Chapter 01
1. One way that criminal law differs from civil law is that it:
a.
provides remedies for violations of private rights.
b.
must yield a unanimous verdict.
c.
can have a jury of fewer than 12 persons.
d.
allows for various claims in one action.
Correct. Criminal trials must result in an unanimous verdict.
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2. Which of the following is NOT an element of a Ponzi scheme?
a.
Gaining other’s confidence.
b.
Promising abnormally high returns.
c.
Collected money is invested.
d.
Investment principle is partially used to make payments to previous investors.
Incorrect. This is one of the most important elements of the ‘con’.
Incorrect. This is how fraudsters lure in investors.
Correct. This is very unlikely.
Incorrect. The original principle is often used to make interest payments.
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3. The following are all elements of Title 26, U.S. Code Section 7201 EXCEPT:
a.
not reporting bribe income may be grounds for being charged with tax evasion.
b.
filing income tax that excludes income from fraud may be considered an improper tax filing.
c.
bribes paid may be deducted as business expenses.
d.
failure to report income from fraud may be grounds for being charged with tax evasion.
4. Which one of the following is NOT a characteristic of a criminal proceeding?
a.
Deals with offenses against society.
b.
Consequences include restitution and damage payments.
c.
Jury of 12 individuals.
d.
Only one claim may be heard at a time.
Incorrect. A crime is considered as an offense against society as a whole.
Correct. In a criminal proceeding, the consequences are jail and/or fines.
Incorrect. A criminal jury consists of 12 jurors.
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5. Management fraud is often referred to as:
a.
stockholder fraud.
b.
financial statement fraud.
c.
employee fraud.
d.
investment fraud.
c.
Correct. Bribes cannot be deducted as legitimate business expenses.
d.
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6. What is required to prove fraud, as opposed to negligence?
a.
Gross error
b.
Intent
c.
Preponderance of the evidence
d.
Confession from the perpetrator
Incorrect. Gross error is not sufficient evidence to prove fraud.
Incorrect. This is what is proven in a civil case.
Easy
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7. Which of the following is the most common type of occupational fraud?
a.
Financial statement fraud
b.
Mail fraud
c.
Investment fraud
d.
Employee embezzlement
Moderate
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8. Which of the following is NOT a characteristic of management fraud?
a.
Top management deception.
b.
Manipulation of financial statements.
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Chapter 01
c.
Kickbacks or bribes.
d.
Pressure to earn year-end bonuses.
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9. Customer fraud includes all of the following EXCEPT:
a.
Get something for nothing.
b.
Do not pay for goods purchased.
c.
Fraud perpetrated through collusion between buyers and vendors.
d.
Deceive organization into giving them something they should not.
Incorrect. This is an example of customer fraud.
Incorrect. This is an example of customer fraud.
Correct. This is an example of vendor fraud.
Incorrect. This is an example of customer fraud.
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10. Which of the following is a common example of vendor fraud?
a.
Fraud perpetrated through collusion between buyers and vendors.
b.
Fraud perpetrated by upper management.
c.
The perpetrator physically removes the inventory from the business premises.
d.
A fraud perpetrated through financial statement manipulation.
11. Government agencies such as the FBI, FDIC, IRS, or various health agencies publish fraud statistics from time to
time. Which of the following observations concerning such statistics is true?
a.
Generally, their statistics are complete.
b.
Such information is rarely used.
c.
They provide only those statistics related to their jurisdiction.
d.
They usually provide a total picture in the areas for which they have responsibility.
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12. Which legal code makes the bribing of public officials illegal?
a.
Title 18, U.S. Code Section 201
b.
Title 41, U.S. Code Section 51 to 58
c.
Title 18, U.S. Code Section 1341
d.
Title 18, U.S. Code Section 1344
Correct. Title 18, U.S. Code Section 201 outlaws the bribing of public officials.
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13. Fraud has a direct dollar for dollar impact on a company’s:
d.
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Chapter 01
a.
Revenues.
b.
Net income.
c.
Profit margin.
d.
Stock price.
Easy
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14. Which of the following is NOT a primary reason for increased size and number of frauds?
a.
The advent of computers
b.
Complex accounting systems
c.
Increased centralization of businesses
d.
The Internet
c
Incorrect. This is a primary reason for the increased frequency of fraud.
Incorrect. This is a primary reason for the increased frequency of fraud.
Incorrect. This is a primary reason for the increased frequency of fraud.
Moderate
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15. Which among the following frauds is most likely to be a civil charge?
a.
Racketeering
b.
Mail fraud
Chapter 01
c.
Defamation
d.
Perjury
c
Easy
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16. The elements of fraud include all of the following EXCEPT:
a.
a material point is misrepresented.
b.
the misrepresentation is intentional.
c.
the misrepresentation is known to the victim.
d.
the victim must sustain damages.
c
Incorrect. An element of fraud is that a material point was misrepresented.
Incorrect. In every fraud there must be intent.
Correct. The victim cannot know of the misrepresentation.
Incorrect. For fraud to take place, the victim must sustain damages.
Moderate
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17. The burden of proof in a criminal case:
a.
level is beyond a reasonable doubt.
b.
is determined by the majority of the jury members.
c.
level is the preponderance of evidence.
d.
lies with the defendant.
a
18. Which of the following statements about criminal and civil cases is correct?
a.
The purpose of a criminal case is “to right a wrong”, the purpose of civil case is to obtain a remedy.
b.
Jury must have 12 people in civil cases but in criminal cases may consist of fewer than 12 persons.
c.
Both criminal cases and civil cases require a fraud perpetrator to make payments for damages.
d.
Only one claim at a time in civil cases however in criminal cases, various claims may be joined in one action.
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19. How is the confidence element established in a Ponzi scheme?
a.
By investing in prime bonds.
b.
By issuing notarized certificates.
c.
By paying returns to investors initially.
d.
By returning money to all investors.
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d.
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20. The most common fraud committed on behalf of an organization is:
a.
Vendor fraud
b.
Employee embezzlement
c.
Fraudulent financial reporting
d.
Customer fraud
c
Easy
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21. A company is a victim of a $414 million fraud. At that time its profit margin is 10%. How much additional revenue
should the company generate in order to recover the effect on net income?
a.
$41.4 million
b.
$414 million
c.
$4.14 billion
d.
$41.4 billion
c
Correct. The company must generate 10 times the amount of fraud.
Moderate
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22. Scammers often use their victim’s ethnic identity to gain their trust and then steal their life savings. This is an example
of:
a.
vendor fraud.
b.
affinity fraud.
c.
embezzlement.
d.
occupational fraud.
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23. The Anti-Kickback Act of 1986 intends to prevent:
a.
bribery, by punishing perpetrators with up to 15 years in prison.
b.
any scheme by a contractor to gain the business of a global entity.
c.
the giving or receiving of any thing of value by a subcontractor to a prime contractor in contracts.
d.
the custom of lobbyists to give gifts to influence laws regarding business transactions.
Incorrect. This is not addressed in the Anti-Kickback Act of 1986.
Incorrect. This is not addressed in the Anti-Kickback Act of 1986.
Incorrect. This is not addressed in the Anti-Kickback Act of 1986.
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24. Perpetrators of some fraud schemes often target conspiracy theorists, promising access to the “secret” investments
used by the Rothschilds or Saudi royalty and offer triple-digit returns. Such schemes are best described as:
a.
Affinity frauds.
b.
Ponzi schemes.
c.
Franchise frauds.
d.
Prime bank schemes.
25. Who are the primary victims of financial statement fraud?
a.
Middle management
b.
Organizations that buy goods or services
c.
Analysts
d.
Stockholders
d
Incorrect. Organizations that buy goods or services are victims of vendor fraud.
1
Easy
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26. Generally applicants for CFE certification should have a minimum of a bachelor’s degree or equivalent from an
institution of higher learning. Alternatively if applicants do not have a bachelor’s degree, they may substitute ______
months of fraud-related professional experience for each year of academic study.
a.
24
b.
18
c.
15
d.
12
e.
9
a
1
Moderate
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