Fraud Examination Test #1

Front 1

T/F A fraud may be perpetrated through an unintentional mistake.

Back 1

False

Front 2

T/F One of the most common responses to fraud is disbelief.

Back 2

True

Front 3

T/F There is no difference between a Certified Fraud Examiner (CFE) and a Certified Public Accountant (CPA).

Back 3

False

Front 4

Which of the following is not true regarding the ACFE?
a. It is the largest antifraud organization in the world.
b. It is the premier provider of antifraud training.
c. The entire organization is dedicated to the prevention of fraud.
d. It has roughly 12,000 members throughout the world.

Back 4

d. It has roughly 12,000 members throughout the world.

Front 5

Which of the following is not a reliable source for fraud statistics?
a. Health agencies.
b. Insurance organizations.
c. Fraud perpetrators.
d. FBI agencies.

Back 5

c. Fraud perpetrators.

Front 6

T/F Many companies hide their losses from fraud rather than make them public.

Back 6

True

Front 7

Which of the following is the least important element of fraud?
a. Intelligence
b. Deception
c. Confidence
d. Trickery

Back 7

a. Intelligence

Front 8

T/F Perpetrators use trickery, confidence, and deception to commit fraud.

Back 8

True

Front 9

Which of the following is not an example of employee embezzlement?
a. Angry employees vandalizing the building with spray paint.
b. Salespeople overcharging for products and pocketing the excess cash.
c. Checkout cashiers stealing money from the cash register.
d. Land conservation employee stealing chain saws.

Back 9

a. Angry employees vandalizing the building with spray paint.

Front 10

Which of the following statements is true?
a. Fraud is often labeled the fastest growing crime.
b. FBI agencies are spending approximately 35 percent of their time on fraudulent activities.
c. Bank robberies are more costly than frauds.

Back 10

a. Fraud is often labeled the fastest growing crime.

Front 11

Which one of the following characters is least likely to be involved in a significant fraud?
a. A long-haired teenager wearing leather pants.
b. Senior executives who have obtained stock options.
c. Middle-aged person who has a middle management position.
d. Recent college graduate.

Back 11

a. A long-haired teenager wearing leather pants.

Front 12

T/F Occupational fraud is usually fraud committed on behalf of an organization.

Back 12

False

Front 13

Which of the following is required to become a CFE?
a. All of the above.
b. Be of high moral character.
c. An individual must commit to abide by a strict code of professional conduct and ethics.
d. Be an associate member, in good standing, in the ACFE.

Back 13

a. All of the above.

Front 14

T/F The single most critical element for a fraud to be successful is confidence, which provides the fraudster the opportunity to take advantage of the fraud victim.

Back 14

True

Front 15

T/F Indirect fraud occurs when a company's assets go directly into the perpetrator's pockets without the involvement of third parties.

Back 15

False

Front 16

T/F All frauds that are detected are made public.

Back 16

False

Front 17

Which one of the following is not a form of vendor fraud?
a. Overcharge for purchased goods.
b. Shipment of inferior goods.
c. Nonshipment of goods even though payment is made.
d. Not paying for goods purchased.

Back 17

d. Not paying for goods purchased.

Front 18

T/F Advances in technology have had no effect on the size or frequency of frauds committed.

Back 18

False

Front 19

T/F Telemarketing fraud is an example of employee embezzlement.

Back 19

False

Front 20

T/F The only group / business that must report employee embezzlement is the federal government.

Back 20

False

Front 21

T/F A Ponzi scheme is considered to be a type of investment scam.

Back 21

True

Front 22

T/F Fraud perpetrators are often those who are least suspected and most trusted.

Back 22

True

Front 23

Investment scams most often include:
a. An action by top management against employees.
b. Worthless investments or assets sold to unsuspecting investors.
c. Nonpayment of invoices for goods purchased by customers.
d. An overcharge for purchased goods.

Back 23

b. Worthless investments or assets sold to unsuspecting investors.

Front 24

T/F The ACFE is a nonprofit organization dedicated to the prevention and detection of fraud throughout the world.

Back 24

True

Front 25

T/F Management fraud is when managers intentionally deceive their employees about the potential of raises, vacations, and other perks.

Back 25

False

Front 26

T/F Fraud losses generally reduce a firm's net income on a dollar-for-dollar basis.

Back 26

True

Front 27

Fraud is considered to be:
a. A problem that is under control.
b. A mild problem that most businesses need not worry about.
c. A serious problem that continues to grow.
d. A problem felt only by a few individuals, but not by most people.

Back 27

c. A serious problem that continues to grow.

Front 28

T/F Management fraud is deception perpetrated by an organization's top management.

Back 28

True

Front 29

Future careers in fraud will most likely be:
a. Low paying.
b. In low demand.
c. In higher demand and financially rewarding.
d. In about the same demand as now.

Back 29

c. In higher demand and financially rewarding.

Front 30

People who commit fraud are usually:
a. People with strong personalities.
b. Trusted individuals.
c. Not well-groomed, and have long hair and tattoos.
d. New employees.

Back 30

b. Trusted individuals.

Front 31

T/F Fraud involves using physical force to take something from someone.

Back 31

False

Front 32

Why does fraud seem to be increasing at such an alarming rate?
a. Computers, the Internet, and technology make fraud easier to commit and cover up.
b. People don't understand the consequences of fraud to organizations and businesses.
c. Most frauds today are detected, whereas in the past many were not.
d. A new law requires that fraud be reported within 24 hours.

Back 32

a. Computers, the Internet, and technology make fraud easier to commit and cover up.

Front 33

T/F When perpetrators are convicted of fraud, they often serve jail sentences and / or pay fines.

Back 33

True

Front 34

T/F Companies that commit financial statement fraud are often experiencing net losses or have profits that are less than expected by outside stakeholders (e.g., investors).

Back 34

True

Front 35

T/F It is most often people who are not trusted that commit fraud.

Back 35

False

Front 36

Corporate employee fraud fighers (best answer from among the choices):
a. Prevent, detect, and investigate fraud within a company.
b. None of the above above.
c. Work as postal inspectors and law enforcement officials.
d. Are lawyers who defend or prosecute fraud cases.

Back 36

a. Prevent, detect, and investigate fraud within a company.

Front 37

Which of the following is not an example of vendor fraud?
a. A vendor has much higher prices than its competitors.
b. A vendor bills for goods not provided.
c. A vendor overcharges for a contracting job which it completed on time.
d. A vendor bills for services not performed.

Back 37

a. A vendor has much higher prices than its competitors.

Front 38

T/F Most people agree that fraud-related careers will be in demand in the future.

Back 38

True

Front 39

Which one of the following is not a fraud type?
a. Supervisor fraud.
b. Direct employee embezzlement.
c. Investment scams.
d. Indirect employee embezzlement.

Back 39

a. Supervisor fraud.

Front 40

Studying fraud will help you to:
a. Avoid high risk and fraudulent activities.
b. Learn evidence gathering skills.
c. Learn valuable interviewing skills.
d. All of the above.

Back 40

d. All of the above.

Front 41

T/F Unintentional errors in financial statements are a form of fraud.

Back 41

False

Front 42

T/F A negative outcome in a civil lawsuit usually results in jail time for the perpetrator.

Back 42

False

Front 43

T/F Despite intense measures meant to impeded it, fraud appears to be one of the fastest growing crimes in the United States.

Back 43

True

Front 44

"The use of one's occupation for personal enrichment through the deliberate misuse or misapplicationof the employing organization's resources or assets" is the definition of which of the following types of fraud?
a. Employee embezzlement or occupational fraud.
b. Vendor fraud.
c. Investment scams.
d. Management fraud.

Back 44

a. Employee embezzlement or occupational fraud.

Front 45

T/F In vendor fraud, customers don't pay for goods purchased

Back 45

False

Front 46

T/F In civil cases, fraud experts are rarely used as expert witnesses.

Back 46

False

Front 47

"Deceptive manipulation of financial statements" describes which kind of fraud?
a. Bookkeeping fraud
b. Management fraud
c. Criminal fraud
d. Stock market fraud

Back 47

b. Management fraud

Front 48

What is the most important element in successful fraud schemes?
a. Profitable activities
b. Promised benefits
c. Complexity
d. Confidence in the perpetrator

Back 48

d. Confidence in the perpetrator

Front 49

T/F When fraud is committed, criminal prosecution usually proceeds first.

Back 49

True

Front 50

Which of the following is not true of civil fraud?
a. It usually beings when one party files a complaint.
b. Only "the preponderance of the evidence" is needed for the plaintiff to be successful.
c. The purpose is to compensate for harm done to another.
d. It must be heard by 12 jurors.

Back 50

d. It must be heard by 12 jurors.

Front 51

Opportunity involves:
a. Opportunity to conceal fraud.
b. Opportunity to commit fraud.
c. All of the above.
d. Opportunity to avoid being punished for fraud.

Back 51

c. All of the above.

Front 52

T/F Many organizations merely dismiss dishonest employees because of the expense and time involved in prosecuting them.

Back 52

True

Front 53

Fraud perpetrators:
a. Have profiles that look like most honest people.
b. Are usually very young.
c. None of the above.
d. Look like other criminals.

Back 53

a. Have profiles that look like most honest people.

Front 54

T/F Fraud perpetrators who are prosecuted, incarcerated, or severely punished usually commit fraud again.

Back 54

False

Front 55

Which one of the following is a common perceived pressure?
a. A financial need.
b. The ability to borrow money by committing fraud.
c. Opportunity to cheat others.
d. The ability to outsmart others.

Back 55

a. A financial need.

Front 56

T/F Effective fraud fighters usually put most of their time and effort into minimizing the pressures for fraud perpetrators to commit fraud.

Back 56

False

Front 57

T/F When hiring, it is usually difficult to know which employees are capable of committing fraud, especially without performing background checks.

Back 57

True

Front 58

T/F An individual who owns his or her own business and is the sole employee needs many control procedures.

Back 58

False

Front 59

T/F Good controls will often increase opportunities for individuals to commit fraud within an organization.

Back 59

False

Front 60

How frequently do most people rationalize?
a. Never
b. Rarely
c. Sometimes
d. Often

Back 60

d. Often

Front 61

Which one of the following is not one of the three elements of fraud?
a. Perceived opportunity.
b. Perceived pressure.
c. Rationalization.
d. Intelligence.

Back 61

d. Intelligence.

Front 62

Which of the following is an example of referent power?
a. The offer of a job promotion.
b. Your teacher asks you to do an assignment.
c. Fear that you may lose your job.
d. Your friend asks you to do a special favor for him / her.

Back 62

d. Your friend asks you to do a special favor for him / her.

Front 63

T/F Fraud can be perpetrated to benefit oneself or to benefit one's organization.

Back 63

True

Front 64

T/F Many frauds are allowed to be perpetrated because victims don't have access to information possessed by the perpetrators.

Back 64

True

Front 65

T/F Appropriate hiring will not decrease an organization's risk of fraud.

Back 65

False

Front 66

T/F The greater the perceived opportunity or more intense the pressure, the less rationalization it takes for someone to commit fraud.

Back 66

True

Front 67

Which of the following noncontrol factors provide opportunities for fraud?
a. All of the above.
b. Lack of an audit trail.
c. Failure to discipline fraud perpetrators.
d. Inability to judge the quality of performance.
e. Lack of access to information.

Back 67

a. All of the above.

Front 68

Which one of the following is not a common type of fraud pressure?
a. Financial pressures
b. Vices
c. Pressure to outsmart others
d. Work-related pressures

Back 68

c. Pressure to outsmart others

Front 69

T/F Management's example or modeling is of little importance to the control environment.

Back 69

False

Front 70

If pressures and opportunities are high and personal integrity is low, the chance of fraud is:
a. Low
b. High
c. Medium
d. Very Low

Back 70

b. High

Front 71

T/F A proper system of authorization will help ensure good internal controls.

Back 71

True

Front 72

Which of the following is not an element of most frauds?
a. Conversion.
b. Taking the assets.
c. Breaking and entering.
d. Concealment.

Back 72

c. Breaking and entering.

Front 73

Which of the following is not a way that management can establish a good control environment?
a. Proper training.
b. Communicating openly.
c. Having a clear organizational structure.
d. All of the above are ways that management can establish a good control environment.

Back 73

d. All of the above are ways that management can establish a good control environment.

Front 74

Who generally has the highest risk of becoming a fraud victim?
a. Older, less educated person.
b. None of the above.
c. College students.
d. Businessperson

Back 74

a. Older, less educated person.

Front 75

T/F Power is rarely used to influence another person to participate in an already existing fraud scheme.

Back 75

False

Front 76

Which of the following is an example of legitimate power?
a. Your boss tells you to do something.
b. The offer of valuable stock options.
c. A decision to participate in fraud based upon fear.
d. You do something because your colleague is more knowledgeable than you are in that particular subject matter.

Back 76

a. Your boss tells you to do something.

Front 77

Which of the following kinds of pressure is most often associated with fraud?
a. Financial pressure.
b. All of the above.
c. Vice pressure.
d. Work-related pressure.

Back 77

a. Financial pressure.

Front 78

Which of the following is not a common vice that motivates people to commit fraud?
a. Alcohol
b. Expensive extramarital affairs
c. All of the above are vices that motivate people to commit fraud.
d. Drugs
e. Gambling

Back 78

c. All of the above are vices that motivate people to commit fraud.

Front 79

T/F Organizations that want to prevent fraud must make it easy for employees and others to report suspicious activities.

Back 79

True

Front 80

T/F Once fraud has been committed, there are no winners.

Back 80

True

Front 81

T/F Organizations often want to avoid embarrassment and expense, so they terminate fraudulent employees without having them prosecuted further.

Back 81

True

Front 82

T/F Most fraud perpetrators have a long history of dishonesty and deceit.

Back 82

False

Front 83

Arguments for taking legal action against perpetrators of fraud include:
a. Prosecution keeps lawyers busy.
b. Prosecution discourages reoccurrence of fraud.
c. Huge cash settlements from prosecuting fraud are an excellent source of revenue.
d. Legal action usually results in positive publicity for the company / victim.

Back 83

b. Prosecution discourages reoccurrence of fraud.

Front 84

T/F Most investigators rely heavily on interviews to obtain the truth.

Back 84

True

Front 85

T/F Legal action taken by an organization can affect the probability of whether fraud will reoccur.

Back 85

True

Front 86

Usually, for everyone involved - especially victims - the investigation of fraud is very (best answer):
a. Pleasant and relaxing.
b. Traumatic and difficult.
c. Educational.
d. Exciting.

Back 86

b. Traumatic and difficult.

Front 87

All of the following are ways to create a culture of honesty and high ethics except:
a. Having top management model appropriate behavior.
b. Creating a positive work environment.
c. Eliminating opportunities for fraud.
d. Hiring the right kind of employees.

Back 87

c. Eliminating opportunities for fraud.

Front 88

T/F Expectations about punishment must be communicated randomly among work groups if fraud is to be prevented.

Back 88

False

Front 89

T/F Physical evidence includes evidence gathered from paper, computers, and other written documents.

Back 89

False

Front 90

To successfully prevent fraud, an organization must:
a. Take proactive steps to create the right kind of environment.
b. All of the above.
c. Explicitly consider fraud risks.
d. Identify internal control weaknesses.

Back 90

b. All of the above.

Front 91

Which of the four types of evidence includes interrogation and honesty testing?
a. Documentary
b. Testimonial
c. Personal observation
d. Physical

Back 91

b. Testimonial

Front 92

Opportunities to commit fraud can be eliminated by identifying sources of fraud, implementing controls, and through independent checks. One other effective way of eliminating opportunities is:
a. Identifying indicators of fraud or red flags.
b. Teaching employees to monitor and report fraud.
c. Terminating and punishing employees who commit fraud.
d. Failing to terminate or punish employees who commit fraud.

Back 92

b. Teaching employees to monitor and report fraud.

Front 93

Which of the following is not a proactive way for a company to eliminate fraud opportunities?
a. Assessing risks.
b. Creating widespread monitoring of employees.
c. Implementing appropriate preventive and detective controls.
d. Severely punish fraud perpetrators.

Back 93

d. Severely punish fraud perpetrators.

Front 94

T/F Effective hiring policies that discriminate between marginal and highly ethical individuals contribute to an organization's success in preventing fraud.

Back 94

True

Front 95

Which of the following is true regarding the Sarbanes - Oxley Act of 2002:
a. Public companies must have a whistle-blower system in place.
b. Public companies with revenues exceeding $10 million must have a whistle-blower system in place.
c. Companies with revenues exceeding $10 million must have a whistle-blower system in place.
d. All companies must have a whistle-blower system in place.

Back 95

a. Public companies must have a whistle-blower system in place.

Front 96

T/F Since complete fraud prevention is impossible because it requires changing actual human behavior, successful companies should forgo fraud prevention and instead focus on strong fraud detection programs.

Back 96

False

Front 97

To prevent fraud from reoccurring, most organizations and other fraud victims should:
a. Pursue civil remedies.
b. Take no legal action.
c. Pursue criminal remedies.
d. Pursue either civil or criminal remedies.

Back 97

d. Pursue either civil or criminal remedies.

Front 98

T/F If a perpetrator is not caught, his confidence in the scheme will decrease, and he will become less and less greedy.

Back 98

False

Front 99

T/F Developing a positive working environment is of little importance when creating a culture of honesty.

Back 99

False

Front 100

T/F Since fraud prevention programs are so costly, despite being ethically superior, they almost always result in higher costs and thus lower net income than using only a strong system of fraud detection.

Back 100

False

Front 101

T/F In order to create a culture of honesty and confidentiality, persons aware of fraudulent activity should be encouraged to tell only the CEO.

Back 101

False

Front 102

Drawbacks to establishing a hotline for employees to report fraud include all of the following except:
a. Fraud symptoms reported are caused by non-fraud factors.
b. This method for finding fraud is outdated.
c. Expense.
d. Many incidents reported are hoaxes motivated by grudges.

Back 102

b. This method for finding fraud is outdated.

Front 103

Factors that are usually associated with high levels of employee fraud include all of the following except:
a. Long and difficult hours shared equally by everyone in the the organization.
b. Negative feedback and lack of recognition of job performance.
c. Perceived inequalities in an organization.
d. High turnover and absenteeism.

Back 103

a. Long and difficult hours shared equally by everyone in the the organization.

Front 104

T/F Fraud is difficult to detect because some fraud symptoms often can not be differentiated from nonfraud factors that appear to be symptoms.

Back 104

True

Front 105

Most often victims of fraud do not take legal action against perpetrators because legal action can be:
a. Embarrassing.
b. Unproductive.
c. All of the above.
d. Expensive.

Back 105

c. All of the above.

Front 106

The three elements of fraud are:
a. Theft act, concealment, and conversion.
b. Theft act, rationalization, and opportunity.
c. Pressure, opportunity, and conversion.
d. Theft act, pressure, and opportunity.

Back 106

a. Theft act, concealment, and conversion.

Front 107

T/F Once predication is present, an investigation is usually undertaken to determine whether or not fraud is actually occurring.

Back 107

True

Front 108

T/F Investigating fraud is the most cost-effective way to reduce losses from fraud.

Back 108

False

Front 109

T/F Fraud prevention involves two fundamental activities: (1) a hotline for tips, and (2) assessing the risk of fraud and developing concrete responses to mitigate the risks and eliminate opportunities for fraud.

Back 109

False

Front 110

T/F Fraud prevention includes taking steps to create and maintain a culture of honesty and high ethics.

Back 110

True

Front 111

T/F No matter how well an organization has developed a culture of honesty and high ethics, most organizations will still have some fraud.

Back 111

True

Front 112

Most frauds start small and:
a. None of the above.
b. Remain steady and consistent.
c. Usually decrease in amount.
d. If not detected, continue to get larger.

Back 112

d. If not detected, continue to get larger.

Front 113

The tone at the top when related to fraud usually refers to management's attitude about:
a. Employee absenteeism
b. Office parites.
c. How it models and labels appropriate behavior.
d. Fraud prosecution.

Back 113

c. How it models and labels appropriate behavior.

Front 114

T/F Research has shown that it is employees and managers, not auditors, who detect most frauds.

Back 114

True

Front 115

The most effective way to reduce losses from fraud is:
a. Preventing fraud from occurring.
b. Severely punishing fraud perpetrators.
c. Detecting fraud early.
d. Implementing proactive fraud detection programs.

Back 115

a. Preventing fraud from occurring.

Front 116

Research shows that fraud occurs less frequently when employees feel:
a. Ownership in the organization.
b. Abused by management.
c. Threatened.
d. Challenged with unreasonable performance goals.

Back 116

a. Ownership in the organization.

Front 117

An investigative approach that includes testimonial evidence, documentary evidence, physical evidence, and personal observations is referred to as the:
a. Investigation square.
b. Fraud triangle plus.
c. Evidence square.
d. Investigative square of evidence.

Back 117

c. Evidence square.

Front 118

T/F When fraud is committed, the problem often is not a lack of controls, but the overriding of existing controls by management and others.

Back 118

True

Front 119

Which of the following factors generally results in a high-fraud environment?
a. Autocratic management
b. Providing an EAP
c. Hiring honest people
d. Both a and b

Back 119

a. Autocratic management

Front 120

Which of the following is usually the most effective tool in preventing and detecting fraud?
a. Discouraging collusion between employees and customers or vendors
b. Having a good system of internal controls
c. Creating an expectation of punishment in the company
d. Effective investigations of fraud symptoms

Back 120

b. Having a good system of internal controls

Front 121

T/F Two of the three elements in creating a positive work environment are (1) having an open-door policy, and (2) having positive personnel and operating procedures.

Back 121

True

Front 122

T/F Studies show that a positive and honest work culture in a company does little to prevent fraud.

Back 122

False

Front 123

Which of the following personnel and operating policies contribute to high-fraud environment(s)?
a. Management by crisis.
b. All of the above.
c. Rigid rules.
d. High employee lifestyle expectations.
e. Poor promotion opportunities.

Back 123

b. All of the above.

Front 124

Which of the following is not a reason identified by Deloitte why whistle-blowing systems fail?
a. Lack of anonymity.
b. Culture.
c. Lack of awareness.
d. Pressure to comply.

Back 124

d. Pressure to comply.

Front 125

Which of the following is not a recognized method of eliminating fraud opportunities?
a. Engendering employee goodwill by having lax rules.
b. Monitoring employees.
c. Creating an expectation of punishment.
d. Having good internal controls.

Back 125

a. Engendering employee goodwill by having lax rules.

Front 126

Which of the following aspects of fraud usually results in the largest savings?
a. Fraud prevention
b. Fraud detection
c. It is impossible to tell
d. Fraud investigation

Back 126

a. Fraud prevention

Front 127

T/F An important factor in creating a culture of honesty, openness, and assistance in the workplace is maintaining an employee assistance program.

Back 127

True

Front 128

T/F Even with the right opportunity or significant pressure, most people would probably not steal or embezzle.

Back 128

False

Front 129

T/F The major role of employee assistance programs is to help employees recover from the damaging psychological effects of fraud.

Back 129

False

Front 130

Which of the following factors contribute to creating a corporate culture of honesty and openness?
a. Not having an open-door policy
b. Having a well-understood and respected code of ethics
c. Hiring honest people
d. Both b and c
e. All of the above
f. Performing criminal background checks

Back 130

d. Both b and c

Front 131

The "tone at the top" is an important element in fighting fraud. This tone at the top involves:
a. Setting a proper example or modeling appropriate management behavior.
b. Doing a good job of integrity risk assessment.
c. Both a and d.
d. Having a positive organization where effective fraud teaching and training is conducted.

Back 131

c. Both a and d.

Front 132

T/F The increasingly complex nature of business helps to decrease the number of collusive frauds.

Back 132

False

Front 133

T/F Even a good system of internal controls will often not be completely effective because of fallibilities of the people applying and enforcing the controls.

Back 133

True

Front 134

People will often be dishonest if they are placed in an environment of:
a. All of the above.
b. Poor controls.
c. High pressure.
d. Loose accountability.
e. Low integrity.

Back 134

a. All of the above.

Front 135

T/F Creating an expectation of punishment causes firm morale to deteriorate and often results in lower productivity.

Back 135

False

Front 136

T/F Not prosecuting fraud perpetrators is cost-effective both in the short run and in the long run.

Back 136

False

Front 137

T/F Not all possible controls should be implemented; rather, one must assess a control's cost and benefits before implementation.

Back 137

True

Front 138

A company's control environment includes:
a. The tone that management establishes toward what is honest and acceptable behavior.
b. Corporate hiring practices.
c. All of the above.
d. Having an internal audit department.

Back 138

c. All of the above.

Front 139

T/F First-time offenders usually exhibit no psychological changes.

Back 139

False

Front 140

When a person commits a crime:
a. He or she usually becomes engulfed by emotions of fear and guilt.
b. He or she will experience no changes in behavior.
c. He or she usually becomes friendly and nice.
d. He or she experiences a lower stress level.

Back 140

a. He or she usually becomes engulfed by emotions of fear and guilt.

Front 141

T/F Fraud perpetrators who manipulate accounting records to conceal embezzlements often attempt to balance the accounting equation by recording expenses.

Back 141

True

Front 142

T/F Most people who commit fraud are under financial pressure.

Back 142

True

Front 143

Which of the following is not a reason people are hesitant to come forward with knowledge or suspicions of fraud.
a. They often think that squealing on someone is wrong.
b. They fear reprisal for being a whistle-blower.
c. It is usually impossible to know for sure that a fraud is taking place.
d. People who report fraud are often rewarded monetarily.

Back 143

d. People who report fraud are often rewarded monetarily.

Front 144

T/F Analytical fraud symptoms are the least effective way to detect fraud.

Back 144

False

Front 145

In the three elements of fraud (theft act, concealment, and conversion), who is usually in the best position to detect the fraud?
a. Coworkers and managers
b. Customers
c. Owners
d. Vendors

Back 145

a. Coworkers and managers

Front 146

T/F A check is an example of a source document.

Back 146

True

Front 147

T/F Auditors can best help detect fraud in conversion.

Back 147

False

Front 148

T/F Most people who commit fraud use the embezzled funds to save for retirement.

Back 148

False

Front 149

T/F New whistle-blowing laws have helped make tips and complaints more effective.

Back 149

True

Front 150

T/F Because of the nature of fraud, auditors are often in the best position to detect its occurrence.

Back 150

False

Front 151

T/F As fraud perpetrators become more confident in their fraud schemes, they steal and spend increasingly larger amounts.

Back 151

True

Front 152

Which of the following is a fraud syptom related to an internal control weakness?
a. Lack of proper authorization
b. Lack of independent checks
c. Inadequate accounting system
d. Lack of physical safeguards
e. All of the above

Back 152

e. All of the above

Front 153

Most people who commit fraud:
a. Use embezzled funds to build a savings account.
b. Give the embezzled funds to charity.
c. Experience no change in their lifestyle.
d. Use the embezzled funds to improve their lifestyle.
e. None of the above

Back 153

d. Use the embezzled funds to improve their lifestyle.

Front 154

Which of the following is not a fraud symptom related to source documents?
a. Duplicate payments
b. Missing documents
c. A tip from an employee
d. Photocopied documents

Back 154

c. A tip from an employee

Front 155

Fraud is usually detected by recognizing and pursuing:
a. Synonyms.
b. Symptoms.
c. Equity.
d. Legends.

Back 155

b. Symptoms.

Front 156

T/F Fraud perpetrators often live beyond their means since their income does not support their lifestyle.

Back 156

True

Front 157

T/F Analytical anomalies are present in every fraud.

Back 157

False

Front 158

T/F Some complaints and tips turn out to be unjustified.

Back 158

True

Front 159

Which element is not a common element of fraud?
a. Concealment
b. Coercion
c. Conversion
d. Theft act
e. None of the above

Back 159

b. Coercion

Front 160

Which of the following is a common fraud symptom relating to ledgers?
a. A ledger that does not balance
b. A ledger that balances too perfectly
c. Master account balances that do not equal the sum of the individual customer or vendor balances
d. Both a and c

Back 160

d. Both a and c

Front 161

If a perpetrator has stolen assets, which of the following is the easiest method of concealing the theft?
a. Reduce liabilities (such as payables)
b. Manipulate dividend or stock accounts
c. Increase other assets (such as receivables)
d. Increase expenses

Back 161

d. Increase expenses

Front 162

T/F Psychopaths feel no guilt because they have no conscience.

Back 162

True

Front 163

T/F Fraud is a crime that is seldom observed.

Back 163

True

Front 164

T/F Internal control is composed of the control environment, the accounting system, and control procedures (activities).

Back 164

True

Front 165

T/F The fraud elements consist of concealment, conversion, and completion.

Back 165

False

Front 166

T/F It is safe to assume that fraud has not occurred if one or more elements of the fraud triangle can not be observed.

Back 166

False

Front 167

Once in a while, someone commits fraud or another crime and does not feel stress. Such people are referred to as:
a. Psychopathic.
b. Altruistic.
c. Philanthropic.
d. Magnanimous.

Back 167

a. Psychopathic.

Front 168

Which of the following is true regarding fraud?
a. It is easily identified.
b. It is seldom observed.
c. When an allegation of fraud is made, there is no question whether a crime has been committed.
d. Many witnesses are usually available when fraud occurs.

Back 168

b. It is seldom observed.

Front 169

T/F Nearly all individuals and organizations are subject to pressures and can rationalize.

Back 169

True

Front 170

Which of the following is not a fraud symptom related to journal entries?
a. Unexplained adjustments to receivables, payables, revenues, or expenses
b. Journal entries that do not balance
c. Journal entries without documentary support
d. Journal entries made near the beginning of accounting periods

Back 170

d. Journal entries made near the beginning of accounting periods

Front 171

T/F Internal control weaknesses give employees opportunities to commit fraud.

Back 171

True

Front 172

T/F Recording an expense is a possible way to conceal the theft of cash.

Back 172

True

Front 173

A letter is most likely to be fraudulent if:
a. It is signed by only one person.
b. It is addressed to an individual, rather than a department.
c. It is a photocopy of an original letter.
d. It is written on outdated company letterhead.

Back 173

c. It is a photocopy of an original letter.

Front 174

Which of the following is not a common internal control fraud symptom or problem?
a. Lack of segregation of duties.
b. Unexplained adjustments to receivables, payables, revenues, or expenses.
c. Lack of independent checks.
d. Overriding of existing controls.

Back 174

b. Unexplained adjustments to receivables, payables, revenues, or expenses.