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Bac 409: Forensic Accounting Question Paper
Bac 409: Forensic Accounting
Course:Bachelor Of Commerce
Institution: Kenyatta University question papers
Exam Year:2016
KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2016/2017
FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE
BAC 409: FORENSIC ACCOUNTING
DATE: FRIDAY 2ND DECEMBER 2016 TIME: 2.00 P.M. - 4.00 P.M
INSTRUCTIONS
ANSWER ALL QUESTIONS
QUESTION ONE
a) Metrine is the purchasing manager at a retail store. She decides to form her own shell company and purchase merchandise through this entity. She then sells the merchandise to her employer at an inflated price as if she were a legitimate vendor.
i. What type of fraudulent scheme is Metrine committing (1 mark)
ii. Briefly discuss how this type of fraudulent scheme works and the effect on the fraudster and the victim. ( 2 marks)
b) Rephah Namarome runs her own business, but has decided to close it. Before she does so, she orders a large quantity of inventory on credit and resells it for cash. She closes the business and leaves the suppliers with almost nothing to recover in the bankruptcy proceedings that follow. Required
i. State the type of fraudulent scheme committed by Rephah Namarome (1 mark)
ii. In this type of fraudulent scheme, which type of assets does the fraudster typically purchase and then sell prior to closing business (2 marks)
c) David Livingstone, a city commissioner negotiated a land development deal with a group of private investors. After the deal was approved, the investors rewarded Livingstone with an all-expenses paid vacation to Dubai. Required
i. What is the most appropriate term to describe what has taken place? (1 mark)
ii. Supposing the investors had rewarded Livingstone before the deal was approved. What would be the appropriate term to describe such an action? ( 1 mark)
iii. What is the distinguishing factor in the fraudulent scheme committed in (i) above and (ii) above? (2 marks)
d) Generally financial experts play two roles in the litigation process. These roles are as a testimonial and non-testimonial expert. Required
i. Briefly state and highlight the roles of a non-testimonial expert (3 marks)
ii. Briefly state and highlight two roles of a testimonial expert covering the requirement in each phase (2 marks)
Question two
You are provided with the following figures for Nanjumbia ltd, for the accounting periods 2014 and 2015
Description 2015 2014
Net sales Shs 100,000 Shs 80,000
Cost of goods sold Shs 58,000 Shs 57,000
Gross margin Shs 42,000 Shs 23,000
Selling expenses Shs 5,000 Shs 4,000
Distribution expenses Shs 4,000 Shs 2,000
Salaries and wages Shs 8,000 Shs 5,000
Other expenses Shs 18,000 Shs 11,000
Pretax income Shs 7,000 Shs 1,000
Income tax expense Shs 2,100 Shs 300
Net income Shs 4,900 Shs 700
The managing director is informed that, you one of the early learners of forensic accounting and approaches you for assistance regarding using various techniques of preparing the above data into change statements. Required
a. Using the knowledge you have learned in forensic accounting, prepare a change statement using horizontal analysis using the above data (10 marks)
b. Prepare a vertical analysis of statements with the base net sales for the above data (10 marks)
QUESTION THREE
a. In forensic accounting studies, before a fraud can be investigated one must have predication.
Required
i. What do we mean by the term predication? (1 mark)
ii. Briefly state and explain at least seven sources of predication (7 marks)
b. According to Statement on Auditing Standard (SAS) No. 99, consideration of fraud in a financial statement audit, the auditor is required in addition to performing an audit to determine the potential that the financial statements were affected by fraud. Therefore it’s important for the auditor to have a brainstorming session before having an audit.
Required
Briefly state and explain four issues/ objectives that can be discussed in such a brainstorming session. (4 marks)
c. Briefly state and explain four types of evidence that can be collected in fraud investigations. (8 marks)
QUESTION FOUR
An approach to fraud investigation involves two triangles, the fraud motivation triangle and the fraud element triangle.
REQUIRED
i. Briefly state the elements in a fraud element triangle while highlighting the corresponding investigative method involved (6 marks)
ii. Briefly state and explain in detail the elements of a fraud motivation triangle and how it works (9 marks)
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