ACCT 705 Exam 1 (Modules 1, 2, 3) Huang

Which type of fraud is described below? A scheme in which the perpetrator misappropriates cash kept on hand at the victim organization's premises (e.g., employee steals cash from a company vault)

Cash-on-hand misappropriations

Which internal control element is described below? The identification and analysis of relevant risks to the achievement of objectives, forming a basis for how the risks should be managed

Risk assessment

The following data can be used to perform benchmarking. a. Budget data b. All the other three choices are correct. c. Industry data d. Historical data

b. All the other three choices are correct.

What kind of reg flags do we need to search for billing schemes? a. Purchase anomalies b. All the other three items are correct c. Vendor anomalies d. Payment anomalies

b. All the other three items are correct

Which of the following is NOT billing schemes? a. Personal purchase schemes b. Cash Larceny c. Nonaccomplice vendor schemes d. Shell company

b. Cash Larceny

Which one is not a payroll scheme? Select one: a. False salary rate b. Double reimbursement c. Ghost employee d. False timecard

b. Double reimbursement

ABC company is a designated vendor for government purchasing. ABC charges the government $50 dollar service fee for each computer purchased as service fee. However, there is no service provided related to this purchase. What kind of the scheme is ? a. Credit card fraud b. Over-billing with a noncompliance vendor's scheme c. Pay and return schemes d. Shell company

b. Over-billing with a noncompliance vendor's scheme

Which type of fraud is described below? A scheme in which an incoming payment is stolen from an organization after it has been recorded on the organization's books and records (e.g., employee steals cash and checks from daily receipts before they can be deposited in the bank)

Cash larceny

Prevention is more important than detection. Select one: True False

True

The most common fraud is asset misappropriation. Select one: True False

True

Please match the items to the elements of the fraud triangle: Pressure, Opportunity, or Rationalization 1) The company does not separate the role of order and payment in the purchasing department. 2) The employee complains the salary is below the average of the industry. 3) The employee has too many medical bills and student loans to pay.

1) Opportunity 2) Rationalization 3) Pressure

What type of organization suffers the most loss and has the most cases of occupational fraud? A. Private company B. Government C. Public company D. Not for profit

A. Private company

Which of the following controls CANNOT help prevent falsified salary scheme? Select one: a. Supervisors return authorized timecards to employees for review before they are sent to the payroll department. b. The duties of payroll preparation, authorization, and distribution are segregated. c. Payroll IS also responsible for hiring. d. Sick leave and vacation time are monitored for excesses by the payroll department.

2 answers are correct: c. Payroll IS also responsible for hiring. a. Supervisors return authorized timecards to employees for review before they are sent to the payroll department.

Please match the fraud detection method to active/passive method: IT controls

Active

Please match the fraud detection method to active/passive method: Management review

Active

Please match the fraud detection method to active/passive method: Surveillance/Monitoring

Active

Which type of fraud is described below? A scheme in which an employee steals or misuses the employing organization's resources (e.g., theft of company cash, false billing schemes, or inflated expense reports)

Asset misappropriation

Which type of fraud is described below? A fraudulent disbursement scheme in which a person causes his or her employer to issue a payment by submitting invoices for fictitious goods or services, inflated invoices, or invoices for personal purchases (e.g., employee creates a shell company and bills employer for services not actually rendered; employee purchases personal items and submits an invoice to employer for payment)

Billing scheme

What is the most common way to initially detect fraud? A. Confession B. External Audit C. Tip D. Internal Audit

C. Tip

Which type of fraud is described below? A fraudulent disbursement scheme in which a person steals his or her employer's funds by intercepting, forging, or altering a check or electronic payment drawn on one of the organization's bank accounts (e.g., employee steals blank company checks and makes them out to himself or herself or an accomplice; employee re-routes an outgoing electronic payment to a vendor to be deposited into his or her own bank account)

Check or payment tampering scheme

Which internal control element is described below? The policies and procedures that help ensure management directives are carried out.

Control activities

Which internal control element is described below? The set of standards, processes, and structures that provide the basis for carrying out internal control across the organization. It is the foundation for all other components of internal control.

Control environment

Which type of fraud is described below? A scheme in which an employee misuses his or her influence in a business transaction in a way that violates his or her duty to the employer in order to gain a direct or indirect benefit (e.g., schemes involving bribery or conflicts of interest)

Corruption

Which type of fraud is described below? A fraudulent disbursement scheme in which an employee makes a claim for reimbursement of fictitious or inflated business expenses (e.g., employee files fraudulent expense report, claiming personal travel, nonexistent meals)

Expense reimbursements scheme

Data analytics is the best way of detecting fraud or fraud prevention. Select one: True False

False

Most Perpetrators have prior criminal background. Select one: True False

False

Which internal control element is described below? Systems or processes that support the identification, capture, and exchange of information in a form and time frame that enable people to carry out their responsibilities

Information and communication

Which internal control element is described below? Processes used to assess the quality of internal control performance over time.

Monitoring

Please match the fraud detection method to active/passive method: By police

Passive

Please match the fraud detection method to active/passive method: Confession

Passive

Which type of fraud is described below? A fraudulent disbursement scheme in which an employee causes his or her employer to issue a payment by making false claims for compensation (e.g., employee claims overtime for hours not worked; employee adds ghost employees to the payroll)

Payroll scheme

Which type of fraud is described below? A scheme in which an incoming payment is stolen from an organization before it is recorded on the organization's books and records (e.g., employee accepts payment from a customer but does not record the sale and instead pockets the money)

Skimming

In general, more perpetrators conclusions lead to more loss to the organization. Select one: True False

True

Internal control weaknesses were responsible for nearly half of the frauds. Select one: True False

True

Periodically analysis the data could be a formal internal control. Select one: True False

True

Created fraudulent physical documentation, altered physical documents, create fraudulent transactions in the accounting system are common ways used to conceal the frauds. Select one: True False

True

Which of the following control activities can help prevent mischaracterized expense reimbursement schemes? Select one: a. A policy should be established and communicated to employees regarding what types of expenses will and will not be reimbursed. b. None of the three choices c. The internal audit department should review all expense reports under a certain dollar amount. d. Employees should be required to sign their expense reports before being reimbursed.

a. A policy should be established and communicated to employees regarding what types of expenses will and will not be reimbursed.

The board of directors and senior management establish the tone at the top regarding the importance of internal control including expected standards of conduct. This action is aim to _______. a. Build the control environment. b. Add another control activity to the organization c. Monitor if the controls work well d. Communicate the ethic value of the directors

a. Build the control environment.

When we test and interpret the data, we should consider if there is _________. a. Concealment b. Data structure c. Verify the data

a. Concealment

James works in the university purchasing department and has the authority to approve orders. He knows the university needs new equipment and furniture. He directed his nephew, Jim, to establish a company purchasing the equipment the university needs and sell the equipment to the university at a higher price. How can we prevent this fraud? a. Establish a list of vendor for purchase. Evaluate the price and quality of the vendors every quarterly. b. Identify the vendors using PO box address c. Count the inventory when receiving it d. Check if the order is pre-numbered

a. Establish a list of vendor for purchase. Evaluate the price and quality of the vendors every quarterly.

False-negative hurts the effectiveness of fraud examination. Why? a. Fraud examiner missed the red flag and not able to find the fraud in the organization. b.A test result which incorrectly indicates that a fraud is present. c. Fraud examiner are still able to find fraud.

a. Fraud examiner missed the red flag and not able to find the fraud in the organization.

Mr. Brown moved to another city and resigned from his job. However, HR does not remove him from the payroll and the manager is collecting Mr. Brown's paychecks. What is this scheme? Select one: a. Ghost employee b. Forged reimbursement c. Falsified salary d. Larceny

a. Ghost employee

We match vendors' addresses to employees' addresses to identify ______? a. If any employee set up a shell company. b. Noncompliance vendor overcharge the company. c. Employee purchase personal item using company credit card

a. If any employee set up a shell company.

Which one is not corruption? a. Larceny b. Economic Extortion c. Bribery d. Illegal Gratuities

a. Larceny

Mr. Green had a fancy dinner with his family while he traveling for a conference. He claims the dinner was with a client and request reimbursement. This is _______________. Select one: a. Mischaracterized expense reimbursement b. Multiple reimbursements c. Overstated expense reimbursement d. Alter expense reimbursement

a. Mischaracterized expense reimbursement

Why do we need to look into the round-dollar payment? a. Real transactions do not occur in simple round numbers. b. Round dollar payment should happen frequently. c. Fraudster does not want to conceal the transaction.

a. Real transactions do not occur in simple round numbers.

Benford's law can be used to detect fraud because: a. The frequency of the nature numbers has pattern. b. The frequency of the nature numbers are random. c. The fraudster can easily replicate the nature pattern.

a. The frequency of the nature numbers has pattern.

Which of the following internal controls CANNOT help to prevent ghost employees? Select one: a. The person responsible for hiring new employees also supervises the payroll function. b. The personnel department conducts background and reference checks on all prospective employees before hiring them. c. The personnel department verifies all changes to the payroll. d. The personnel records are maintained separately from the payroll and timekeeping functions.

a. The person responsible for hiring new employees also supervises the payroll function.

Summarizing the card used by each employee can help identify_____________? a. Using company card to purchase personal item b. Shell company set up by employee c. Cash skimming by employees

a. Using company card to purchase personal item

Why do we need to understand how the data is generated when we perform the analysis? a. We need to interview before run the analysis. b. (Garbage in, garbage out.) If the data is not generated or structured properly, the results are meaningless. c. We can look the data randomly.

b. (Garbage in, garbage out.) If the data is not generated or structured properly, the results are meaningless.

Fictitious entities created for the sole purpose of committing fraud are called: a. Non-accomplice vendors b. Shell companies c. Ghost companies d. Reimburse scheme

b. Shell companies

There a several invoices identified as consultant fees. You are not able to identify the details of the consultant service. There is no contract or service term. There is no information on google about the consultant company. The google map shows the address of the bill was a household address. You suspect this is ___________. a. Personal use of company card b. Shell company c. Noncompliance vendor d. Shelf company

b. Shell company

Why do we need to identify the amounts just below the threshold? a. Fraudster always use large number. b.Fraudster try to avoid internal control by using the number lower than threshold and maximize his/her benefit from fraud. c. Fraudster creates random number.

b.Fraudster try to avoid internal control by using the number lower than threshold and maximize his/her benefit from fraud.

Mr. Green noticed there were some forged and altered receipts when auditing XYZ firm. This is a red flag of ________________. Select one: a. Mischaracterized expense reimbursements b. Fictitious expense reimbursements c. All three of the other choices d. Overstated expense reimbursements

c. All three of the other choices

What are the effective controls to prevent multiple expense reimbursement? Select one: a. Photocopies are not allowed for reimbursement b. Compare the expense with the budget c. All three of the other choices d. Direct supervisor approval before issuing reimbursement

c. All three of the other choices

What kind of analysis can you perform to identify a ghost employee? Select one: a. Identify employees without SSN b. Compare payroll expenses to production schedules c. All three of the other options d. Identify a duplicate SSN in the payroll system

c. All three of the other options

Purchasing personal items using an organization's money is what type of scheme? a. Skimming b. Pay-and-return scheme c. Billing scheme d. Larceny scheme

c. Billing scheme

Mr. Green sold 800 units of product and claims a commission of 1,000 units. What kind of fraud is this? Select one: a. This is abuse of company resources, and is not fraud. b. Ghost employee c. Commission scheme d. False salary rate

c. Commission scheme

Match social security number to the employee name to see if there are multiple names under one social security number. This is a _________. a. Bench-marking b. Compliance verification c. Duplicate testing.

c. Duplicate testing.

There is evidence that the company paid one vendor twice for the same order. You suspect there are ___________ in the firm. a. Employee use company credit card to buy personal use items b. Shell company c. Employ pay and return scheme d. None of the three

c. Employ pay and return scheme

Regularly perform analysis on vendors and compare the payment to the vendor with the market price can help___________ a. Shell company. b. Employee purchase using company credit card c. Identify overcharge by noncompliance vendor

c. Identify overcharge by noncompliance vendor

Expense reimbursement schemes do not include ________________? Select one: a. Overstate expense b. Multiple reimbursement c. Inflated commission d. Mischaracterized expense

c. Inflated commission

James submitted a photocopy of his receipts and requested reimbursement. The reimbursement was issued without further verification. What possible scheme could this be? Select one: a. Mischaracterized expense b. Falsified salary c. Multiple reimbursement d. Overstated expense reimbursement

c. Multiple reimbursement

Which one is NOT a common red flag for owner/executive fraud? a. Control issues, unwillingness to share duties b. Unusually close association with vendor/customer c. Refusal to take vacations

c. Refusal to take vacations

What department poses the greatest risk for fraud? a. Executive/upper managers b. Operations c. Sales d. Accounting

d. Accounting

ABC company finds the payroll has increased unproportionally increased to its sales. This is a red flag of Select one: a. Falsified salary scheme b. Commission scheme c. Ghost employee d. All three of other choices are possible

d. All three of other choices are possible

What kind of analytics can be used to detect mischaracterized expenses? Select one: a. Compare current expense reimbursement levels to amounts for prior years. b. Compare current expense reimbursement levels to budgeted amounts. c. Compare the dates of claimed reimbursable business expenses to the employees' work schedules. d. All three of the other choices

d. All three of the other choices

Jim was hired to fix and replace roofs. He always adds 2-3 hours in addition to his work hours on his timecard reporting to the company. The timecard is always submitted in a stack and the supervisor does not read it carefully before signing. How can the manager detect this scheme? Select one: a. Separate hiring and payroll b. Background check before hiring c. Check duplication of the SSN in payroll d. Compare his hours to his colleagues and budgeted hours.

d. Compare his hours to his colleagues and budgeted hours.

James and a client went out for dinner and the client paid for the dinner. However, James submitted a copy of the receipt and requested reimbursement. What scheme is this ? Select one: a. Duplicate reimbursement scheme b. Mischaracterized expense reimbursement c. Overstated expense reimbursement d. Fictitious expense reimbursement

d. Fictitious expense reimbursement

What is the most serious internal control weakness that contributes to occupational fraud? a. Poor tone at the top b. Override of existing controls c. Lack of management review d. Lack of internal control

d. Lack of internal control

There a several invoices identified as consultant fees. You are not able to identify the details of the consultant service. There is no contract or service term. There is no information on google about the consultant company. The google map shows the address of the bill was a household address. What is your next step? a. Ask the purchasing department b. Call the supervisor c. Check the journal entry d. Match the address to employee address

d. Match the address to employee address

James works in the university purchasing department and has the authority to approve orders. He knows the university needs new equipment and furniture. He directed his nephew, Jim, to establish a company purchasing the equipment the university needs and sell the equipment to the university at a higher price. What is this scheme? a. Employee use company credit card for personal use b. Overbilling by an accomplice vendor c. Pay and return d. Pass through-Shell company

d. Pass through-Shell company

Charles Dieter and Joey Davis worked together to steal nearly $50,000 from Valdosta Medical Supply. Charles, an accounts payable clerk, deliberately overpaid a few of the company's vendors. He then called the vendors, explained the "mistake," and asked for the excess to be refunded. Joey, a mailroom employee, intercepted the incoming refund checks and cashed them. The two men split the proceeds. What type of scheme did Charles and Joey commit? a. Larceny b. Shell company c. Pass-through d. Pay-and-return

d. Pay-and-return

____________________ are schemes in which the employee intentionally mishandles payments that are owed to legitimate vendors. a. Pass-through schemes. b. Shell company schemes. c. Switch and swap schemes d. Pay-and-return schemes

d. Pay-and-return schemes

Eli Adams is an accounts payable clerk for MJF Productions. By forging signatures, he was able to procure a company credit card. He recently bought home stereo equipment and put it on his company credit card. When the credit card statement arrived at MJF, Eli prepared a check to the credit card company and buried the purchase in the monthly expenses of the company's largest cost center, knowing that his manager is generally inattentive when approving payments. What type of fraud is this? a. Forged maker scheme b. Larceny c. Pass-through scheme d. Personal purchase scheme

d. Personal purchase scheme