978-0134125053 Chapter 6 Part 2

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6.3 Define fraud and describe the different types of fraud in business

1) In a broad sense, fraud is the use of deception or trickery for personal gain.

Question Type: Concept

2) Fraud is always committed against an organization.

Question Type: Concept

3) An organization’s employees are usually responsible for fraud that is committed by a business

organization.

Question Type: Concept

4) The Fraud Triangle is used to show the connection of the factors necessary to commit fraud by

or against an organization.

Question Type: Concept

5) Living beyond one’s means is an example of perceived opportunity.

Question Type: Concept

6) Bob was passed over for a raise; when he took $20 from the register, saying “they owe me” –

this is an example of perceived pressure.

Question Type: Application

7) Fraud is most likely to occur when 2 of the 3 elements of the fraud triangle are present.

Question Type: Concept

8) When an employee overbills the company for business related expenses, this is an example of

a disbursement scheme.

Question Type: Application

9) Marla has a gambling addiction. She may have a perceived pressure to commit fraud.

Question Type: Application

10) The goal of overstating earnings by using fraud is to:

A) deflate the amount of taxes the corporation pays.

B) overstate the cost of goods sold.

C) help increase the stock price of the company.

D) overstate receivables.

Question Type: Concept

11) Fraudulent financial reporting typically involves:

A) management.

B) employees.

C) the board of directors.

D) the stockholders.

Question Type: Concept

12) In order to overstate earnings, a company can:

A) overstate expenses and overstate revenue.

B) overstate receivables and understate payables.

C) understate unearned revenue and understate property, plant and equipment.

D) understate expenses and understate revenue.

Question Type: Application

13) An overstatement of earnings can inflate a company’s stock price and may also be used to:

A) deflate the amount of taxes the corporation pays.

B) avoid paying raises to employees.

C) ensure larger bonuses to upper management at year-end.

D) avoid paying dividends to stockholders.

Question Type: Concept

14) The primary form of fraud committed against an organization is usually done by:

A) management.

B) employees.

C) stockholders.

D) boards of directors.

Question Type: Concept

15) ________ embezzlement is a form of fraud committed against an organization.

A) Management

B) Employee

C) Stockholder

D) Board of directors

Question Type: Concept

16) Embezzlement usually involves the misappropriation of business:

A) equity by an employee.

B) liabilities by an employee.

C) assets by an employee.

D) information by an employee.

Question Type: Concept

17) If an employee overbills a company for travel, this would be considered a(n):

A) disbursement scheme.

B) expense scheme.

C) cash register scheme.

D) check tampering scheme.

Question Type: Application

18) If an employee gives a false refund and pockets the cash, this would be considered a(n):

A) disbursement scheme.

B) expense scheme.

C) cash register scheme.

D) check tampering scheme.

Question Type: Application

19) By definition, an employee who tricks a company into giving up cash for an invalid reason

has engaged in a(n):

A) disbursement scheme.

B) expense scheme.

C) cash register scheme.

D) check tampering scheme.

Question Type: Concept

20) If an employee receives a check from a customer, endorses it and then cashes it, this would

considered a(n):

A) disbursement scheme.

B) expense scheme.

C) cash register scheme.

D) check tampering scheme.

Question Type: Application

21) An employee may embezzle by taking bribes or kickbacks from:

A) suppliers.

B) customers.

C) both suppliers and customers.

D) stockholders of the company.

Question Type: Concept

22) Granting customers a lower sales price for something that benefits you in return would be an

example of a:

A) disbursement scheme.

B) bribe or kickback.

C) cash register scheme.

D) check tampering scheme.

Question Type: Application

23) Receiving something from a supplier in exchange for authorizing payments for goods not

delivered to the employer would be an example of a:

A) cash receipts scheme.

B) cash register scheme.

C) bribe or kickback.

D) check tampering scheme.

Question Type: Application

24) Cash register schemes are a form of:

A) employee embezzlement.

B) bribe.

C) fraudulent financial reporting.

D) management fraud.

Question Type: Concept

25) Receiving favors from a supplier by turning a blind eye to the delivery of inferior goods is a

form of:

A) cash register scheme.

B) bribe.

C) fraudulent financial reporting.

D) management fraud.

Question Type: Application

26) An employee who pockets cash received from a customer without recording the transaction

is an example of a(n):

A) disbursement scheme.

B) expense scheme.

C) cash register scheme.

D) check tampering scheme.

Question Type: Application

27) Overbilling the company for parking fees or cab fare would be examples of:

A) disbursement schemes.

B) expense schemes.

C) cash register schemes.

D) check tampering schemes.

Question Type: Application

28) Recording assets that the company does NOT possess is an example of:

A) management fraud.

B) employee fraud.

C) collusion.

D) embezzlement.

Question Type: Application

29) Which of the following is NOT part of the Fraud Triangle?

A) Realization

B) Perceived opportunity

C) Rationalization

D) Perceived pressure

Question Type: Concept

30) The chance to commit a fraud, conceal it, and avoid punishment is an example of:

A) realization.

B) perceived opportunity.

C) rationalization.

D) perceived pressure.

Question Type: Concept

31) Finding good reasons for doing things that we REALLY know are wrong is an example of:

A) realization.

B) perceived opportunity.

C) rationalization.

D) perceived pressure.

Question Type: Concept

32) Committing a fraud because of a drug habit or living beyond your means is an example of:

A) realization.

B) perceived opportunity.

C) rationalization.

D) perceived pressure.

Question Type: Application

33) Committing a fraud because of easy access to a company’s assets is an example of:

A) realization.

B) perceived opportunity.

C) rationalization.

D) perceived pressure.

Question Type: Application

34) If an employee has a low incentive to commit fraud, the employee does NOT have:

A) realization.

B) perceived opportunity.

C) rationalization.

D) perceived pressure.

Question Type: Concept

35) Committing a fraud because of a gambling addiction is related to what part of the Fraud

Triangle?

A) Realization

B) Perceived opportunity

C) Rationalization

D) Perceived pressure

Question Type: Application

36) Committing a fraud because the employee feels “I deserve a pay raise. The company owes

this to me” is related to what part of the Fraud Triangle?

A) Realization

B) Perceived opportunity

C) Rationalization

D) Perceived pressure

Question Type: Application

37) ________ can be reduced through a good system of internal control.

A) Realization

B) Perceived opportunity

C) Rationalization

D) Perceived pressure

Question Type: Concept

38) The factor that would make a person feel forced to steal money because of high medical bills

would be:

A) realization.

B) perceived opportunity.

C) rationalization.

D) perceived pressure.

Question Type: Application

39) The factor that might make a person steal money because “The company has more than its

fair share,” would be:

A) realization.

B) perceived opportunity.

C) rationalization.

D) perceived pressure.

Question Type: Application

40) Attempting to justify your actions is an example of:

A) realization.

B) perceived opportunity.

C) rationalization.

D) perceived pressure.

Question Type: Concept

41) “I didn’t steal the money, I only borrowed it until I can pay it back” is an example of:

A) realization.

B) perceived opportunity.

C) rationalization.

D) perceived pressure.

Question Type: Application

42) Removing any of the components of the Fraud Triangle:

A) ensures that fraud will be eliminated.

B) makes it more likely that fraud will increase.

C) has no impact on the occurrence of fraud.

D) makes it less likely that fraud will occur.

Question Type: Concept

43) As it relates to accounting fraud, which of the following BEST describes “perceived

pressure”?

A) An element of the fraud triangle in which the employee feels a need to obtain cash or other

assets

B) An element of the fraud triangle in which the employee justifies his or her actions

C) An element of the fraud triangle in which the employee believes there is a chance to commit

and conceal fraud

D) Intentional misrepresentation of the financial statements

Question Type: Concept

44) Joe was overlooked for a promotion and decides to embezzle money because he feels like he

deserved that raise. This is an example of, respectively:

A) perceived opportunity, perceived pressure.

B) perceived pressure, rationalization.

C) perceived opportunity, rationalization.

D) rationalization, perceived pressure.

Question Type: Application

45) Larry is concerned that the company won’t meet expected earnings, so he overstates

revenues, telling himself “it‘s for a good reason!” This is an example of, respectively:

A) perceived pressure, rationalization.

B) perceived opportunity, rationalization.

C) rationalization, perceived pressure.

D) perceived opportunity, perceived pressure.

Question Type: Application

46) Ron notices that there are no safeguards over company inventory, and tells himself that the

company is probably going to write the inventory off as obsolete anyway. However, he doesn’t

really need the inventory. Because there is no ________, Ron is less likely to commit fraud.

A) perceived pressure

B) rationalization

C) perceived opportunity

D) internal controls

Question Type: Application