Exam 1

According to ACFE's 2020 Report to the Nations, a study of more than 2500 fraud cases from around the world found that those cases caused losses of more than $________. $1,509,000 $1.7 trillion $565 million $3.6 billion

$3.6 billion

From 2010 to 2012, Mickellson's profit margin increased by ____ percentage points. 17 5.8 0 29

29

Each of the quizzes throughout the course may be taken up to ____ times. 3 4 2 1

3

The 2012 current ratio for Mickellson was: 3.71 5.06 4.01 3.79

4.01

Certified Fraud Examiners estimate that organizations lose _____% of revenue to fraud every year. 50 5 12 15

5

During 2012, Mickellson's goods spent an average of _____ days in inventory. 46.2 19.1 57.7 25.0

57.7

Mickellson's inventory turnover ratio for 2010 was: 2.5 8.4 7.9 6.3

7.9

Which of the following best describes an "air loan"? A fictitious loan used to cover a theft of cash. A loan for purchasing vacant land. A loan obtained for the purpose of purchasing oxygen, helium, or other elements in a gaseous state. A loan collateralized by property that does not exist.

A loan collateralized by property that does not exist.

Which of the following is a prerequisite for ACC 5140? ACC 2010 - Financial Accounting ACC 2020 - Managerial Accounting University Advanced Standing Passing the CFE exam.

ACC 2010 - Financial Accounting

A dishonest employee falsifies an asset transfer form in order to remove inventory from the warehouse and divert it to personal use. This is an example of which of the following? Misappropriation of a company's assets. A larceny scheme. All of the answers are correct. Occupational fraud and abuse.

All of the answers are correct.

Types of billing schemes include all of the following, except: False invoicing via shell companies Altering bank statements Personal purchases made with entity funds False invoicing via non-accomplice vendors

Altering bank statements

A victim of identity theft should contact the primary credit reporting bureaus and have a security alert or freeze placed on their report. Which of the following is not one of the primary credit reporting bureaus? Equifax Experian American Express TransUnion

American Express

Which of the "Big 5" accounting firms in the U.S. went out of business due largely to its involvement with Enron? PricewaterhouseCoopers Correct! Arthur Andersen KPMG Deloitte & Touche Ernst & Young

Arthur Andersen

The vast majority of fraud cases reviewed by ACFE pertain to which category of fraud? Asset misappropriation schemes Corruption None of the selections is correct. Financial statement fraud

Asset misappropriation schemes

The basic equation for all double-entry accounting is: Liabilities - Bad Debts = Assets - Owners' Equity Owners' Equity = Liabilities - Assets Liabilities + Assets = Owners' Equity Assets = Liabilities + Owners' Equity

Assets = Liabilities + Owners' Equity

Creative Craft Corporation's accounts receivable employee who might be suspected of fraud is: Lionel Barrymore Barry Manilow Drew Barrymore Barrimore Barkker

Barrimore Barkker

Jayne Johnson's job at Aspen Community Bank is: receptionist CEO loan officer CFO

CFO

The analytical process of transforming disaggregated competitor data into relevant, accurate, and usable knowledge about competitor's positions, performance, capabilities, and intentions is best described by which of the following terms? Phishing Competitive intelligence Industrial espionage Corporate spying

Competitive intelligence

Jayne's regular duties at the bank included all the following, except: Prepares financial statements for the board of directors and federal regulators. Writes most of the checks to pay bills and disperse loan proceeds. Conducts surprise cash counts. Keeps all accounting records.

Conducts surprise cash counts.

Corruption includes all of the following, except: Correct! Larceny Conflicts of Interest Bribery Illegal Gratuities

Correct! Larceny

While creating a hypothesis, a fraud examiner should perform all the following steps except: Decide whether or not a suspect is guilty of fraud. Determine evidence to be gathered to test the hypothesis and the expertise needed. Consider the worst possible outcome. Determine the characteristics of the possible fraud.

Decide whether or not a suspect is guilty of fraud.

ACFE's Fraud Tree includes three primary types of occupational fraud including all of the following, except: Correct! Economic Extortion Corruption Asset Misappropriation Financial Statement Fraud

Economic Extortion

A year-end physical count will always uncover a perpetrator's theft of inventory. True False

False

According to the syllabus, Prof Rollins worked for the CIA. True False

False

As a result of the Enron scandal, ex-CEO Kenneth Lay was given a 24-year prison sentence which he continues to serve as of 2020. True Correct! False

False

Barry agreed that he needed an assistant to help with accounts receivable. True False

False

Biological theories of criminal behavior suggest that all people, regardless of their race, class, or gender, have the potential to become criminals. True False

False

Credit is given to Donald Sutherland for coining the term "white collar crime" in 1939. True False

False

Financial statement fraud can usually be considered a victim-less crime. True False

False

Fraud examiners are responsible for the prevention of fraud. True Correct! False

False

If there is a red flag within an organization, fraudulent activity must be happening. True False

False

Punishment has been proven to be the most effective method for suppressing unwanted behaviors. True False

False

Suspicious Activity Reports are not required under the Bank Secrecy Act to detect & prevent money laundering. True False

False

The bank has no apparent problems with segregation of duties. True False

False

The process of resolving allegations of fraud from inception to disposition is best known as: Correct! Fraud Examination Law Enforcement Capital Punishment Forensic Accounting

Fraud Examination

Which of the following is not one of the three general elements shown in the fraud triangle? Opportunity Greed Rationalization Pressure

Greed

This case included all of the following red flags for fraud except: Lack of segregation of duties employee who refused to take vacations Lack of bank reconciliations actual embezzlement

Lack of bank reconciliations

The fraud triangle includes all of the following elements, except: Correct! Mistrust Pressure Opportunity Rationalization

Mistrust

ACFE's Fraud Examination Methodology includes all of the following, except: Correct! Move from the specific to the general. Assume litigation will follow. Approach from two perspectives. Use the Fraud Theory Approach.

Move from the specific to the general.

From 2010 to 2012, Mickellson's working capital ______________. Nearly doubled each year. Could not be calculated. Reflected a dramatic loss of liquidity. Was wildly erratic.

Nearly doubled each year.

The Australian Wheat Board was accused of paying bribes to: Saddam Hussein Goldman Sachs Prime Minister Howard Ernst & Young

Saddam Hussein

Which check altering scheme is the easiest to detect? Scratching out original payee or using correction fluid Blank checks signed by authorized signor Entering the accounts payable system and changing the payee before check is written Adding additional letters or words to payee

Scratching out original payee or using correction fluid

The person given the most credit for "blowing the whistle" on Enron's dubious accounting practices was: Andrew Fastow Arthur Andersen Kenneth Lay Correct! Sherron Watkins Jeffrey Skilling

Sherron Watkins

Effective alternatives to punishment include all of the following, except: Reward positive behaviors like honesty & cooperation . Shock therapy. Implement internal controls. Change the circumstances with fair pay, counseling, etc.

Shock therapy.

Individuals should employ reasonable efforts to protect all information used for personal identification. In protecting yourself from identity theft which of the following items of personal information is the most important to protect? Student ID number Social security number The name of your dog Personal telephone number Drivers license number

Social security number

During the 1990s, Enron created dozens of limited partnerships known as SPEs. According to the case, what did the initials SPE stand for? Correct! Special Purpose Entities Sigma Psi Epsilon Subsidiary Power Enterprises Society of Petroleum Engineers

Special Purpose Entities

Enron was able to avoid disclosing billions of dollars of debt from its consolidated financial statements due to a "gaping loophole" in US accounting practices. This loophole was known as: Generally Accepted Accounting Principles. Accumulated depreciation. The Securities and Exchange Commission Guidebook. Correct! The 3 percent rule.

The 3 percent rule.

To assure that evidence is sufficient to conclude a fraud examination, it should be all of the following except: Timely Complete Organized Unbiased

Timely

According to ACFE's 2020 Report to the Nations, the most common source for discovering occupational fraud is: Correct! Tips Management Review Internal Audit Other Means

Tips

Why should businesses require original receipts and ink signatures on expense reports? To save money on photocopy paper and ink cartridges. To satisfy the internal auditors. To annoy employees on business trips. To prevent alterations that are less noticeable on a photocopy than on an original document.

To prevent alterations that are less noticeable on a photocopy than on an original document.

A good control to help prevent theft of bank deposits is to deposit them daily. True False

True

According to ACFE, the two basic ways that a person can misappropriate a company asset is to either misuse it or steal it. True False

True

Accrual basis accounting requires that revenues are recorded when they are earned and that expenses are recorded in the same period as the revenues to which they relate. True False

True

As a result of the Cole Commission report, the United States and other countries banned AWB from receiving contracts from their respective governments. True False

True

Asset misuse is not always a harmless crime. True False

True

Barry discovered an embezzlement while reconciling the corporation's bank account. True False

True

Computer generated checks require computer access. True False

True

Conflicts of interest do not necessarily constitute legal violations, as long as they are properly disclosed. True False

True

Embezzlement is defined as the wrongful taking or conversion of the property of another by a person to whom it has been lawfully entrusted. True False

True

Fraud examination does not begin without predication. True False

True

Many fraud examinations utilize forensic accounting, but not all forensic accounting is done for fraud examination purposes. Correct! True False

True

One of the course objectives is to develop a mastery of professional fraud examination skills. True False

True

Plus and minus grades will be awarded at the discretion of the instructor. True False

True

Since beginning work at Aspen, Jayne has won the trust and admiration of the CEO and members of the Board of Directors. True False

True

Skimming schemes are also known as off-book frauds because cash is stolen before it is recorded in the victim organization's accounts. True False

True

Social Engineering is deception to get individuals to divulge confidential or personal information. True False

True

The Dodd-Frank Act requires mortgage lenders to make reasonable effort to ensure the ability to repay before issuing a loan to customers. True False

True

The OECD's 1996 Convention Against the Bribery of Foreign Public Officials in International Business Transactions obligated member countries to "criminalize" bribes paid to foreign government officials. True False

True

The longer a fraud remains undetected, the greater the financial losses. True False

True

All of the following are ways that a fraud examiner can prove corrupt payments, except: Engaging in a covert "sting" operation. Waterboarding Tracing corrupt payments through audit steps. Turning an inside witness.

Waterboarding

All of the following are differences between white-collar criminals and other criminals, except: White-collar criminals tend to steal larger amounts of cash or other items of valuable.. White-collar criminals are less likely to serve jail time. White-collar criminals have a lower probability of being caught. White-collar criminals are usually less educated.

White-collar criminals are usually less educated.

Aspen Community Bank was originally organized by: a medical insurance provider and a stockbroker. two medical doctors. two attorneys. a medical doctor and a real estate developer.

a medical doctor and a real estate developer.

The vast majority of frauds fall under this major category in the fraud tree. Correct! asset misappropriation corruption financial statement fraud bribery

asset misappropriation

All of the following are considered to be financial statements, except: bank statement balance sheet statement of retained earnings income statement statement of cash flows

bank statement

Misappropriation of intangible assets might include theft of all of the following, except: trade secrets customer lists cash marketing strategies

cash

Which of the following assets is most susceptible to theft? cash accounts receivable marketable securities inventory

cash

Skimming schemes include all of the following, except: cash larceny register manipulation sales skimming understated sales theft of checks received through the mail

cash larceny

U.S. generally accepted accounting principles (GAAP) include all of the following, except: competitive matching going concern full disclosure historical cost consistency

competitive

Information theft by insiders include all of the following, except: competitors affiliates associates employees

competitors

Zack, an employee of a manufacturing company invested in the stock of one of its suppliers. Zack used his influence in the manufacturing company to encourage purchases from the supplier that he owned stock in. Zack's actions are best described by which of the following terms? conflict of interest good business collusion overbilling

conflict of interest

The wrongful use of influence to procure a benefit for the actor or another person, contrary to the duty or the rights of others best describes: lapping collusion corruption larceny

corruption

Check tampering schemes may include all of the following, except: double billing authorized maker forged endorser altered payee forged maker

double billing

According to ACFE, detection/prevention of cash larceny can be achieved through all the following methods, except: enforcing conflict-of-interest policies surprise cash counts assignment rotation mandatory vacations procedure supervision

enforcing conflict-of-interest policies

Senior managers of the AWB tried to pass the bribes off as: economic extortion. marketing expenses. petty cash larceny. facilitating payments.

facilitating payments.

In general, payroll schemes fall into the following three categories: ghost employee schemes, falsified hours and salary schemes, and commission schemes. cash larceny, skimming, and check tampering. asset misappropriation, billing schemes, and register disbursement schemes. bribery, corruption, and conflict of interest

ghost employee schemes, falsified hours and salary schemes, and commission schemes.

ACFE's Fraud Tree classifies occupational fraud into all the following categories, except: financial statement fraud asset misappropriation identity theft corruption

identity theft

The most common type of financial statement fraud, according to an SEC report for the years 1997-2002, consisted of: failure to disclose related-party transactions improper expense recognition improper revenue recognition inadequate disclosures in MB&A and elsewhere

improper revenue recognition

The unaccounted-for reduction in a company's inventory that results from error or theft is known as _________. non-cash larceny. inventory shrinkage. accounts receivable turnover. inventory turnover.

inventory shrinkage.

Property flipping is illegal or fraudulent when: there is no valid title insurance on the property. a property is sold twice in rapid succession at a significant increase in value. a property is purchased and resold within a short period of time. it is the result of a fraudulent appraisal.

it is the result of a fraudulent appraisal.

On the balance sheet assets are presented in order of _________. chronology magnitude liquidity dollar amount

liquidity

According to ACFE's 2020 Fraud Examiners Manual, there are basically two ways a person can misappropriate company assets. They are: copy or paste break or borrow abuse or neglect misuse or steal consume or waste

misuse or steal

Internal controls are generally designed to reduce or eliminate which element of the fraud triangle? Correct! opportunity incentive motivation rationalization

opportunity

Financial statement fraud almost always involves: understating profits and losses and overstating expenses and revenues. understating assets, revenues, and profits and overstating liabilities, expenses, and losses. overstating assets, revenues, and profits and understating liabilities, expenses, and losses. overstating assets and liabilities and understating revenues and expenses.

overstating assets, revenues, and profits and understating liabilities, expenses, and losses.

Barry's duties with regard to accounts receivable included all of the following except: approve new accounts make account adjustments deposit cash in bank receive check payments sell products

sell products

The difference between skimming and cash larceny is: skimming is only done at a cash register while larceny requires stealing from a vault skimming takes place before cash is recorded and larceny takes place after cash is recorded skimming involves currency while larceny involves checks skimming requires destruction or alteration of records while larceny does not

skimming takes place before cash is recorded and larceny takes place after cash is recorded

Intellectual property is best described as: the intelligence and skills of the employees of an organization the inventory of software for sale in a high-tech company the knowledge-based assets and capital within an organization all publicly available information about an entity

the knowledge-based assets and capital within an organization

The OECD Convention did not require member countries to criminalize facilitating payments as long as: the payments were legal in the countries in which they were made. such payments were generally accepted within the culture of the country in which they were made. external auditors were consulted and approved the payments. the total amount of the payments did not exceed the equivalent of $50,000.

the payments were legal in the countries in which they were made.

Which of the following is not classified as a form of corruption? kickbacks theft extortion bribery

theft

What are the three most common ways that the frauds studied by ACFE were originally detected? account reconciliation, tips, and external audit internal audit, external audit, and by accident tips, internal audit, and management review IT controls, document examination, and management review

tips, internal audit, and management review

Financial statement fraud is committed for all of the following reasons, except: to meet company goals and objectives to obtain financing, or to obtain more favorable terms on existing finances To cover inability to generate cash flow to hide potential conflicts of interest to encourage investment through the sale of stock to receive performance-related bonuses

to hide potential conflicts of interest