1) The acronym MICE signifies fraud motivations such as money, intellectualism,
coercion, and ego.
2) What are some of the ways in which financial statement fraud is committed?
3) The accepted concept for measuring lost revenues or excess expenses over a loss
period is to project incremental lost sales or increased expenses.
4) Data mining and knowledge discovery software is generally classified into two
general categories: public domain and commercial applications.
5) What is a kickback scheme, and how is it committed?
6) Channel stuffing, which is compliant with GAAP, refers to the sale of an unusually
large quantity of a product to distributors, who are encouraged to overbuy through the
use of deep discounts and/or extended payment terms.
7) The Frye Rule makes an opinion inadmissible even if that opinion has general
acceptance in the scientific community.
8) Relevance implies that certain information will make a difference in arriving at a
decision
9) Management has an obligation to disclose to the shareholders any acts of fraud
committed by officers, executives, and others in positions of trust.
10) During the body of the interview, the interviewer needs to demonstrate patience,
and should be sure to interrupt the interviewee.
11) A fraud hotline is considered by most professionals to be the cornerstone of an
employee reporting program.
12) Forensic accounting is the use of accounting for possible courtroom purposes.
13) Writing off inventory and other assets is a relatively common way for fraudsters to
remove assets from the books before or after they are stolen.
14) Section 404 of SOX recommends, but does not require, the companys external
auditors to attest to and issue a report on managements assessment of internal control.
15) There are two major ways to test IT systems – the black-box approach, and the
white-box approach, which utilizes a relatively small dataset to test the system.
16) It is advisable that employers document good cause for any termination in the
employees personnel file. Good cause might include the following EXCEPT:
A.The employees conduct was against written policy
B.The investigation was fair, objective, and evidence suggested the elimination of
alternative suspects
C.The punishment fits the crime, meaning that the punishment is reasonable given the
nature of the offense
D.The termination was discriminatory, meaning that not all persons committing such an
act were or would be terminated
17) Plaintiffs and victims have a number of possible legal mechanisms available to
recover assets either through the civil or criminal justice system with the exception of:
Y.Expropriation
Z.Freezing orders
AA.Judgments
BB.Insurance and Bonds
18) With respect to security controls, Hollinger and Clark discovered that most
employees regarded these measures to be
A.targeted toward external security
B.targeted toward internal security
C.part of increasing morale
D.part of organizational trust communication
19) An example of an input error that would likely be caught by a validation control in
payroll processing would be:
A.Overtime hours above 10 hours for an individual
B.Zero hours for a long time employee
C.90 hours worked by one employee in one week
D.The addition of a new employee
20) Verifying multiples of a number in data extraction and analysis software could be
used to discover all EXCEPT:
A.Recalculation of invoice totals
B.Reimbursement rates for mileage
C.Paycheck amounts for hours worked
D.Embezzled petty cash
21) Portions of the RICO Act outlaw all of the following except:
A.investing illegal funds in another business
B.acquisition of a business through illegal acts
C.a private or civil wrong or injury other than breach of contract
D.the conduct of business affairs with funds derived from illegal acts
22) When either a source or informant is used, the attorney must also:
a.Guarantee confidentiality will be maintained
b.Understand the motives of each
c.Obtain evidence to corroborate the claims made
d.Both b and c
23) Alteration of expenses includes:
a.Altering the amount of an expense item
b.Changing the purpose of the expense from personal to business
c.Altering the names of clients entertained
d.All of the above
24) Accounting principles and policies:
A.were designed to provide some degree of choice to management
B.areone-size-fits-all to ensure comparability between companies
C.preclude using GAAP compliant alternatives to manage income
D.None of the choices are correct
25) Which of the following is NOT an example of financial statement fraud:
a.The sales manager records as a sale a large shipment of finished goods on January 1,
20X1, the day after year-end in order to earn a large bonus
b.The financial controller increases monies in the reserve account in order to meet
analysts expectations regarding earnings
c.The CEO insists that the payment for current year accrued bonuses be deferred to the
next fiscal year
d.The treasurer transfer money from one bank account to another in order to mask a
shortage
26) Which of the following is not a symptom of one of the six common categories of
fraud?
A.Unexplained accounting anomalies
B.Exploited internal control weaknesses
C.Where nonfinancial data correlates with financial data
D.Anomalies communicated via tips and complaints
27) Which of the following acts would not be considered an abuse or abusive?
A.Surf the Internet while at work
B.Remove small amounts of cash from the cash register till
C.Taking a long lunch or break
D.Using sick leave to see a childs play at school
28) Which of the following is an example of invigilation:
a.Claire is hired on Tuesday and on Wednesday $1,000 cash is found missing from the
office
b.Claire is hired in 20×1 and cash is missing from the office during 20X2; Claire
subsequently leaves in 20X3 and cash is no longer missing
c.Dora is hired in January and leaves unexpectedly in March. Later that month, $1,000
cash is missing from the office
d.All of the above
29) Case management software can be used in a number of situations to manage cases
and case data.
30) A person is said to act in a fiduciary capacity when:
A.the business which he transacts, or the money or property which he handles, is not for
his own benefit
B.a relationship exists between the defendant and the plaintiff
C.the action resulted in harm to the defendant
D.he stands in a relation implying normal confidence, trust, and faith
31) Fraud professionals and forensic accountants use the term red flag to indicate:
A.that they are looking for symptoms and badges of fraud
B.that all personnel will be investigated
C.that evidence of fraud or abuse have been located and identified
D.that a person or group of people have been identified as possible fraudsters or abuser
32) Which of the following is a legal form of evidence:
a.A conversation overhead by a fellow employee in the lunchroom
b.A conversation between two parties
c.A document found in the defendants possession
d.All of the above
33) What is the difference between mail and wire fraud:
a.Mail fraud consists of written material;, wire fraud is electronic and written
b.Mail fraud consists of using the US Postal system; wire fraud consists of the use of
non US Postal system services
c.Mail fraud applies whenever the US Postal system is involved ,including intrastate
mail service; wire fraud consists of transmissions to foreign or interstate locales
d.All of the above
34) The purview of auditing of nonpublic companies falls under the guidelines of the:
A.FASB
B.PCAOB
C.
D.GAO
35) Cresseys conjuncture of events basically says that all three elements must be
present for the trust violation to occur. These events are:
A.no fraud prevention program is available, the offender lacks a conscience, employees
are friends with customers
B.perceived non-shareable financial problem, perceived opportunity, and the ability to
rationalize
C.the perpetrator is not married, is a male, and needs to buy a car or other large asset
D.there are no witnesses to the crime, the individual has a strong challenge to beat the
system, and the individual has a gambling problem
36) According to Hollinger and Clarks research, which of the following are least likely
to engage in illegal behavior in the workplace?
A.younger workers
B.older workers
C.employees that feel they are exploited
D.dissatisfied workers
37) Generally, investigators can obtain documentary evidence using all approaches
EXCEPT:
A.theft
B.voluntary consent
C.subpoena
D.search warrant
38) The foundation behind the use of nonfinancial information for fraud detection is
that:
A.prenumbered forms function as fraud deterrents
B.the more data available, the harder it is to conceal fraud
C.every accounting event has a quantity of units associated with it
D.the world revolves around quantities and prices
39) Under RICO, which of the following is an illegal activity:
a.Purchasing a bank to deposit gambling receipts generated from illegal betting parlors
b.Investing in a bank that provides services to foreign nationals
c.Purchasing a bank formerly used to reinitiate money into the financial system from a
bankruptcy trustee
d.All of the above
40) An auditors opinion of:
A.unqualified indicates that there are major problems with the financial statements
presented by management
B.unqualified indicates that the independent auditors believe the financial statements
presented by management are fairly presented
C.qualified indicates that the independent auditors believe the financial statements
presented by management meet the guidance of U.S. GAAP
D.All of the choices are correct
41) Financial statement fraud is often attributed to pressures, such as all of the
following except:
A.investment losses
B.meeting analysts expectations
C.deadlines, and cutoffs
D.qualifying for bonuses
42) The Certified Information Systems Analyst (CISA) designation is:
A.considered to have a growing demand for those possessing IS audit, control, and
security skills
B.considered to be a diminishing opportunity due to the increased role of external and
internal auditors as mandated by the Sarbanes-Oxley Act (SOX Act)
C.primarily an academic accreditation designed to establish educational institutions
curriculum building blocks
D.None of the above are correct answers
43) Hollinger and Clark found that the same kinds of employees who engage in
workplace deviance also engage in employee theft. According to their research, which
of the following is not a characteristic evidence of the employee-thief?
A.arrives early at work
B.takes long coffee breaks
C.abuses sick leave policy
D.has slow workmanship
44) Validity of evidence means:
a.The information cannot be corroborated
b.The information is consistent with past accounts
c.The information is judgmental
d.All of the above
45) An employee has a business dinner with her supervisor. The supervisor requires that
the employee complete an expense report and list the supervisors meal as entertainment.
The reason for this is:
a.The supervisor wants to avoid having the expense report reimbursement delayed
b.The supervisor wants to avoid having his supervisor see the amount spent
c.The supervisor wants the employee to obtain credit for entertaining
d.None of the above
46) The estimate of earnings losses in a wrongful death case requires the evaluation of
investigative areas with the exception of:
A.Determining the basis for earning losses: expected earnings versus diminished
earnings capacity
B.Evaluating the deceased individuals strength of character
C.Analysis of employment history and related past earnings
D.Projected of probable career paths: before and after the loss
47) According to Cressey, a trust violator is best described as
A.fictious collateral
B.an embezzler
C.one who is willing to settle for low status
D.a satisfied employee
48) In determining validity, which of the following carries the most weight:
a.Probable
b.Confirmed
c.Doubtful
d.None of the above
49) The public perception of independent auditors, particularly with regard to asset
misappropriation, corruption, and misstated financial statements, is that:
A.independent auditors have overcome the expectations gap
B.an independent auditors responsibility is to provide reasonable assurance that the
financial statements are free from material misstatement whether by error or fraud
C.independent auditors are responsible for fraud detection
D.audited financial statements are free of estimates and misstatements
50) From the list below, create the typical fraud perpetrator profile.
A.Male, high school education, young, general labor, and with the company for years
B.Female, high school education, young, general labor, and relatively new to the
company
C.Male, post secondary education, middle aged, professional, and with the company for
years
D.Female, post secondary education, middle aged, professional, and relatively new to
the company
51) During cross-examination, the fraud examiner or forensic accountant has several
goals, EXECPT for:
Y.Be combative with the opposing attorney
Z.Be cooperative
AA.Maintain the credibility of his or her conclusions and opinions
BB.Be alert for reasonable and proper opportunities to provide explanation and disagree
52) Authentication, as it relates to evidence, is demonstrated by:
a.Storing the evidence in a secure facility that is accessible to police and prosecuting
attorneys
b.Copying the evidence where possible
c.Maintaining a chain of custody of the evidence
d.All of the above
53) Management need not develop a methodology to measure their performance since
this is done with the released annual financial statements.
54) How did the SarbanesOxley Act address corporate governance and public
accounting responsibilities?
55) Financial statement fraud is complex because it often involves collusion.
56) Fixed assets are subject to manipulation through several different schemes. Which
scheme is NOT commonly used?
Q.Booking fictitious assets
R.Misrepresenting asset valuation
S.Improperly capitalizing inventory and startup costs
T.Depreciating an asset to an amount less than zero
57) Improper asset valuations usually fall into one of the following EXCEPT:
Q.Inventory valuation
R.Accounts receivable
S.Cash
T.Fixed assets
58) What employment opportunities currently exist for fraud examiners and financial
forensics specialists?
59) Which of the following is NOT a red flag of improper financial disclosure?
Q.Domination of management by a single person or small group (in a
non-owner-managed business) with no compensating controls
R.Used by the company of a non-Big Four accounting firm
S.Ineffective board of directors or audit committee oversight of the financial reporting
process and internal control
T.Ineffective communication, implementation, support, or enforcement of the entitys
values or ethical standards by management
60) Fraudulent disbursements are commonly made to a fictitious payee.
61) Falsifying time and attendance data are central to a ghost employee scheme.
62) List three proactive audit tests to detect noncash misappropriations.