1 It is important for a forensic accountant to understand
1. It is important for a forensic accountant to understand the client firm’s industry as well as local and national economic conditions.
a. True
b. False

2. A forensic accountant need not consider the factors set forth in Rev. Rul. 59– 60.
a. True
b. False

3. The objective of the data gathering effort is to obtain sufficient data to quantify and qualify:
a. The ability of the business to produce future earnings
b. The risk associated with the production of future earnings
c. Both a and b
d. Neither a nor b

4. Each of the following is an acceptable valuation ­approach except:
a. Asset approach
b. Market approach
c. Income approach
d. Owner valuation approach

5. The asset valuation approach often requires a forensic accountant to rely on assistance from other professionals, such as real estate and equipment appraisers.
a. True
b. False

6. The net asset value method is most commonly used in valuations of:
a. A company pending liquidation
b. A company with over $ 1 billion in total assets
c. A company with net earnings below $ 100 million
d. Both b and c are correct responses to this question

7. When using the income approach, a forensic accountant employs:
a. A future value of prior year earnings concept
b. Time value of money techniques
c. Residual value analysis techniques
d. IRS approved procedures

8. The market approach is used by forensic accountants to value a business when it is easy to obtain data on comparable companies in the client’s industry.
a. True
b. False

9. Once a forensic accountant has completed his or her valuation analysis, each of the following report types might be issued except:
a. Calculation report
b. Detailed report
c. Summary report
d. Explanatory report

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