Question 1

You are an auditor reviewing the financial statements of a firm that manufactures construction equipment The firm's sales have slowed in recent months. Within the last quarter it has closed one of its lactones, however the firm's management are still reporting a positive outlook. Concerned shareholders have asked you to investigate (or possible signs of improper accounting or fraud. You are reviewing two balance sheets from the start and end of the quarter below Given this information and your knowledge of the company s status which issue is MOST likely to be a red flag?

Options :

A : Receivables and inventory levels have increased over three months despite a reduction in sales

B : Wages payable has reduced by nearly $100,000 in the last three months

C : The firm's property plant and equipment have dropped substantially in the past three months

D : Other liabilities have remained roughly the same over the three-monlh period despite a decline in total liabilities

Answer: A

Question 2

A bank holds accounts for several different gatekeeper clients such as attorneys accountants and company formation agents II is conducting a periodic review of these accounts and updating their risk ratings. Which two accounts should the bank consider to be at highest risk? Choose 2 answers

Options :

A : A company formation agent that establishes private investment companies primarily for clients in Africa and Asia

B : An attorney whose practice specializes in cases involving maritime law in the international shipping industry

C : An accountant at a private accounting firm whose clients are large multinational agricultural corporations

D : A notary in Latin America who specializes in assisting clients from other countries with high-end real estate transactions

Answer: A,D

Question 3

John purchased a property live years ago Real estate records show that two years ago, John transferred his interest to a third parley Susan. Susan obtained a mortgage on the properly with a mortgage company Company Z. John maintains the properly and pays the mortgage and taxes John only lives there on the weekends John also rents a room to someone who lives at the property full time. You are the investigator tasked with identifying the property's beneficial owner Who is the beneficial owner?

Options :

A : John

B : Company Z

C : Susan

D : Renter

Answer: A

Question 4

You are the chief compliance officer for a non-U S Bank that maintains some accounts in the name of U S residents Your country has signed a FATCA Model 1 inter-governmental agreement. In developing your FATCA compliance program which should be incorporated into your program?

Options :

A : Customer due diligence for FATCA should be based on existing IRS requirements (or Qualified Intermediaries

B : Customer due diligence for FATCA should leverage your existing AML program

C : IRS reporting must include all account balances and securities held in the name of a US resident

D : Once evidence indicates a relationship with a U S resident, an exemption to file form must be obtained

Answer: C

Question 5

An internal auditor is conducting a quality assurance review of sales results and records for a large U.S. based aerospace and defense contracting firm The auditor has been tasked with reviewing the recordsofsales departments in several countries because the company has raised concerns over accounting discrepancies and possible issues with inflated sales figures. In the records of one sales department the auditor documents an unusually high number of returnsofairplane parts. These returns come from purchasers who executed sales contracts only to invoke right of return shortly afterwards. Upon reviewing thesesales contracts,the auditor cannot find specific provisions regarding right of return for purchasers. Given this information which is the MOST likely conclusion the internal auditor will make?

Options :

A : The sales department may be violating sanctions through the undocumented saleofdual-use goods to countriessubjectto U S sanctions

B : The sales department manager may be involved in an embezzlement scheme tied to the returned airplane parts

C : The sales department may be involved in a tax evasion scheme involving falsified returns to disguise undisclosed assets

D : The sales department may beinvolved in a fraudulent revenue recognition scheme related to hidden payment andrefundterms

Answer: D

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