Chapter 03
a.
by surveillance and undercover operations.
b.
by accident.
c.
by providing ways for people to report suspicions of fraud.
d.
by examining transaction records and documents to determine if there are anomalies that could represent
fraud.
a.
b.
c.
d.
LO: 3-1
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Bloom’s: Understanding
30. In recent years, organizations have implemented a number of initiatives to more proactively detect fraud. The first and
most common proactive fraud detection approach has been to:
a.
install reporting hotlines.
b.
conduct undercover operations.
c.
install surveilance cameras.
d.
collect physical evidence.
a.
b.
c.
d.
LO: 3-1
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Bloom’s: Understanding
31. Which of the following is an example of a whistle-blowing system?
a.
Bulletin board service
b.
Supervisor intervention
c.
Removing middle management layer
d.
Fraud reporting hotline
a.
b.
c.
d.
32. Which of the following is a prerequisite for a fraud investigation?
a.
Predication
b.
A specific allegation of fraud against another party
c.
Consistent bottom-line improvement
d.
Rationalization
a
a.
b.
c.
d.
Easy
LO: 3-7
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Bloom’s: Remembering
33. Although there are multiple approaches to fraud investigation, most investigators tend to rely heavily on ______.
a.
invigilation
b.
surveillance
c.
interviews
d.
confrontation
c
a.
b.
c.
d.
Easy
LO: 3-7
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Bloom’s: Remembering
34. Which type of evidence is gathered from individuals using investigative techniques such as interviewing,
interrogation, and honesty tests?
a.
Documentary evidence
b.
Testimonial evidence
c.
Physical evidence
d.
Personal observation
Easy
LO: 3-1
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Chapter 03
a.
b.
c.
d.
LO: 3-7
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Bloom’s: Remembering
35. What is the overall term for the investigative technique that includes gathering evidence through data mining, audits,
computer searches, net worth calculations, and financial statement analysis?
a.
Documentary evidence
b.
Testimonial evidence
c.
Physical evidence
d.
Personal observation
a.
b.
c.
d.
LO: 3-7
United States – BUSPROG: – Technology
36. Investigative techniques under which approach include invigilation, surveillance, and covert operations?
a.
Documentary evidence
b.
Testimonial evidence
c.
Physical evidence
d.
Personal observation
a.
b.
c.
d.
LO: 3-7
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Bloom’s: Remembering
37. All of the following are part of the fraud element triangle EXCEPT:
a.
Theft act
b.
Concealment
c.
Conversion
d.
Rationalization
a.
Incorrect. This is a part of the fraud element triangle.
b.
Incorrect. This is a part of the fraud element triangle.
c.
Incorrect. This is a part of the fraud element triangle.
d.
Easy
LO: 3-7
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38. Investigative methods utilized to catch a fraud perpetrator while he/she is actually receiving a kickback fall under
which of the following categories?
a.
Theft act investigative methods
b.
Concealment investigative methods
c.
Conversion investigative methods
d.
Collusion investigative methods
a
a.
b.
c.
d.
Easy
LO: 3-7
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39. Which area of investigative method involves searching for ways in which perpetrators have spent or used their stolen
assets?
a.
Theft act
b.
Concealment
c.
Conversion
d.
Collusion
c
a.
b.
c.
d.
40. The gathering of this type of evidence in a fraud investigation often involves forensic analysis by experts.
a.
Documentary evidence
b.
Testimonial evidence
c.
Physical evidence
d.
Personal observation
c
a.
b.
c.
d.
Easy
LO: 3-7
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41. The most effective way to involve employees in the monitoring process is to provide a protocol for which of the
following?
a.
communication
b.
office etiquette
c.
administrative action
d.
management oversight
a
a.
b.
c.
d.
Moderate
LO: 3-7
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42. _______ refers to the circumstances, taken as a whole, that would lead a reasonable, prudent professional to believe a
fraud has occurred, is occurring, or will incur.
a.
Audit process
b.
Surveillance
c.
Predication
Easy
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Chapter 03
d.
Investigation
c
a.
b.
c.
d.
Moderate
LO: 3-5
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Bloom’s: Understanding
43. Which of the following statements is NOT true?
a.
It is much more difficult to get a criminal conviction than it is to get a judgment in a civil case.
b.
A preponderance of the evidence (more than 50 percent) is necessary to win a civil case.
c.
Criminal convictions are only successful if there is overwhelming, undeniable proof that the perpetrator
“intentionally” stole money or other assets.
d.
Civil actions are quite rare in cases of employee fraud because perpetrators have usually spent the money they
stole.
c
a.
Incorrect. The statement is correct.
b.
Incorrect. The statement is correct.
c.
d.
Incorrect. The statement is correct.
Easy
LO: 3-8
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44. Which one of the following was NOT discussed as a way to create a culture of honesty and integrity?
a.
Offer rewards for honest behavior
b.
Communicate expectations throughout the organization
c.
Hire the right kinds of employees
d.
Create a positive work environment
a
a.
b.
c.
d.
Easy
LO: 3-3
45. Research in moral development strongly suggests that honesty can be best reinforced when:
a.
expectations of honesty are implied.
b.
fraud perpetrators are given a second chance.
c.
appreciation is exhibited for honesty.
d.
a proper example is set by management.
a.
b.
c.
d.
Correct. This is sometimes referred to as “the tone at the top.”
LO: 3-3
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Bloom’s: Understanding
46. Which of the following is NOT true regarding why fraud prevention controls are important?
a.
Preventing fraud also saves the family of the perpetrator from embarrassment (guilt by association).
b.
Once the fraud has been committed, the cost of any legal action taken can cause the victims to lose even more.
c.
The organization that isn’t proactive about possible fraud is more likely to have an employee commit a fraud
act.
d.
Fraud control costs are less than the known costs that would have been lost through fraud.
a.
This is a true statement.
b.
This is true regarding additional costs incurred through taking legal action.
c.
This is a true statement.
LO: 3-2
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47. Which of the following is a result of the presence of fraud prevention controls within an organization?
a.
Employees are less likely to commit fraud.
b.
The organization bonding insurance company will reduce its rate based on the controls in place.
c.
The auditors will be less thorough during audits.
d.
Employees feel more trusted.
a.
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48. Which of the following is NOT a proactive hiring procedure?
a.
conducting background investigations on prospective employees
b.
instilling in employees a desire to develop ethical awareness and courage to do the right thing
c.
thoroughly checking references provided
d.
learning how to interpret responses to inquiries of references about job candidates
a.
This is a proactive hiring procedure.
c.
This is a proactive hiring procedure.
d.
This is a proactive hiring procedure.
LO: 3-4
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49. According to the text, which of the following is a consideration that influences the risk of fraud when identifying a
company’s fraud risks?
a.
current organization employee demographics
b.
top management personal characteristics
c.
industry characteristics
d.
customer demographics
a.
Incorrect, these constantly change.
b.
Incorrect, these change over time.
c.
d.
Incorrect, these also change often.
LO: 3-5
d.
Incorrect, employees usually feel less trusted.
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Bloom’s: Understanding
50. Which of the following questions should be answered when considering fraud risk and fraud prevention?
a.
which types of fraud are the easiest and least costly to prevent
b.
which employees are in the best position to commit fraud
c.
which symptoms of a fraud act are most likely to be spotted
d.
all types of possible fraud that can be committed
a.
b.
c.
d.
LO: 3-5
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51. Which of the following is true of why fraud should be detected early?
a.
Most frauds start small and get larger over time.
b.
Determining motive is a strong tool to prevent similar frauds in the future.
c.
When top management is the perpetrator, preventions can be implemented once the fraud has been discovered.
d.
Fraud is often obvious and more easily detected when first committed.
a.
Correct, it is best to discover the fraud early to reduce losses.
b.
Incorrect, motive may never be known.
d.
Incorrect, the ease of detection depends on many factors.
LO: 3-6
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52. Which of the following is NOT a primary way fraud can be detected early?
a.
by accident
b.
finding anomalies in the financial records
c.
someone reports suspicious activity
d.
watching those employees whose honesty test results were suspicious
a.
b.
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53. Which of the following is a possible indication that fraud may be present?
a.
An employee’s spouse is diagnosed with Alzheimer’s disease.
b.
An employee’s lifestyle changes suddenly.
c.
An employee’s spouse has a serious vehicle accident.
d.
An employee reports that another employee is a gambling addict.
a.
b.
Correct, a change in lifestyle is a warning.
c.
d.
LO: 3-6
United States – BUSPROG: – Technology
54. Which of the following is true about whistle-blowing?
a.
Whistle-blowers are respected by colleagues.
b.
Whistle-blowing is a good way to get back at a co-worker.
c.
Whistle-blowing systems should include an anonymous hotline.
d.
Whistle-blowing usually provides monetary rewards.
a.
b.
c.
d.
LO: 3-6
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55. Which of the following is true about legal action taken by organizations who are the victims of fraud?
a.
Legal action is taken in fewer than half of frauds committed.
b.
Legal criminal action is brought the the victim organization.
c.
d.
Incorrect, all employees should be treated equally initially.
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Chapter 03
c.
Civil action is a good way to get restitution.
d.
Civil action sends a message to others not to commit fraud.
a.
b.
Incorrect, action can only be brought by law enforcement agencies.
c.
Incorrect, the perpetrators’ usually are unable to repay.
d.
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56. Which of the following is FALSE concerning legal actions by organizations regarding fraud?
a.
Legal action is expensive.
b.
Legal action is time consuming.
c.
Legal action is sometimes embarrassing.
d.
Legal action stops future frauds.
a.
b.
c.
d.
LO: 3-8
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Bloom’s: Remembering