Section 3 (Qs) - Fraud Risk Assessment

Front 1

During a fraud risk assessment, the assessment team should consider:

A. Opportunities for collusion.

B. The inherent limitations of internal controls.

C. Internal controls that might have been eliminated due to restructuring efforts.

D. All of these answers are correct

Back 1

All of these answers are correct

Front 2

The fraud risk assessment team should consider both qualitative and quantitative factors when assessing the organization's fraud risks.

Back 2

True

Front 3

A fraud risk assessment report should reflect the assessment teams subjective perspective and opinions that were formed during the assessment engagement.

Back 3

False

Front 4

Which of the following influences the level of a risk faced by an organization?

A. The ethics of its leadership team.

B. The effectiveness of its internal controls.

C. The geographic regions in which it operates.

D. All of these answers are correct.

Back 4

All of these answers are correct

Front 5

Fraudulent customer payments, corporate Espionage, and hacking schemes are all fraud risks pertaining to which of the following categories?

A. Regulatory and legal misconduct

B. External fraud

C. Reputation risk

D. Asset misappropriation

Back 5

External fraud

Front 6

The payment of bribes to procure business is considered a fraud risk pertaining to which category of fraud?

A. Asset misappropriation

B. Corruption

C. Fraudulent financial reporting

D. None of these answers are correct

Back 6

Corruption

Front 7

Which of the following is false regarding the communication of the fraud risk assessment process?

A. The communication should be personalized to make it more effective in encouraging employees to participate in the process.

B. Communication should be visibly disseminated through the business.

C. The communication should be in the form of the message from the assessment sponsor.

D. The communication should be limited to management and the board.

Back 7

The communication should be limited to management and the board

Front 8

Which of the following techniques for gathering information during a fraud risk assessment involves obtaining individuals responses through a formal electronic or paper questionnaire?

A. Interviews

B. Surveys

C. Focus Groups

D. Anonymouse feedback mechanisms

Back 8

Surveys

Front 9

When performing a fraud risk assessment, the fraud examiner should only designate an area as high risk if he assessment has conclusively revealed that fraud risk is occurring there.

Back 9

False

Front 10

The fraud risk assessment team should include:

A. Individuals who are credible

B. Individuals with diverse knowledge, skills, and perspectives.

C. Individuals with experience Gathering and eliciting information.

D. All of these answers are correct

Back 10

All of these answers are correct

Front 11

During an audit, Auditors should validate that the organization is appropriately managing the moderate to high fraud risks identified in the fraud risk assessment. Ways to do so include:

A. Designing and Performing tests to evaluate whether the identified controls are operating effectively and efficiently.

B. Identifying and mapping the existing controls that pertain to the moderate to high fraud risks identified in the fraud risk assessment.

C. Identifying with in the moderate to high fraud risk areas whether there is a moderate high risk of management override of internal controls.

D. All of these answers are correct.

Back 11

All of these answers are correct

Front 12

The size of the fraud risk assessment team will depend on the size of the organization and the methods used to conduct the assessment.

Back 12

True

Front 13

The fraud risk assessment team might include:

A. Accounting and finance personnel.

B. The general counsel.

C. External consultants.

D. All of these answers are correct

Back 13

All of these answers are correct

Front 14

Designating an area as having a high fraud risk and putting the related activity under increased scrutiny can deter potential fraudsters by increasing their perception of detection.

Back 14

True

Front 15

Preventative anti-fraud controls include all of the following except:

A. Hiring policies and procedures

B. Continuous audit techniques

C. Fraud awareness training

D. Segregation of duties

Back 15

Continuous audit techniques

Front 16

Fraud risk assessment should include input from both management and Auditors to ensure a holistic view of the organization's risks, but should exclude all others to maintain the independence and objectivity of the assessment process.

Back 16

False

Front 17

Which of the following individuals would generally be the best choice for a sponsor for a fraud risk assessment?

A. A mid-level sales manager

B. A CFO who has been known to command the use extremely aggressive Earnings management practices

C. A staff accountant

D. An independent audit Committee Member

Back 17

An independent audit Committee Member

Front 18

Which of the following is true regarding a fraud risk assessment?

A. The results should be used to develop plans to mitigate fraud risk.

B. It can help management identify individuals who put the organization at the greatest risk of fraud.

C. It can be used to improve employee fraud awareness.

D. All of these answers are correct.

Back 18

All of these answers are correct

Front 19

The results of the fraud risk assessment should be reported using a standardized risk assessment report developed by the ACFE or another Professional Association.

Back 19

False

Front 20

Which of the following is true regarding fraud risks?

A. Risks that are present before management action are described as residual risks.

B. The objective of anti-fraud controls is to make the residual fraud risk significantly smaller than the inherent fraud risk.

C. The objective of anti-fraud controls is to make the inherent fraud risk significantly smaller than the residual fraud risk.

D. The objective of anti-fraud controls is to completely eliminate residual fraud risks.

Back 20

The objective of anti-fraud controls is to make a residual fraud risk significantly smaller than the inherent fraud risk.

Front 21

Fraud risks that remain after management action are considered inherent risks.

Back 21

False

Front 22

The individuals conducting the fraud risk assessment should incorporate their existing biases regarding employees and processes into their assessment of overall fraud risk.

Back 22

False

Front 23

In response to a risk identified during a fraud risk assessment, management decides to eliminate an asset or discontinue an activity because the control measures required to protect the organization against the identified threat are too expensive. This response is known as:

A. Assuming the risk.

B. Avoiding the risk.

C. Mitigating the risk.

D. Transferring the risk.

Back 23

Avoiding the risk

Front 24

In response to a risk identified during a fraud risk assessment, management chooses to accept the risk, rather than to implement any responsive measures. This approach is known as....

Back 24

Assuming the risk

Front 25

The risk that an organization might be victimized by an individual who is able to combine three elements of the fraud triangle is called _____ _____.

Back 25

Fraud risk

Front 26

Detective anti-fraud controls include all of the following except:

A. Hotline

B. Proactive data analysis techniques

C. Hiring policies and procedures

D. Physical inspections

Back 26

Hiring policies and procedures

Front 27

In response to a risk identified during a fraud risk assessment, management decides to implement appropriate countermeasures, such as prevention and detection control. This response is known as...

Back 27

Mitigating the risk

Front 28

A fraud risk assessment report should contain a detailed, comprehensive list of every assessment finding and also suggested responses so that management can address each issue within the company, no matter how small.

Back 28

False

Front 29

In addition to the specific risks related to each of the three primary categories of fraud, the fraud risk assessment team should consider:

A. Reputation risk

B. Incentives for individuals to engage in fraud

C. Risk to information technology

D. All of these answers are correct

Back 29

All of these answers are correct

Front 30

The fraud risk assessment should be formally incorporated into the annual audit planning process.

Back 30

True

Front 31

During a fraud risk assessment, the assessment team should consider the Way employees make decisions, behave, or treat others and assess how those actions affect the company's vulnerability to fraud.

Back 31

True

Front 32

To ensure the independence of the team members, a fraud risk assessment must be conducted by a consultant or other external party.

Back 32

False

Front 33

Following the conclusion of the fraud risk assessment Process, Management should:

A. Use the assessment findings to monitor the performance of key internal controls.

B. Use the results to promote awareness, education, and action planning.

C. Track and measure progress against agreed-upon action plans.

D. All of these answers are correct.

Back 33

All of these answers are correct

Front 34

An effective system of internal controls:

A. Increases the perception that fraud will be detected.

B. Mitigate the risk of fraud, but cannot completely eliminate it.

C. Involves balancing preventive controls and detective controls.

D. All of these answers are correct.

Back 34

All of these answers are correct

Front 35

The success of the fraud risk assessment process depends on how effectively the results are reported and what the organization then does with those results.

Back 35

True

Front 36

As part of a fraud risk assessment, the assessment team should identify the individuals most likely to commit fraud in the methods they are likely to use.

Back 36

True

Front 37

Theft of competitor Trade Secrets, anti-competitive practices, environmental violations, and trade and Customs regulations in areas of Import and Export are all fraud risks pertaining to:

A. Regulatory and legal misconduct.

B. Fraudulent financial reporting.

C. Reputation risk.

D. Asset misappropriation.

Back 37

Regulatory and legal misconduct

Front 38

The fraud risk assessment process should be conducted covertly so that assessment team members can get an accurate picture of what actually occurs in the business.

Back 38

False

Front 39

Fraud risk assessment Frameworks are valuable because they have been developed to be applied as is within any organization.

Back 39

False

Front 40

Which of the following is true about the fraud risk assessment process?

A. The assessment team must be perceived as independent and objective by others for the assessment to be effective.

B. Conducting an effective fraud risk assessment requires thinking like a fraudster.

C. Management and Auditors should share ownership of the process and accountability for its success.

D. All of these answers are correct.

Back 40

All of these answers are correct

Front 41

When deciding on techniques to use as part of a fraud risk assessment, the assessment team should consider what methods are already commonly and effectively used throughout the organization.

Back 41

True

Front 42

In identifying the fraud risks that could apply to the organization, the fraud risk assessment team should specifically discuss the potential for management override of controls.

Back 42

True

Front 43

_____ controls are designed to stop something bad from happening before it occurs, while _____ controls are designed to identify something bad that has already occured.

Back 43

Preventetive; detective

Front 44

In response to a risk identified during a fraud risk assessment, management decides to purchase a bond to help protect the company against the associated risk of loss. This response is known as....

Back 44

Transferring the risk

Front 45

The objective of a fraud risk assessment is....

Back 45

To help an organization identify what makes it most vulnerable to fraud