1) Corruption schemes are broken down into four classifications: bribery, illegal
gratuities, economic extortion and larceny.
2) The SarbanesOxley Act of 2002 was signed into law on July 30, 2002 to address
corporate governance and accountability as well as public accounting responsibilities in
improving the quality, reliability, integrity, and transparency of financial reports.
3) To prevent fraudulent shipments of merchandise, organizations should make sure that
every packing slip (sales order) is matched to an approved purchase order and that
every outgoing shipment is matched to the sales order before the merchandise goes out.
4) Record validation can include reasonableness checks, sequences checks, and other
checks.
5) An information technology (IT) audit consists of (1) planning, (2) tests of controls,
and (3) substantive tests.
6) Bribery, illegal gratuities, and economic extortion cases all bear a great deal of
similarity in that they all involve a legitimate payment from one party to another, either
to influence a decision or as a reward for a decision already made.
7) Illegal gratuities are similar to bribery schemes, except that something of value is
given to an employee to reward a decision rather than influence it.
8) During the introduction stage, the interviewer also maintains a professional tone but
importantly solicits the cooperation of the witness, subject, or target
9) Perhaps the most common indicator of collusive bidding practices is an unusually
low contract price.
10) The PCAOB is charged with overseeing public company audits, setting audit
standards, and investigating acts of noncompliance by auditors or audit firms.
11) Money laundering is:
a.The disguising of assets derived from criminal activities
b.The process of making money obtained from criminal activities appear clean
c.Only involves cash
d.Both a and b
12) Which of the follow is not a reason why small businesses have high losses to fraud?
A.Smaller businesses have fewer personnel doing more jobs
B.Small businesses frequently have external fraud detection units
C.Small businesses frequently have higher degrees of trust between personnel
D.All of the above are reasons why small businesses have higher fraud losses
13) Match the following frauds with their appropriate definition
a.check is intercepted and cashed
b.blank check is stolen and cashed
c.check is stolen and payee added
d.fictitious company added to the vendor master file
e.goods purchased from a legitimate vendor, then resold to a fictitious company
f.terminated employee continues to be paid
g.expense amount altered by use of blank receipts
h.expenses reimbursed for personal vacation
i.prices for goods ordered inflated
j.refunds issued to fictitious customers
k.price discounts given to friends
DEFINITIONS:
1>Check maker fraud
2>Check payee fraud
3>Check endorser fraud
4>Shell company fraud
5>Ghost employee fraud
6>Mischaracterization expense
7>Expense Disbursement fraud
8>Register Disbursement fraud
14) Which statement below correctly states the four elements required to prove larceny?
A.There must be a taking or carrying away of the money of another without the consent
of the owner and with the intent to deprive the owner of its use
B.There was a taking or carrying away, of the money or property of another without the
consent of the owner, and with the intent to deprive the owner of its use or possession
C.There was a carrying away, of the property of another without the consent, and with
the intent to deprive the owner of its possession
D.There was a taking or carrying away, of the property of another with the intent to
deprive the owner of its use or possession
15) Anthony and Cleopatra are lying dead on the floor in a villa. Nearby on the floor is
a broken bowl. There is no mark on either of their bodies, and they were not poisoned.
With this information, determine how they died.
16) One major difference between fraud and a mistake is:
a.Concealment
b.Cover-up
c.The act
d.Conversion
17) Which of the following would be normally be detected as an input error in payroll
processing?
A.An alphabetic character in the employee hours field
B.Overtime hours above 10 hours for an individual employee
C.Zero hours for a long time employee
D.The addition of a new employee
18) In fraud cases where no legal action was taken, the most significant reason for the
lack of prosecution was cited as:
A.that internal discipline was sufficient
B.the fear of bad publicity
C.private settlement was attained
D.the dollar value of the loss was insufficient
19) Status gaining is most typically associated with which of the following?
A.perceived economic pay inequities
B.no one to share a problem with
C.revenge for unfair treatment in the workplace
D.keeping up with the Joneses syndrome
20) Compliance verification in data extraction and analysis software could be used to
discover all EXCEPT:
A.Credit approvals for customer credit limits by credit manager
B.Excessive per diem amounts on employee expense accounts
C.Criminal background searches on prospective employees
D.Insuring that middle managers do not exceed company mandated budget limits
21) Pay and return schemes depend on which of the following controls being absent:
a.Separation of duties between the payment requestor and the mailroom
b.Separation of duties between the mailroom and cash receipts
c.Separation of duties between the vendor and the payment requestor
d.None of the above
22) The main avenues for terrorist financing are:
a.Electorate sponsorship and legal activities
b.Illegal activities and bank ownership
c.State sponsorship and illegal activities
d.Legal activities and bank ownership
23) Which of the following would be in violation of RICO:
a.Investing in a bank with ties to foreign nationals
b.Investing in a dry cleaning business used to place funds derived from prostitution
c.Investing in a bank that caters to cash-only businesses
d.All of the above
24) Anomalies are:
A.most often red flags that indicate fraud is present
B.part of the day-to-day operations for most companies
C.seldom seen in companies with good internal controls and procedures
D.Both A and C are correct
25) Intent is usually demonstrated by showing which of the following:
a.The act
b.The concealment
c.The cover-up
d.All of the above
26) Remailers:
a.Resend email through a series of routers and servers
b.Usually involve the use of free email accounts
c.Often use more than one anonymous email server
d.Both b and c
27) M/CFraud deterrence begins:
A.with the employers internal controls
B.in the employees mind
C.with the fraud examination
D.with regulatory and legal actions such as PCAOB Auditing Standard No. 5,
28) Pick the incorrect continuation: To effectively discharge its financial reporting
responsibility, management should:
A.ensure that published financial statements are not misleading and are free of material
errors, irregularities, and fraud
B.assess and manage the risk of fraud associated with the identified circumstances,
conditions, and factors
C.identify and assess the circumstances, conditions, and factors that can lead to fraud
D.design and implement an adequate and effective internal control process for
prevention and detection of fraud
29) Preventing collusion is:
a.Sometimes possible, although very difficult
b.Impossible
c.Only possible with effective internal controls
d.Both a and c
30) Rationalizations of long-term violators in Cresseys study included all of the
following except:
A.they were embezzling to keep their families from shame, disgrace, or poverty
B.they were embezzling because theirs was a case of necessity
C.their co-workers encouraged them to do it
D.they were embezzling because their employers were dishonest and needed to be
fleeced
31) In data analysis and extraction software, the types of queries conducted on the
general ledger would include everything EXCEPT:
A.Calculating financial ratios
B.Select specific journal entries for analysis
C.Age counts receivable in various formats
D.Create actual to budget comparison reports
32) One way of perpetrating register disbursement fraud is to:
a.Have an accomplice return fictitious goods for reimbursement
b.Undercharge for goods and split the difference with the accomplice
c.Failure to ring up a cash sale and pocketing the cash
d.All of the above
33) One way to detect altered expense schemes is to:
a.Compare the expenses claimed to the credit card statement
b.Require a company issued credit card for all expense purchases
c.Require a full printed receipt, as opposed to a summary receipt
d.All of the above
34) Which of the following is not part of or one of the three elements of professional
skepticism for a fraud investigation?
A.An attitude that includes a questioning mind and a critical assessment of the evidence
B.A commitment to persuasive evidence
C.That the plaintiff and/or the defendant may be masking the true underlying story
D.The investigation must reveal a benefit to the plaintiff
35) Detecting a shell company scheme requires:
a.A review of bank statements
b.A review of cash disbursements
c.An analysis of price variances
d.Both b and c
36) At a minimum, corporate governance should address this issue:
X.Creating and maintaining a culture of honesty and high ethics
Y.Evaluating fraud risks and implementing programs and controls to mitigate them
Z.Developing an appropriate anti-fraud oversight process
AA.All of the above
37) Sources of information include:
a.Witnesses to an act of fraud
b.Surveillance by private detectives
c.Surveillance by police officers
d.All of the above
38) Hidden assets can be found through:
a.A lifestyle audit
b.Examination of property records
c.Examination of spending habits
d.All of the above
39) One of the most disturbing aspects of the audit process and corporate governance
responsibility is that a certain cohort can do almost anything they want despite the
systems of checks and balances designed to prevent asset misappropriation and
financial statement fraud. This is referred to as management:
A.Override
B.Obligation
C.Duty
D.Custom
40) All of the following are characteristics of absconders except:
A.low occupational and socioeconomic status
B.typically single or separated from their spouse
C.few group associations
D.have strong social ties
41) Which is an example of a front runner:
a.A bucket shop
b.A clerk who overhears good news about a company and trades on the information
c.A clerk who becomes aware of a large pending trade and trades on the information
d.All of the above
42) Evidence of invigilation can be:
a.Used as direct evidence
b.Used as indirect evidence
c.Must be coupled with evidence to be admissible
d.All of the above
43) Which of the following is an example of badges of fraud:
a.A taxpayer ignores the advice of her tax preparer and tales a deduction from income
because she believes she understands the tax code better than her advisor
b.A taxpayer routinely omits cash receipts collected on Sunday from his tax return
c.A taxpayer provides false statements to his tax preparer
d.All of the above
44) The key to successful fraud detection and investigation using digital tools and
techniques requires:
A.a systems-type approach
B.a targeted approach
C.a results-driven approach
D.access to data warehouses and data mining tools such as Access, ACL, or IDEA
45) The major approaches to fraud detection are through:
I.Red flags that ultimately point to problems underlying the foundation upon which
transactions are recorded.
II.Whistleblowers.
III.Targeted risk assessment.
A.I and II
B.II and III
C.I and III
D.I, II, and III
46) What computer audit steps could catch a scheme in which inventory is shipped
directly to an employee address?
A.List top ten employees by sales adjustments
B.Join an employee home address file to a shipment address file
C.List tope tem employees in respect to asset transfers
D.Summarize user access to the sales file
47) In a collusive environment:
A.management is responsible for all acts of fraud
B.the fear of detection is usually more than adequate to stop fraud by senior
management
C.internal and external auditors must design procedures to detect such activity
D.All of the choices are correct
48) One of the most important contributions of criminology to the study of fraud is:
A.the M.I.C.E. concept
B.the fraud triangle
C.the relationship of punishment to remediation
D.Another choice is the most important contribution of criminology
49) The Patriot Act:
a.Amends the money laundering statutes
b.Adds cybercrime activities to the list of activities covered under money laundering
c.Prohibits individuals from bringing more than $10,000 into the US
d.Both a and b
50) The decedent or his or her surviving family (in a wrongful death suit) may have
suffered the following types of losses, both past and future, that need to be considered
with the exception of:
I.Loss of earnings
J.Loss of employment benefits associated with the earnings
K.Losses associated with the ability to perform nonmarket services
L.Losses associated with intangible assets
51) Can a law permit an action that is prohibited by a professions code of ethics?
Discuss and give an example.
52) What is meant by inventory shrinkage?
53) Is earnings management considered fraud?
54) What is included as an experts work product?