Chapter 4
Critical Thinking Q&A
A woman came home with a bag of groceries, got the mail, and walked into the house. On the
way to the kitchen, she walked through the living room. In the living room, she glanced in her
husband’s direction. Sadly, her husband had blown his brains out. She then continued to the
kitchen, put away the groceries and made dinner. What might explain this behavior?
Review Questions & Answers
4-1 What is the difference between a predator and an “accidental fraudster?”
Answer: Notwithstanding the fraud act, the accidental fraudster is considered a good,
law-abiding person, who under normal circumstances would never consider theft,
4-2 Why does collusion pose unique prevention and detection challenges?
Answer: The primary concern when collusion is involved is that internal controls are
generally ineffective in preventing fraud and other financial crimes.
4-3 How is the concept of an “organization” involved in mixing illegal activities with
legitimate ones?
Answer: Fraud and forensic accounting professionals must understand the
“organization,” even if the organization is not recognized as a legal entity. Some
4-4 Why is financial statement fraud often considered a complex fraud?
Answer: Financial statement fraud is more often than not a complex fraud. It almost
4-5 What are the different types of schemes associated with complex frauds?
4-6 How are the objectives of terrorists and organized criminals different?
Answer: Terrorists, as their main objective, attempt to intimidate or coerce persons,
4-7 What are the different types of banks in the U.S. banking system? How are they different?
Answer: Different types of banks in the U.S. banking system include:
Commercial banks are those with which most people are familiar. Some people have
4-8 What is a documentary letter of credit used for?
Answer: In order to transact business internationally, some businesses located
4-9 What is the difference between tax avoidance and tax evasion?
Answer: Tax avoidance consists of using legal means and methodology
4-10 How have some of the more common securities fraud schemes been perpetrated?
Answer: The more common securities fraud schemes include:
Pyramid Schemes. In a pyramid scheme, fees or dues are paid by new members to join
the organization. The new member, upon joining, is expected to attract and sign up new
