1. Lost profits generally means the difference in profits between (a) what the plaintiff would have earned but for the defendant's actions and (b) the actual profits made by the plaintiff.

a. True

b. False

 

2. Prejudgment interest is used to compensate the plaintiff for the interest not earned on lost profits from the date of the incident or event giving rise to damages to the date of trial.

a. True

b. False

 

3. Family law engagements can include both fraud investigation elements, such as searching for undisclosed or diverted assets, and business valuation elements.

a. True

b. False

 

4. Generally, under the U.S. federal bankruptcy laws, liabilities are quantified by class.  All of the priority claims must be paid in full before any payments will be made to general unsecured claims.

a. True

b. False

 

5. A forensic accountant can serve in a variety of roles in a bankruptcy setting, including consultant, administrator of the estate, examiner, financial analyst or investigator. All of these roles share a common requirement to fulfill the requirements of the law to the bankruptcy estate while preventing fraud or material errors.

a. True

b. False

 

6. Which of the following is NOT a business valuation approach?

a. Income approach

b. Market approach

c. Asset approach

d. Reasonable yield approach

 

7. What is the definition of fair market value?

a. The price in cash at which an asset will change hands between a hypothetical buyer or seller, acting at arms' length, not under compulsion, in an open and unrestricted market and with reasonable knowledge of relevant facts.

b. The price in cash at which an asset will change hands between a specific buyer and specific seller, acting at arms' length, not under compulsion, in an open and unrestricted market and with reasonable knowledge of relevant facts.

c. The price in cash at which an asset will change hands between a buyer or seller, acting at arms' length, on a going concern basis, in an open and unrestricted process and with reasonable knowledge of relevant facts.

d. The value determined by a qualified business appraiser using the average of market, income and asset approaches with reasonable and appropriate assumptions

 

8. Which of the following is NOT a true statement about the market approach to business valuation?

a. There are databases of merger and acquisition transactions that can be used to gather pricing guidance by reference to completed transactions for companies similar to the subject company.

b. One important decision in the guideline company method is the selection of a group of publicly-traded companies for the purposes of pricing guidance.  It's important to select companies with similar characteristics to the subject company.

c. In order to ensure the reliability of the business valuation, the analysts uses the pricing guidance without adjustments.

d. Market prices are usually expressed as a multiple of some business measure, such as earnings or cash flow.  These multiples are then used to price the same measures for the subject company.

 

If an external auditor discovers a potential asset misappropriation by a chief financial officer, the audit team should conduct a forensic investigation.

a. True

b. False