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

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 4

A hacker gains access to aclient’semail. The hacker, posing as the client contacts the real client's financial advisor and requests a wire transfer of S50,000 The advisor sells stock to generate cash and wires the funds to the account at ABC Bank provided by the hacker Has money laundering occurred?

Options :

A : Yes; the advisor sold stock and generated cash

B : No; there was no placement of funds in the account

C : No; the hacker has committed fraud but not money laundering

D : Yes; the hacker committed fraud and then wired money out to hide its origin

Answer: D

Question 5

Your construction company wishes to hire Mr. X to provide consultancy services within his country. He has his own consulting firm and is also a board member of a state-owned bank Mr. X is known for having highlevel business connections and for charging exorbitant rales for his services Mr. X does not like to complete paperwork and prefers to work based on a verbal agreement. Which three facts are red flags requiring enhanced due diligence? Choose 3 answers

Options :

A : Mr. X may be considered to be a politically exposed person (PEP)

B : The price Mr. X charges is suspect if fees are not itemized and documented

C : As a board member of a stale-owned bank Mr. X may be considered a public official under the U.S. Foreign Corrupt Practices Act

D : The price Mr. X charges is suspect since he is in the business of helping companies obtain and retain business

Answer: A,B,C

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