated (true/false).
   
9. 
   A ____ (high/low) MAPE indicates a close fir between the actual past values and the fitted time-series values.
   
10. 
    The heating oil sales data shows that the demand is highly ________ (reasonable/seasonal/elastic) with a low demand in the warm summer months and a high demand in the cold winter months.
    

1. 
   The suggested metric for assessing the goodness-of-fit for time-series data is the _____.
   

f.R²

g.MAPE

h.Chi-square statistic

a.Measurement

b.Inventory

c.Seasonal

d.Forensic

49.Time-series analysis is used to _____ the revenues or expenses for future periods.

a.Audit

b.Predict

d.Control

50.A ______ pattern is one that cycles up and down over long unequal time periods.

a.Regression

b.Linear

c.Geometric

d.Cyclical

51.Time-series can be calculated in Excel by using its _____ function.

a.TIME

b.FORECAST

d.There is no time-series function in Excel

1. 
   Create an Excel data file with the 2008 to 2011 heating oil data that follows the same format as the table in Figure 1.20. The table should have three fields, namely Year (2008 to 2011), Month (1 to 12) and GallonsPD (with the numbers shown above). The table will have 48 rows. It will be easier to use Excel to create the table. Save the Excel file as Case_14_16.xlsx.
   
2. 
   Graph the data in Excel.
   
3. 
   Import the data into Minitab. Run time series analysis on the data using Stat→Time Series→Decomposition. The variable is GallonsPD and the seasonal length is 12. Choose the generate forecasts option to generate 12 forecasts (i.e., for 2012). Show the forecasts in a graphical form as produced by Minitab and also in an Excel worksheet.
   

1. 
   Calculate the seasonal factors for the data as is shown in Column K of the worksheet in Figure 14.18. Include the labels in Column L. Use columns B, C, and D for your data just as is done in Figures 14.17 and 14.18. Your columns should therefore match the columns in Figures 14.17 and 14.18.
   
2. 
   Are the high seasonal factors associated with the high volume months, or are the low seasonal factors associated with the low volume months?