Fraud 4235 Midterm, Fraud: Chapter 10
c. at the end of the investigation process so that they can gather sufficient evidence against the
When investigating fraud, investigators should usually interview suspects: a. at the beginning of the investigation process to really put the heat on them. b. in the middle of the investigation process to make them feel that they are not really a suspect. c. at the end of the investigation process so that they can gather sufficient evidence against them. d. any time during the investigation process to avoid creating undue stress and suspicion among other employ
SHA-1
Which checksum method is considered more advanced and secure than the method it replaced? a. MD5 b. CRC-1 c. SHA-1 d. CRC-2
Computer forensics
Which general term refers to the gathering of electronic evidence? a. Checksum b. Online verification c. Electronic audit d. Computer forensics
Surveillance and covert operation
Which investigation technique relies on a person's senses, especially hearing and seeing? a. Invigilation b. Surveillance and covert operations c. Electronic evidence d. Obtaining physical evidence
Concealment
Which investigation technique usually does not work well in kickback situations? a. Concealment b. Theft c. Inquiry d. Conversion
Inquiry
Which investigative method is most useful after you have gathered other types of evidence and know who to interview and what questions to ask? a. Inquiry b. Theft c. Concealment d. Conversion
Surveillance and covert operations
Which of the following are theft act investigative methods that usually involve observing or listening to potential perpetrators? a. Audits b. Online resources c. Document examination d. Surveillance and covert operations
An employee has bought a luxury car and some expensive jewelry
Which of the following indicates an observed symptom (red flag) of fraud? a. An employee is unhappy with her pay. b. An employee is undergoing a messy divorce. c. An employee has bought a luxury car and some expensive jewelry. d. An employee was seen shredding documents after hours
identification of the suspected perpetrator
Which of the following is NOT a component of a vulnerability chart? a. listing assets that are missing b. concealment possibilities c. internal controls that had to be compromised d. identification of the suspected perpetrator
b. Electronic searches
Which of the following is NOT a method for theft investigation? a. Covert operations (surveillance) b. Electronic searches c. Invigilation d. Physical evidence
Audit
Which of the following is NOT a type of surveillance? a. Stationary or fixed point b. Audit c. Tailing d. Electronic surveillance
Catch fraud at the theft act stage
Which of the following is a basic objective of surveillance, whether manual or electronic? a. Identify victims of the fraud b. Analyze how the money comes back in the form of assets c. Understand the cover-up or concealment of fraud d. Catch fraud at the theft act stage
It forces the investigators to explicitly consider all aspects of a fraud act
Which of the following is a benefit of creating a vulnerability chart? a. It forces the investigators to explicitly consider all aspects of a fraud act. b. It conveys a warning to all employees that fraud will not be tolerated. c. It lists/coordinates the steps the investigator must take to uncover the perpetrator. d. It shows management where controls are weak
Wiretapping
Which of the following is a form of surveillance that is usually only available to law enforcement officers? a. Surveillance using video cameras b. Wiretapping c. Stationary surveillance d. Tailing
confiscating and searching computers
Which of the following is an increasingly popular form of gathering physical evidence of fraud? a. reviewing spending habits of the those possibly involved b. confiscating and searching computers c. tracking missing inventory through bar codes d. creating and viewing surveillance tapes
Invigilation should include all areas of the business
Which of the following is important regarding invigilation? a. Invigilation should include all areas of the business. b. The time period for the invigilation should be at least one month. c. Past records should be analyzed in order to establish an operating profile for the invigilation. d. The investigator should make the decision regarding the temporary controls to be put in place for the invigilation.
a. Interview suspect
Which of the following is the last step in an investigation? a. Interview suspect b. Interview former employees c. Interview former buyers d. Perform surveillance
The strict controls imposed are temporary in nature
Which of the following is true about invigilation? a. The strict controls imposed are temporary in nature. b. During the period of invigilation, evidence is presented to suspects with the hopes of getting a confession. c. When invigilation is conducted, it is best to cover all aspects of the business. d. Invigilation should be accomplished in 5-7 days
It is more associated with nonfraud types of crime
Which of the following observations concerning physical evidence is TRUE? a. It is not useful in fighting fraud cases. b. It is more associated with nonfraud types of crimes. c. It is useful in fraud cases because fraud has physical symptoms. d. It does not involve electronic sources of information
The investigation process usually starts by approaching the suspect
Which of the following statements is FALSE? a. Fraud investigations should begin in a manner that does not arouse suspicion. b. Initially, investigators should avoid using words like investigation. c. The investigation process usually starts by approaching the suspect. d. Investigators should focus on gathering the strongest types of evidenc
Cloning
Which step in the electronic evidence collection process is important to ensure that the original disk is kept in its seized state? a. Evidence mapping b. Search c. Seizure d. Cloning
Predication
______ means that there are symptoms or red flags that a fraud may be occurring. a. Predication b. Vulnerability c. Audit d. Presumption
50. Guilty people almost never confess when it is conveyed that they are what type of person? a. Bad b. Simply careless c. Intelligent d. Obviously guilty
a. Bad
19. Which of the following is a popular program used to index and store evidence? a. CaseCentral b. IDEA c. TANZAN d. SQL
a. CaseCentral
35. Which of the following refers to the use of time in interpersonal relationships to convey meaning, attitudes, and desires? a. Chronemic communication b. Paralinguistic communication c. Kinetic communication d. Proxemic communication
a. Chronemic communication
7. Which of the following statements is true? a. Concealment investigation includes document investigation, physical asset counts, and computer searches. b. Most concealment investigation techniques focus on obtaining eyewitness accounts as evidence. c. Honesty testing is considered as a concealment investigation technique. d. Concealment investigation is dependent on employee cooperation to gather evidence
a. Concealment investigation includes document investigation, physical asset counts, and computer searches.
11. Which of the following is generally considered a best practice while handling documentary evidence? a. Copies of the document should be used during the investigation and trial and should be kept in the same file where the original is kept. b. Photocopies are always preferable to original documents as evidence, as the original could be tampered with. c. Copies of the document should not be made and only the original document should be used during investigation and trial. d. Generally, a summary of the original document should be made for investigation and trial.
a. Copies of the document should be used during the investigation and trial and should be kept in the same file where the original is kept.
6. Which of the following does NOT constitute a federal source of information? a. County clerk b. CIA c. Secret service d. FBI
a. County clerk
7. Which of the following is the correct sequence of reaction to a crisis? a. Denial, anger, rationalization, depression, acceptance b. Rationalization, anger, depression, acceptance, denial c. Denial, depression, anger, rationalization, acceptance d. Rationalization, depression, anger, denial, acceptance
a. Denial, anger, rationalization, depression, acceptance
14. Which of the following will be useful in ascertaining whether a doctor is legitimate? a. Department of Business Regulation b. Secretary of State c. State Medical Registry d. County Clerk
a. Department of Business Regulation
13. Identify the usual order of net worth calculations used to determine stolen funds. a. Find net worth, find the net worth increase, find income, find the funds from unknown sources b. Find net worth, find income, find the funds from known sources, find the net worth increase c. Find income, find net worth, find the net worth increase, find the funds from unknown sources d. Find net worth, find the net worth increase, find the funds from known sources, find income
a. Find net worth, find the net worth increase, find income, find the funds from unknown sources
33. How are permit departments helpful in conversion investigation efforts? a. Identifying the nature and location of businesses, new leases, and recent construction. b. Obtaining information about chattel mortgages and loans to individuals or businesses on equipment. c. Obtaining license numbers used for identification in transactions. d. Identifying owned assets, indebtedness, mortgage holders, trustees or straw buyers.
a. Identifying the nature and location of businesses, new leases, and recent construction
44. Which of the following is NOT an important Closing Question? a. In conclusion, what do you think should be done? b. Do you know anyone else I should talk to? c. Is there anything I have forgotten to ask that you believe would be relevant? d. If I need to talk to you again, would that be all right?
a. In conclusion, what do you think should be done?
7. Net Worth Increase + Living Expenses = a. Income b. Funds from known sources c. Liabilities d. Assets
a. Income
40. Each of the following is a clue that an interviewee is dishonest EXCEPT: a. Interviewee's denials become more vehement as accusations are repeated. b. Interviewee requests that the interviewers obtain character testimony from other people. c. Interviewee refuses to implicate possible suspects. d. Interviewee frequently covers his/her mouth with hand or fingers.
a. Interviewee's denials become more vehement as accusations are repeated.
51. The most common of all techniques used to investigate and resolve fraud is: a. Interviewing b. Auditing c. Arbitration d. Invigilation
a. Interviewing
4. From the following, identify an item that does NOT go into current net worth calculations? a. Preliminary expenses b. Prior year's net worth c. Funds from known sources d. Assets
a. Preliminary expenses
22. Identify the strongest response to a threatened ego. a. Repression b. Disapproval c. Loss of Status d. Anger
a. Repression
28. What do you mean by opting out? a. Serving a written notice, denying the bank the right to sell personal information. b. Withdrawing from a fraud being perpetrated by a colleague. c. A bidder denying to pay the proceeds of the bid on becoming bankrupt d. Whistle-blowing by a person who was part of a fraud earlier..
a. Serving a written notice, denying the bank the right to sell personal information.
5. Which one of the following information is NOT maintained by credit reporting agencies? a. Supplier or creditor information such as sales volume and credit policies. b. Account information such as payment schedules, items purchased, and buying habits. c. Marketing information such as customer breakdowns by age, sex, and income levels. d. Consumer information such as addresses, ages, family members, and income.
a. Supplier or creditor information such as sales volume and credit policies.
4. Which of the following practices should interviewers avoid? a. Taking detailed notes. b. Taping the interview with permission. c. Maintaining eye contact. d. Documenting the results.
a. Taking detailed notes.
16. The most effective theme of interviewing is: a. That help is being sought. b. The motive for committing the fraud. c. The fraud and how it evolved. d. The suspect's involvement in the fraud.
a. That help is being sought.
42. What is Graphology? a. The study of handwriting for the purpose of character analysis. b. Voice stress analysis for the purpose of determining whether a person is lying. c. Using answers to pencil-and-paper honesty tests to elicit information about a person's honesty and code of ethics. d. The process by which we obtain release from unpleasant emotional tensions by talking about the source of these tensions.
a. The study of handwriting for the purpose of character analysis.
24. Which of the following is a primary reason for conducting conversion searches? a. To determine the extent of embezzlement. b. To identify how perpetrators conceal frauds. c. To develop a vulnerability chart. d. To understand the suspect's reaction to crisis.
a. To determine the extent of embezzlement.
2. Income from known sources subtracted from the total income gives a reasonable estimate of: a. Unknown funds b. Liabilities c. Living expenses d. Net worth
a. Unknown funds
24. The four most common examples of documentary evidence which are valuable but difficult to obtain are: a. Web-based e-mail accounts, private bank records, tax returns, and brokerage records. b. Sample analytical reports, photographs and videos, tax returns, and SEC filings. c. Office e-mail accounts, private bank records, maps and diagrams, and sample analytical reports. d. Photographs and videos, private bank records, tax returns, and brokerage records.
a. Web-based e-mail accounts, private bank records, tax returns, and brokerage records.
8. During which stage of the reactionary process is the most useful time to interview individuals who are dealing with fraud? a. acceptance b. bargaining c. depression d. anger
a. acceptance
14. When the document is in the custody of a public office: a. it is permissible to obtain photocopies, which are considered secondary evidence, in a court of law. b. copies of the document should be made but kept separate from the original document. c. the document (or a copy) cannot be used as evidence, in a court of law. d. a summary of the document will suffice.
a. it is permissible to obtain photocopies, which are considered secondary evidence, in a court of law.
60. Which of the following best states what should be included in the fraud report? a. references to all evidence supporting the allegation(s) b. disclose that guilt was clearly demonstrated if a confession is included c. references to all actions by the suspect that prove guilt d. disclosures of the conclusive evidence of guilt
a. references to all evidence supporting the allegation(s)
33. Which of the following statements is FALSE regarding a search warrant? a. A 'possible cause' condition must be met before a search warrant is issued. b. There is a belief that the documents have been used in committing a crime. c. Only law enforcement officials can execute a search warrant. d. Search warrants are generally used only in criminal cases.
a. A 'possible cause' condition must be met before a search warrant is issued.
32. Which of the following statements about subpoenas is correct? a. A subpoena can only be issued by agents of a grand jury or of the court. b. A subpoena is one of the two ways to gain access to difficult to obtain information. c. A subpoena must be signed by the chair of the grand jury. d. A subpoena's only purpose is to access difficult to obtain documents.
a. A subpoena can only be issued by agents of a grand jury or of the court.
40. Which of the following is a limitation to the Net Worth Method? a. It only includes assets and liabilities that can be discovered. b. The resulting amounts presented in court are usually lower than the actual theft amount. c. The Net Worth Method only gives an estimate of Net Worth increases or decreases. d. When presented with the Net Worth amount(s), suspects sometimes confess.
a. It only includes assets and liabilities that can be discovered.
41. Which of the following statements is NOT included in a subpoena? a. the location of the documents being requested b. the identity of who is making the request for the documents c. the exact information being requested d. the signature of a judge or court commissioner
a. the location of the documents being requested
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. 24
8. Which of the following is a commercial data-mining software? a. ACL b. QuickBooks c. Peachtree d. Excel
a. ACL
6. Recording an expense to conceal fraud involves making a fictitious journal entry. A faulty journal entry is an example of which fraud symptom? a. Accounting anomaly b. Internal control weakness c. Unusual behavior d. Analytical anomaly
a. Accounting anomaly
11. An effective accounting system is designed to provide which of the following to help discover fraud? a. An audit trail b. Matching of expenses to revenues c. Set of controls d. Set of accounting procedures
a. An audit trail
14. ______ fraud symptoms are procedures or relationships that are unusual or that do not make sense. a. Analytical b. Accounting c. Internal control d. Environmental
a. Analytical
29. _____ are relationships in financial or nonfinancial data that do not make sense, such as an unreasonable change in a volume, mix, or price. a. Analytical anomalies b. Accounting anomalies c. Auditing anomalies d. Control weaknesses
a. Analytical anomalies
12. Kickbacks from vendors to buyers might generate one of the following symptoms. a. Buyer doesn't relate well to other buyers and vendors b. Decreasing purchases from favored vendor c. Increasing purchases from other vendors d. Decreasing prices and increasing quality
a. Buyer doesn't relate well to other buyers and vendors
33. Which of the following questions should be avoided during a job interview? a. Can you tell me your birth date? b. If the opportunities in your previous assignment were good, why did you leave it? c. Can you relate an instance in which you resolved a conflict with a co-worker? d. What motivates you at work?
a. Can you tell me your birth date?
22. Which of the following is least effective while searching for anomalies? a. Comparing account balances in the statements from one period to the next. b. Calculating key ratios and comparing them from one period to the next. c. Performing horizontal analysis. d. Performing vertical analysis.
a. Comparing account balances in the statements from one period to the next.
16. Modeling and labeling are sub-components of which fraud-related element of an organization? a. Control environment b. Accounting system c. Audit procedures d. Review procedures
a. Control environment
10. Which of the following is an analytical symptom of a kickback? a. Decreasing purchases from other vendors b. Charging normal price for goods supplied c. Providing better quality goods d. Smaller purchase quantities and more frequent orders
a. Decreasing purchases from other vendors
45. What are detectlets? a. Detectlets are small program plug-ins that discover specific indicators. b. Detectlets are infrequent accounting anomalies discovered during an audit. c. Detectlets are fraud indicators highlighted by the data process program during an audit. d. Detectlets are items discovered by the program that indicate the percentage possibility that fraud is present.
a. Detectlets are small program plug-ins that discover specific indicators.
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. Documentary evidence
37. Which of these help employees deal with substance abuse (alcohol and drugs), gambling, money management, and health, family, and personal problems? a. Employee Assistance Programs b. Equal Employment Opportunity Programs c. Employees Anonymous Programs d. Whistle-Blowing Programs
a. Employee Assistance Programs
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. Employees are less likely to commit fraud.
22. Which is the highest level in the ethical maturity model? a. Ethical leadership b. Ethical courage c. Personal ethical understanding d. Application of ethics to business situations
a. Ethical leadership
46. Wilma participates in a fraud scheme by executing some derivative trades because she believed that a senior analyst knew more about complex derivative transactions than she did. These transactions were fraudulent in nature. Which type of power was employed to deceive Wilma? a. Expert power b. Referent power c. Coercive power d. Reward power
a. Expert power
10. Greed, living beyond one's means and high bills all describe what type of fraud-related pressure? a. Financial b. Peer c. Environmental d. Work-Related
a. Financial
15. Poor credit could become a ____ that could lead to fraud. a. Financial pressure b. Social pressure c. Family pressure d. Financial threat
a. Financial pressure
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.
a. Fraud perpetrated through collusion between buyers and vendors.
22. Which method will result in biggest savings? a. Fraud prevention--including EAP plans. b. Fraud detection--including audit proactively, monitoring. c. Investigation--including criminal prosecution. d. Promotion--including raising rank or position.
a. Fraud prevention--including EAP plans.
6. Which of the following approaches is most useful in creating a culture of honesty and integrity in the workplace? a. Hiring right kind of employees b. Security cameras c. Peer evaluations d. Ergonomics
a. Hiring right kind of employees
25. A smart fraudster usually manipulates which financial record in order to better avoid an audit trail? a. Income statement. b. Balance sheet. c. Statement of cash flows. d. Statement of retained earnings.
a. Income statement.
22. Which of the following is a highly suspicious financial statement relationship? a. Increased revenues with decreased inventory. b. Decreased production with decreased scrap. c. Increased revenues with increased receivables d. Decreased cost per unit with increased level of output
a. Increased revenues with decreased inventory.
24. Which of the following is true of the "swing group" of employees in organizations? a. Individuals in this group have situational ethics. b. Individuals in this group are dishonest most of the time. c. Individuals in this group do not know how to translate their ethical values to the business world. d. Individuals in this group lack ethical courage.
a. Individuals in this group have situational ethics.
38. Telemarketing fraud usually falls into this category. a. Investment scams b. Management fraud c. Vendor fraud d. Embezzlement
a. Investment scams
27. Which of the following statements is true about ODBC? a. It allows use of the powerful SQL language for searching and filtering of the data. b. It is generally slower and less robust than text files. c. IT departments are very comfortable in giving out ODBC connections. d. It is an application-level setting rather than a system wide setting.
a. It allows use of the powerful SQL language for searching and filtering of the data.
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 victim organization. c. Civil action is a good way to get restitution. d. Civil action sends a message to others not to commit fraud.
a. Legal action is taken in fewer than half of frauds committed.
23. What is the strongest factor in deterring future fraud activity? a. Legal prosecution. b. Sanctions. c. Termination. d. Counseling.
a. Legal prosecution.
41. Which of the following is a true statement? a. Lifestyle changes are often the easiest fraud symptoms to detect. b. Lifestyle changes are helpful in detecting fraud on behalf of a corporation. c. Fraud is indicated when an employee sells a large number of shares of stock he/she owns. d. Evidence of an employee paying off large debt can be verified, but it is costly to do so.
a. Lifestyle changes are often the easiest fraud symptoms to detect.
4. Which of the following is NOT a part of the evidence square? a. Management evidence b. Documentary evidence c. Testimonial evidence d. Physical evidence
a. Management evidence
45. Which of the following possible actions may discourage an employee to report suspected fraudulent activities? a. Management promises no prosecution of the individual if guilty. b. Corporate security's number is provided. c. The number of the internal auditor is provided. d. Corporate management stresses that any information provided will be kept confidential.
a. Management promises no prosecution of the individual if guilty.
12. Which of the following is an example of accounting anomaly fraud symptom? a. Missing documents b. Excess purchases c. Too many debit or credit memos d. Inadequate accounting system
a. Missing documents
11. What is the primary drawback of the data-driven approach? a. More expensive and time intensive than the traditional approach. b. The time necessary to verify the large number of indicators identified. c. Cannot highlight frauds while they are still small. d. The investigator loses control of the fraud investigation process.
a. More expensive and time intensive than the traditional approach
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. Most frauds start small and get larger over time.
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. Offer rewards for honest behavior
38. Which of the following is an example of an authorization control procedure? a. Password protection b. Periodic job rotation c. Cash checks d. Supervisor review
a. Password protection
28. Generally, internal controls are implemented in a corporation to help prevent which element of the fraud triangle? a. Perceived opportunity b. Perceived pressure c. Rationalization d. Authorization
a. Perceived opportunity
19. Recent research has shown that there is an ethical maturity model (EMM) that explains why people make unethical decisions. Which of the following represents the foundation of ethics according to this model? a. Personal ethical understanding b. Ethical courage c. Ethical leadership d. Application of ethics to business situations
a. Personal ethical understanding
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. Predication
31. To be successful, plaintiffs in civil cases must prove their case by which of the following? a. Preponderance of evidence. b. Beyond a reasonable doubt. c. To a degree of reasonable mitigation. d. To the standard of prima facie.
a. Preponderance of evidence.
28. What is the most cost-effective way to minimize the cost of fraud? a. Prevention b. Detection c. Investigation d. Prosecution
a. Prevention
24. Which of the following usually motivates embezzlers to indulge in a fraudulent activity? a. Pursuit of immediate gratification. b. Safeguard their future. c. Cover expenses required to live. d. Protection against uncertainties.
a. Pursuit of immediate gratification.
39. Who do criminologists compare fraudsters to in relation to repeat offenses and why? a. Rapists. They repeat their crimes because they are not severely punished. b. Shoplifters. They steal goods frequently and in small quantities until they are confronted. c. Bank Robbers. They steal a lot of money from wealthy sources. d. Bank Tellers. They have access to a large amount of resources and they are perceived to be trustworthy people.
a. Rapists. They repeat their crimes because they are not severely punished.
27. An employee decides to steal cash from his/her employer. What would be the best way to conceal such a fraud? a. Record the stolen cash as an expense. b. Writing down accounts payable for a supplier. c. Increasing accounts receivable from a customer. d. Writing down as dividend paid to shareholders.
a. Record the stolen cash as an expense.
48. Many individuals, when persuaded by a trusted friend to participate in fraud, will rationalize the actions as being justifiable. Which type of power is being employed in such situations? a. Referent power b. Legitimate power c. Coercive power d. Reward power
a. Referent power
41. An organization has a policy requiring the dual counting of all incoming cash receipts. Which control activity is being used here? a. Segregation of duties b. Proper authorizations c. Physical safeguards d. Documents and records
a. Segregation of duties
49. Which of the following is true? a. Stratification is the splitting of data into case-specific tables. b. Stratification is an extension of summarization. c. Summarization provides detail for each grouping into tables. d. Stratification is utilized to create a z-score across data sets.
a. Stratification is the splitting of data into case-specific tables.
52. Which of the following is a true statement regarding the fraud scale depicted in the text? a. The greater the perceived opportunity to commit fraud, the less rationalization is takes to commit fraud. b. The more dishonest a person is, the higher the need to rationalize the fraud act. c. When the financial pressure increases, even low perceived opportunity is sufficient to commit fraud. d. As the 'need' to gamble increases, rationalization to commit fraud becomes easier.
a. The greater the perceived opportunity to commit fraud, the less rationalization is takes to commit fraud.
43. Which of the following is usually NOT a reason people hesitate to anonymously report their suspicions about an act of fraud? a. The perpetrator has bullied them in the past. b. The perpetrator is a friend who has helped them in the past. c. The perpetrator is a relative. d. The perpetrator is a neighbor.
a. The perpetrator has bullied them in the past.
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.
a. The purpose of a criminal case is "to right a wrong", the purpose of civil case is to obtain a remedy.
50. Which of the following is true regarding the fraud triangle? a. The three elements of the fraud triangle are inter-active. b. Rationalization for the fraud act is thought of after the fraud has been committed. c. The perceived ability to conceal the fraud act concerns the rationalization side of the fraud triangle. d. A financial pressure to commit fraud is the strongest pressure of the three fraud triangle elements.
a. The three elements of the fraud triangle are inter-active.
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. Theft act investigative methods
43. Which of the following observations concerning collusive frauds is true? a. They are usually slower to develop than frauds committed by one individual. b. Research indicates that majority of the frauds involve collusion. c. Frauds involving collusion are usually the easiest to detect because of the involvement of multiple players. d. Recent trends in business have dramatically decreased the number of collusive frauds.
a. They are usually slower to develop than frauds committed by one individual
21. Most fraud perpetrators have profiles that look like: a. Those of other honest people b. Those with criminal records c. Those who are uneducated d. Those who use alcohol and drugs
a. Those of other honest people
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
a. Title 18, U.S. Code Section 201
13. Which of the following is NOT an element of a good control environment? a. Trust b. Modeling c. Appropriate hiring d. Management's communication
a. Trust
14. The fraud triangle includes all of the following EXCEPT: a. Validation b. Perceived opportunity c. Rationalization d. Perceived pressure
a. Validation
50. Which individual listed is most likely to commit financial statement fraud in order to benefit an organization? a. an executive b. an internal auditor c. a floor manager (line supervisor) d. the company Treasurer
a. an executive
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. communication
47. Which of the following indicates proactive fraud auditing? a. creating an awareness among employees that their actions can be reviewed at any time b. establishing controls to discourage collusion between employees c. creating an expectation of punishment for a fraud act. d. establishing a system of segregation of duties throughout the organization
a. creating an awareness among employees that their actions can be reviewed at any time
50. Which of the following is false regarding a comprehensive approach to fighting fraud? a. detecting fraud is the responsibility of the independent auditors b. evaluating controls is the function of the internal auditor c. corporate security officers see their role as investigative d. employees are in the best position to prevent and spot fraud
a. detecting fraud is the responsibility of the independent auditors
40. In fraud prosecution cases, ______ matter consists of the underlying data and all corroborating information available. a. evidential b. remedial c. supplemental d. elementary
a. evidential
54. Which of the following is an example of a vice pressure? a. expensive extramarital relationship(s). b. an extravagant life-style. c. needing to appear successful. d. being offered a bribe.
a. expensive extramarital relationship(s).
46. Which of the following is the most important step in data analysis? a. gathering the right data in the right format in the right time period b. understanding the available data c. learning the basics of table structure and field types d. learning the basics of key relationships and query syntax
a. gathering the right data in the right format in the right time period
13. Research in psychology indicates that when people commit a crime (especially for the first time), they are initially overwhelmed by ____ and ____. a. guilt, fear b. anxiety, insomnia c. confidence, rationalization d. defensiveness, anger
a. guilt, fear
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 surveillance cameras. d. collect physical evidence.
a. install reporting hotlines.
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. level is beyond a reasonable doubt.
15. An employee recently bought three new cars and remodeled his/her home. These facts would be considered as a: a. lifestyle symptom. b. spending addiction symptom. c. extravagant behavior symptom. d. financial symptom.
a. lifestyle symptom.
10. Which of the following is an operating condition that can contribute to a higher risk of fraud is? a. management by crisis b. high company loyalty c. flexible rules d. proper authorization
a. management by crisis
21. A major difference between financial statement auditors and fraud examiners is that most financial statement auditors: a. match documents to verify whether support exists for recorded information. b. determine whether the documents are originals. c. determine whether the expenditures make sense. d. check whether all aspects of the documentation are in order.
a. match documents to verify whether support exists for recorded information.
6. When management fraud occurs, companies usually: a. overstate assets and net income. b. understate assets and net income. c. overstate assets and understate net income. d. understate assets and overstate net income.
a. overstate assets and net income.
42. According to Max Weber, ______ is the probability that a person can carry out his or her own will despite resistance. a. power b. persuasion c. prejudice d. potency
a. power
8. In order to detect fraud at the earliest, a manager should pay attention to: a. present lifestyle. b. past conduct. c. attitude toward work. d. absenteeism.
a. present lifestyle.
16. Digital analysis is: a. the art of analyzing the digits that make up numbers like invoice amounts, reported hours, and costs. b. a technique which calculates the average probability for each grouping of data. c. the searching for expected relationships between numbers. d. the use of numeric values for decision making.
a. the art of analyzing the digits that make up numbers like invoice amounts, reported hours, and costs.
35. Refer Data Set 9-1. Calculate the net worth of the individual at the end of year 1. a. $3,000 b. $8,000 c. $0 d. $288,000
b. $8,000
22. Using the data given below, calculate the income from unknown sources for years 2 and 3 respectively. a. (i) -3,200; -26,200 b. (i) 65,800; 47,800 c. (i) 76,600; 56,600 d. (i) 69,000; 74,000
b. (i) 65,800; 47,800
21. Which of the following products can be useful to coordinate the evidence in large cases that involve investigators, legal counsel, accountants, expert witnesses, and management representatives? a. DatiCon b. Analyst's Notebook c. CaseMap d. Ringtail
b. Analyst's Notebook
30. In the sequence of reactions to a crisis, which is the most dangerous time in which to attempt to solve a fraud? a. Denial b. Anger c. Depression d. Rationalization
b. Anger
1. ____ are used by attorneys involved in litigation to track all documents. a. Link analyses b. Bates numbers c. Bar codes d. RFID tags
b. Bates numbers
32. Identify the state agency that maintains licensing information about various professionals. a. Department of Vital Statistics b. Department of Business Regulation c. Permit Department d. County clerk
b. Department of Business Regulation
49. Which of the following is NOT a technique for refuting an alibi? a. Display physical evidence in reverse order of importance b. Discuss specific witnesses to the crime by name c. Discuss deceptions d. Present alternatives
b. Discuss specific witnesses to the crime by name
9. Which is NOT a verbal clue that would place suspicion on an interviewee? a. Frequent reference to good character b. Eagerness to end the interview c. Avoidance of emotionally charged terms d. Answering with a question
b. Eagerness to end the interview
32. Which of the following is an element of a leading question? a. It is not easily understood. b. It contains the answer in it. c. It should not confirm known facts. d. It is confusing and suggests an answer opposite to the correct one.
b. It contains the answer in it.
17. The use of body movement to convey meaning is a. Proxemic communication. b. Kinetic communication. c. Chronemic communication. d. Paralinguistic communication.
b. Kinetic communication.
29. What do you understand by the term trashing? a. A broad search on the Internet to obtain valuable information. b. Looking through a suspect's garbage for possible evidence. c. Destroying hard copies important documents, so as to leave no evidence. d. Gaining financial information through previous acquaintances.
b. Looking through a suspect's garbage for possible evidence.
1. Which of the following is a characteristic of a good interviewer? a. One who interrupts respondents as key issues are introduced b. One who is able to get others to open up and share information c. One who interviews in a highly formal/professional manner d. One who indicates the expected answer during questioning
b. One who is able to get others to open up and share information
34. Which of the following involves the use of volume, pitch, and voice quality to convey meaning? a. Chronemic communication b. Paralinguistic communication c. Kinetic communication d. Proxemic communication
b. Paralinguistic communication
57. Which element of conversation is used mostly to convince respondents of the legitimacy of theinterview? a. Expression b. Persuasion c. Rituals d. Therapy
b. Persuasion
2. What is meant by calibrating? a. The use of interpersonal space to convey meaning. b. Process of observing behavior before critical questions are asked. c. The strongest response to a threatened ego. d. Reinforcement of the confessor's decision.
b. Process of observing behavior before critical questions are asked.
23. Which of the following statements regarding sampling risk is FALSE? a. To reduce sampling risk, the investigator can increase the sample size. b. Sampling risk can only be slightly reduced by careful planning of the sampling procedure. c. To reduce sampling risk, the investigator can use a random number table. d. In fraud examination, sampling risk can be significant.
b. Sampling risk can only be slightly reduced by careful planning of the sampling procedure.
5. Methods for concealment investigation include all but which of the following? a. Document examination b. Searching public records c. Audits d. Computer searches
b. Searching public records
27. Which of the following is NOT a verbal clue that someone may be lying? a. Expressing reluctance to terminate the interview b. Showing intolerance for shady conduct of others c. Asking for the question to be repeated d. Refusal to implicate other suspects
b. Showing intolerance for shady conduct of others
18. What is the main objective of the net worth method? a. To determine the income and expenditure of an individual. b. To determine the extent of the stolen funds. c. To determine the financial position of the organization. d. To determine the change in the net worth.
b. To determine the extent of the stolen funds.
26. Identify an appropriate accusation in an effective admission-seeking interview. a. We have reason to believe that you took company assets without permission. Do you agree? b. We have clearly established that you made a false entry in the books. c. We understand you may have taken money from a vendor. d. We have been conducting an investigation into the kickback fraud, and your responses so far indicate that you lied.
b. We have clearly established that you made a false entry in the books.
8. Mandy calls a local newspaper and pretends to be a neighbor who is away for the winter. She obtains account history and orders the newspaper for six months. Has Mandy committed a fraud? If yes, under which act? a. No, the newspaper has not yet been delivered or paid. b. Yes, she is in violation of the Gramm-Leach Bliley Act of 1999. c. No, as the neighbor has not served any written notice to keep the information private. d. Yes, she is in violation of Fair and Accurate Credit Transactions Act of 2003.
b. Yes, she is in violation of the Gramm-Leach Bliley Act of 1999
4. Computer searches and physical asset counts usually focus on the ________ element of the fraud triangle. a. theft b. concealment c. conversion d. inquiry
b. concealment
54. Which of the following is defined as converting concrete experiences into a higher level of generalization. a. deduction b. induction c. negation d. catharsis
b. induction
55. Inferential errors fall into two categories: a. circular reaction and identification. b. induction and deduction. c. denial and trauma. d. generalization and identification.
b. induction and deduction
2. The risk that an auditor will examine a fraudulent check and not recognize it as being fraudulent is called _________ . a. sampling risk b. non-sampling risk c. systematic risk d. systemic risk
b. non-sampling risk
3. During a concealment investigation, an investigator fails to recognize that an invoice had been forged. This represents: a. sampling risk. b. non-sampling risk. c. systematic risk. d. systemic risk.
b. non-sampling risk.
6. The three most common ways to obtain documentary evidence which are valuable but difficult to obtain are: a. subpoena, voluntary consent, and searching public records b. subpoena, search warrant, and voluntary consent c. search warrant, invigilation, and surveillance d. voluntary consent, surveillance, and invigilation
b. subpoena, search warrant, and voluntary consent
12. The Gramm-Leach Bliley Act prohibits: a. telemarketers from selling information to corporations. b. the use of false pretenses to access the personal information of others. c. public from accessing the criminal database of FBI. d. customers to opt out of information sharing.
b. the use of false pretenses to access the personal information of others.
27. The best way to obtain documentary evidence is: a. by chance, accident or tip discovery. b. through computer-based queries of full-population accounting and other databases. c. through interviews and interrogations. d. through traditional audits like discovery sampling.
b. through computer-based queries of full-population accounting and other databases.
35. Which of the following is NOT a warning sign indicating a possible problem with a document? a. disguised or unnatural handwriting b. authorized initialed changes c. inconsistency or disruption in the continuity of the content d. use of two or more different colors of ink
b. authorized initialed changes
39. Which of the following is NOT a publicly available means of fine tuning an internet search? a. by entering specific phrases b. by placing a minus sign after unique terms c. by utilizing domestic restrictions d. by utilizing the regular Google search engine
b. by placing a minus sign after unique terms
59. Which of the following is NOT included in the fraud report? a. recommendations for control improvement b. recommendations for legal action against the suspect(s) c. all pertinent findings d. all conclusions made by the investigator
b. recommendations for legal action against the suspect(s)
13. According to Benford's law, the first digit of random data sets will most often begin with which number? a. 7 b. 1 c. 3 d. 4
b. 1
14. From the information given below, calculate the quick ratio. a. .83 times b. 1.25 times c. 1.63 times d. 1.08 times
b. 1.25 times
7. While using n-grams, a match percentage of ________ or ________ generally indicates very similar values. a. 10 percent, smaller b. 20 percent, greater c. 5 percent, smaller d. 40 percent, greater
b. 20 percent, greater
41. The study conducted by the Association of Certified Fraud Examiners in 2008 estimated that U.S. organizations lose _____ percent of their annual revenues to fraud. a. 8 b. 7 c. 23 d. 17
b. 7
14. Approximately ____ of all frauds are committed by individual acting alone. The remaining ____ involves collusion and often involve the ____ thefts. a. 63%, 37%, smallest b. 71%, 29%, largest c. 47%, 53%, smallest d. 18%, 82%, largest
b. 71%, 29%, largest
30. Which of the following should employers always obtain from the applicant to obtain information from references? a. A verbal authorization b. A hold harmless agreement c. A privacy statement d. A no-objection certificate
b. A hold harmless agreement
7. Which of the following is NOT an indicator that a person with a salary of $50,000 per year is living above his or her lifestyle? a. A person owns several expensive cars. b. A person closely monitors his/her investments. c. A person who hosts extravagant parties in their home. d. A person who owns a valuable art collection.
b. A person closely monitors his/her investments.
24. Which of the following is NOT a true statement? a. Almost every fraud involves rationalization. b. All frauds involve financial or vice-related pressures. c. Perceived opportunity diminishes when fraud perpetrators are prosecuted.
b. All frauds involve financial or vice-related pressures.
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.
b. An employee's lifestyle changes suddenly.
4. ACL stands for: a. Account Coverage Level. b. Audit Command Language. c. Actuarial Confidence Level. d. Auditors' Common Language.
b. Audit Command Language.
43. ____________ is the ability of the fraud perpetrator to make an individual perceive punishment if he or she does not participate in the fraud. a. Expert power b. Coercive power c. Legitimate power d. Reward power
b. Coercive power
33. According to the study mentioned in the text, people who commit fraud are most similar to which of the following groups? a. Property offenders b. College students c. Convicted felons d. Animal lovers
b. College students
2. In which stage do auditors have a good chance of detecting fraud, if the audit samples include altered documents and miscounts? a. Theft act b. Concealment c. Conversion d. Layering
b. Concealment
45. What is the single most critical element for a fraud to be successful? a. Criminal intent b. Confidence c. Greed d. Compulsion
b. Confidence
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.
b. Consequences include restitution and damage payments.
39. Which of the following is the foundation for the components of internal control, providing discipline and structure? a. Open door policy b. Control environment c. Whistle-blowing system d. Surveillance
b. Control environment
18. Recent research has shown that there is an ethical maturity model (EMM) that explains why people make unethical decisions, and there are four levels in it. Which of the following level is NOT one among them. a. Personal ethical understanding b. Corporate code of ethics c. Application of ethics d. Ethical courage e. Ethical leadership
b. Corporate code of ethics
20. Document symptoms to some extent can signal out that embezzlement is taking place. Which among the following usually does NOT point to some problem with the source documents? a. Photocopied documents b. Different names or addresses of payees or customers c. Excessive voids or credits d. Increased past-due accounts
b. Different names or addresses of payees or customers
9. Which of the following proactive fraud detection methods use Benford's Law to detect fraud? a. Vertical analysis b. Digital analysis c. Real-time analysis d. Time trend analysis.
b. Digital analysis
15. Stuart, a CFE, is investigating a possible management fraud. He found an email on an employee's computer to use as evidence in the case. Under which category of evidence would an email message fall? a. Testimonial evidence b. Documentary evidence c. Physical evidence d. Personal observation
b. Documentary evidence
43. Given below are the profit margins and fraud related losses of four economies. Which economy will have to generate the maximum dollar amount of additional revenues to recover the loss to aggregate income?Economy A 10% $225 millionEconomy B 10% $150 millionEconomy C 5% $100 millionEconomy D 2% $ 50 million a. Economy A b. Economy D c. Economy C d. Economy B
b. Economy D
28. What does the acronym "EAP" stand for? a. Entrepreneurial Assistance Program b. Employee Assistance Program c. Ethical Awareness Program d. Employee Anti-fraud Program
b. Employee Assistance Program
21. Which level in the ethical maturity model can be summarized as "willingness to pay the price for ethics?" a. Ethical positioning b. Ethical courage c. Personal ethical understanding d. Application of ethics to business situations
b. Ethical courage
30. According to the study mentioned in the text, which of the following is true about fraud perpetrators compared to property offenders? a. Fraud perpetrators are more likely to be caught than property offenders b. Fraud perpetrators are more educated than property offenders c. Fraud perpetrators are more likely to be men than property offenders d. Fraud perpetrators are much younger than property offenders
b. Fraud perpetrators are more educated than property offenders
34. Which of the following is NOT one of the major types of fraud classification schemes? a. Employee embezzlement b. Government fraud c. Investment scams d. Customer fraud
b. Government fraud
25. Research on honesty shows that individuals fall into three groups:(1) those who will almost always be honest,(2) those who are situationally honest, and(3) those who will always be dishonest.Which of these groups is (are) the biggest? a. Group 1 (50%) b. Group 2 (40%) c. Group 3 (45%) d. Groups 1 and 3 (35% each)
b. Group 2 (40%)
3. One of the most important responsibilities of an employer is the hiring and retention of employees. Which situation below reflects the current market scenario? a. High turnover, high loyalty b. High turnover, low loyalty c. Low turnover, high loyalty d. Low turnover, low loyalty
b. High turnover, low loyalty
15. Which of the following is similar to ACL and its primary competitor? a. Picalo b. IDEA c. Microsoft Office + ActiveData d. Z-score
b. IDEA
18. A good fraud auditing involves four steps. Which of the following is the correct sequence? a. Identifying fraud risk exposures; building audit programs to proactively look for symptoms and exposures; investigating fraud symptoms identified; and identifying the fraud symptoms of each exposure. b. Identifying fraud risk exposures; identifying the fraud symptoms of each exposure; building audit programs to proactively look for symptoms and exposures; and investigating fraud symptoms identified. c. Building audit programs that proactively check for symptoms and exposures; identifying fraud risk exposures; identifying the fraud symptoms of each exposure; and investigating fraud symptoms identified. d. Identifying the fraud symptoms of each exposure; identifying fraud risk exposures; investigating fraud symptoms identified; and building audit programs to proactively look for symptoms and exposures.
b. Identifying fraud risk exposures; identifying the fraud symptoms of each exposure; building audit programs to proactively look for symptoms and exposures; and investigating fraud symptoms identified.
6. What is the most widely recognized way to deter fraud? a. Encourage employees to report suspicious activity. b. Implement a good system of controls. c. Keep management involved in company procedures. d. Quickly punish employees found committing fraud.
b. Implement a good system of controls.
31. Which of the following creates opportunities for fraud? a. Requirement to change passwords on a regular basis b. Inability to judge quality of performance c. Controls that prevent or detect fraud d. Segregation of duties
b. Inability to judge quality of performance
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
b. Intent
49. What is a purpose of proactive fraud auditing? a. It creates an atmosphere of distrust between and among employees. b. Its purpose is to deter employees from committing fraud. c. It provides ways for employees to deal with personal pressures. d. It eliminates collusion as a means of committing fraud.
b. Its purpose is to deter employees from committing fraud.
32. All transactions related to specific accounts, such as cash or inventory, are listed and totaled in a: a. Journal b. Ledger c. Trial balance d. Balance sheet
b. Ledger
13. Studies show that legal action against fraudsters is typically taken: a. Less than 25 percent of the time. b. Less than 50 percent of the time. c. More than 75 percent of the time. d. At least 50 percent of the time.
b. Less than 50 percent of the time.
8. What is the most important element in a control environment? a. Management's communication b. Management's role and example c. The hiring process d. The internal audit department
b. Management's role and example
26. Which of the following scenarios is least conducive to fraud? a. Outstanding bills at home b. Mandatory vacation time c. Economic downturns d. Moral decay in upper management
b. Mandatory vacation time
13. Fraud has a direct dollar for dollar impact on a company's: a. Revenues. b. Net income. c. Profit margin. d. Stock price.
b. Net income.
40. Which of the following observations is true? a. The effectiveness of an ideal control system should be independent of the people enforcing it. b. No internal control structure can ever be completely effective, regardless of the care followed in its design and implementation. c. A control system by itself can provide assurance that fraud will be prevented. d. The type of control activities include reactive controls and proactive controls.
b. No internal control structure can ever be completely effective, regardless of the care followed in its design and implementation.
35. Which of the following allows managers and others to become aware of employees' pressures, problems, and rationalizations thus enabling them to take fraud prevention steps? a. Office grapevine b. Open door policies c. Code of ethics d. Pygmalion effect
b. Open door policies
15. Which of the following is NOT an analytical fraud symptom? a. Consistent cash shortages b. Overriding of existing controls c. Excess purchases d. Unreasonably high expenses
b. Overriding of existing controls
7. Which of the following is NOT one of the key elements common to all frauds? a. Perceived pressure b. Perceived inequality c. Perceived opportunity d. Rationalization
b. Perceived inequality
20. An employee who has the responsibilities of both writing checks and making bank deposits would have ____. a. Financial pressure b. Perceived opportunity c. Rationalization
b. Perceived opportunity
27. Who has the primary responsibility for establishing and maintaining good internal controls? a. Primary responsibility for controls belongs to internal auditors. They are the ones who create the controls and investigate potential violations of the controls. b. Primary responsibility rests with management. Management both conveys acceptable culture and has the final say in how fraud cases are treated. c. Primary responsibility lies with employees. They are the ones most likely to fully understand the system on a day-to-day basis and know where controls should be put in place. d. Primary responsibility is not attributable to one person or group of people within an organization. Each member of an organization must consider himself or herself personally responsible for the organization's control environment.
b. Primary responsibility rests with management. Management both conveys acceptable culture and has the final say in how fraud cases are treated.
2. Which of the following would usually be an environment conducive to fraud? a. Low turnover b. Reactive rather than proactive management c. Supportive rather than rivalrous relationships d. Long-term business focus
b. Reactive rather than proactive management
12. What is the last stage in the current (default) model that most organizations typically use for dealing with fraud? a. Fraud incident b. Resolution c. Investigation d. Action
b. Resolution
35. Which of the following is usually the most expensive of all control procedures? a. Documents and records b. Segregation of duties c. System of authorizations d. Independent checks
b. Segregation of duties
16. Which of the following is an analytical fraud symptom? a. Increase in past due accounts receivable b. Significant increase or decrease in account balances c. Lack of independent checks d. Excessive voids or credits
b. Significant increase or decrease in account balances
24. ____ is the splitting of complex data sets into case-specific tables. a. Deviation b. Stratification c. Data mining d. Soundex
b. Stratification
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
b. Testimonial evidence
17. ___________ requires every public company to have a code of ethics to help deter wrongdoing. a. The Glass Steagall legislation b. The Sarbanes-Oxley legislation c. The Securities Act d. Generally Accepted Auditing Standards
b. The Sarbanes-Oxley legislation
43. Which of the following is a true statement regarding the United States Social Security Administration (U.S. SSA)? a. The U.S. SSA publishes a monthly list of newly issued Social Security numbers. b. The U.S. SSA publishes a monthly list of Social Security numbers that are no longer in use. c. The U.S. SSA database of valid numbers can be accessed by interested parties. d. The U.S. SSA database can be used to create mailing lists.
b. The U.S. SSA publishes a monthly list of Social Security numbers that are no longer in use.
57. Which of the following statements is false? a. Half-truths are often a part of rationalization. b. The bigger the fraud act, the more believable the rationalization. c. Many fraud perpetrators believe their rationalizations to be true. d. Perceived rationalizations are a part of the fraud triangle.
b. The bigger the fraud act, the more believable the rationalization.
20. What is the most likely outcome when a company demotes the perpetrator but allows him or her to go unprosecuted? a. The company will avoid bad publicity. b. The perpetrator may commit another fraud in the future. c. The perpetrator will be saved from pain and embarrassment. d. Management will send a signal that fraud will not be tolerated.
b. The perpetrator may commit another fraud in the future.
42. Which of the following is a true statement? a. A fraud perpetrator who normally smokes often quits after committing a fraud. b. The perpetrator may start entertaining coworkers more often and more lavishly. c. The perpetrator may start looking coworkers directly in the eye when talking to them. d. The perpetrator who committed the fraud act to pay off gambling debts may suddenly stop gambling.
b. The perpetrator may start entertaining coworkers more often and more lavishly.
8. In most organizations, coworkers and others have knowledge or suspicions that fraud is occurring but do not come forward with their information. There are several major reasons for this hesitancy. Which of the following is NOT one among them? a. It is usually impossible to know for sure that a fraud is taking place. b. The suspicious action is not affecting their work. c. They fear reprisal for being a whistle-blower. d. They often think that squealing on someone is wrong.
b. The suspicious action is not affecting their work.
35. _______ involves the actual taking of cash, inventory, information, or other assets whereas _______ involves selling stolen assets or transferring them into cash and then spending the cash. a. Conversion, coercion b. Theft, conversion c. Coercion, theft d. Theft, coercion
b. Theft, conversion
49. Which of the following statements regarding fraud on behalf of an organization is true? a. Middle management is usually the perpetrator. b. This type of fraud benefits top executives as it generally increases stock price. c. This type of fraud includes inflating expenses in order to save of corporate income taxes. d. Financial statement fraud is common among publically-traded companies who must meet the public's expectations.
b. This type of fraud benefits top executives as it generally increases stock price.
23. The correct order of the six elements of the fraud fighting model is: a. Tone at the Top; Education and Training; Proactive Detection; Integrity Risk and Controls; Reporting and Monitoring; Investigation and Follow-up. b. Tone at the Top; Education and Training; Integrity Risk and Controls; Reporting and Monitoring; Proactive Detection; Investigation and Follow-up. c. Education and Training; Integrity Risk and Controls; Reporting and Monitoring; Proactive Detection; Investigation and Follow-up; Tone at the Top. d. Education and Training; Tone at the Top; Integrity Risk and Controls; Reporting and Monitoring; Proactive Detection; Investigation and Follow-up.
b. Tone at the Top; Education and Training; Integrity Risk and Controls; Reporting and Monitoring; Proactive Detection; Investigation and Follow-up.
19. Financial statement fraud is typically committed by: a. Employees with access to company assets b. Top management c. Customers d. Vendors
b. Top management
29. Which approach converts financial statement numbers as percentage of total assets or total sales? a. Horizontal Analysis b. Vertical Analysis c. Ratio Analysis d. Variance Analysis
b. Vertical Analysis
39. Which statistical approach is one of the most powerful and yet simple methods for identifying outliers? a. N-grams b. Z-score c. Time-trend analysis d. Soundex algorithm
b. Z-score
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.
b. affinity fraud.
47. Which of the following skills would be least beneficial in a career as a fraud-fighting professional? a. sales experience b. auto mechanic c. data entry clerk d. journalist
b. auto mechanic
29. In the past, most frauds were detected: 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.
b. by accident.
5. Management fraud is often referred to as: a. stockholder fraud. b. financial statement fraud. c. employee fraud. d. investment fraud.
b. financial statement fraud.
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
b. instilling in employees a desire to develop ethical awareness and courage to do the right thing
23. According to Benford's law, 5 will be the first digit of a random number set: a. more often than 1. b. less often than 4. c. about the same as 6. d. more often than 3.
b. less often than 4.
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.
b. must yield a unanimous verdict.
2. A ______ is a financial statement that reflects account balances at a specific point in time like a snapshot. a. periodic statement b. position statement c. change statement d. static statement
b. position statement
17. When perceived pressures and(or) opportunities are low, a person needs more ________ to commit fraud. a. support from people at workplace b. rationalization c. courage d. motivation
b. rationalization
5. Preventive controls that provide early fraud detection opportunity include: a. independent checks. b. segregation of duties. c. documents and records. d. financial statement reviews
b. segregation of duties.
32. Horizontal analysis is performed when: a. total assets are set at 100% and all other balances are a percentage of total assets. b. the percentage change in the balance sheet and income statement numbers is computed for one period to the next. c. there is a need to calculate and compare key ratios from period to period. d. income statement amounts are shown as a percentage of total sales.
b. the percentage change in the balance sheet and income statement numbers is computed for one period to the next.
50. Which of the following records data for each case in a graph and analyzes the slope? a. summarization analysis b. time-trend analysis c. fuzzy-matching method d. cross tables method
b. time-trend analysis
55. Which of the following is NOT a work-related pressure? a. fear of losing one's job b. wanting to appear successful c. getting overlooked for a promotion d. insufficient/little recognition for work performance
b. wanting to appear successful
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
b. which employees are in the best position to commit fraud
33. Which of the following is an example of an informational question that you should avoid? a. "How are you doing this morning?" b. "All right, so you started here in June 2003—after working for Caterpillar—to the best of your recollection?" c. "Didn't you suspect that something wasn't right?" d. "What are your duties here?" e. "Please tell me about your job."
c. "Didn't you suspect that something wasn't right?"
19. Using the net worth method, calculate an individual's income from unknown sources. The following information is available: a. $0 b. $10,000 c. $20,000 d. $40,000
c. $20,000
30. Which of the following is an alternative when original documents are too voluminous to permit careful examination? a. A photocopy of the original document will suffice. b. It will have to be excluded from usage as evidence. c. A summary of its contents is acceptable. d. There are no alternatives. The original has to be produced.
c. A summary of its contents is acceptable.
11. Which of the following information is NOT contained in the Social Security numbers issued by the Social Security Administration? a. Area b. Person's serial number c. Age d. Group
c. Age
43. Which of the following is a facilitator of communication? a. Threatened Egos b. Trauma c. Catharsis d. Unconscious Behavior
c. Catharsis
6. Most nonverbal clues fall into one of four categories. Which is NOT one of those categories? a. Paralinguistics b. Kinetics c. Catharsis d. Proxemics
c. Catharsis
12. Interviewers who use pacing are employing a form of ____. a. Kinetic communication. b. Paralinguistic communication. c. Chronemic communication. d. Proxemic communication.
c. Chronemic communication.
25. Name the agency of the Department of Justice charged with enforcing laws against narcotics trafficking. a. NCIC b. Secret Service c. DEA d. SSA
c. DEA
46. Which of the following is true concerning signed statements? a. Allow the confessor to draft the statement. b. The statement's wording should be general. c. Declarants should read and sign the statement without undue delay. d. Two people are legally required to witness the signing of the statement.
c. Declarants should read and sign the statement without undue delay.
15. Which federal agency maintains information on individuals who may be a threat to national security? a. Department of Justice b. Bureau of Prisons c. Department of Defense d. Secret Service
c. Department of Defense
34. Military records are not confidential and provide valuable information that can help you trace a person's whereabouts through changing addresses. Which government agency furnishes such information? a. Central Intelligence Agency b. Federal Bureau of Investigation c. Department of Defense d. Department of Justice
c. Department of Defense
20. Which of the following is classified as a state source of information? a. Bureau of Alcohol, Tobacco, and Firearms b. County Clerk's office c. Department of Motor Vehicles d. Permit Departments
c. Department of Motor Vehicles
16. Which statistical sampling allows an auditor to generalize and make inferences from the sample to the population? a. Probability sampling b. Random sampling c. Discovery sampling d. Quota sampling
c. Discovery sampling
16. Identify the principal investigative agency of the Department of Justice. a. CIA b. NCIC c. FBI d. Secret Service
c. FBI
29. Which of the following observations is true about subpoenas? a. Subpoenas are generally used only in criminal cases. b. Subpoenas are orders issued by the Company Law Board to produce documents. c. Failure to honor a subpoena is punishable by law. d. Every subpoena must be signed by the plaintiff and the accused.
c. Failure to honor a subpoena is punishable by law.
10. Funds from unknown sources equals: a. Assets − liabilities. b. Net worth increase + living expenses. c. Income − funds from known sources. d. Net worth −prior year's net worth.
c. Income − funds from known sources.
29. Which of the following words should be avoided during the introductory phase of an interview? a. Inquiry b. Review c. Interview d. Shortage
c. Interview
5. Which of the following is NOT a good thing to do during an interview? a. Conduct the interview in private b. Establish the purpose of the interview c. Interview more than one person at once d. Get a commitment for assistance
c. Interview more than one person at once
10. Which of the following is the most common inquiry method? a. Graphology b. Pencil-and-paper tests c. Interviewing d. Polygraphs
c. Interviewing
18. Which aspect of documentary evidence should be kept in mind to ensure that the documents can be identified later and accessible for trial? a. Organization of evidence b. Coordination of evidence c. Marking of evidence d. Chain of custody of documents
c. Marking of evidence
48. Which of the following is a basic strategy of admission-seeking interviews? a. Schedule them in such a fashion that shortage of time becomes a major factor. b. Express outrage, or moral condemnation about the confessor's actions. c. Maximize sympathy and minimize the perception of moral wrongdoing. d. Convey to the accused that he or she is a "bad person."
c. Maximize sympathy and minimize the perception of moral wrongdoing.
52. What is one of the most important personality traits of being an effective interviewer? a. Introversion b. Strict c. Outgoing d. Formal
c. Outgoing
15. Which of the following is the last attempt of the affected group to return to the previous psychological equilibrium while reacting to a crisis? a. Depression b. Anger c. Rationalization d. Acceptance
c. Rationalization
10. What is the term for the risk that the sample was not representative of the population. a. Systematic risk b. Non-sampling risk c. Sampling risk d. Compliance risk
c. Sampling risk
13. _______ are executed only by law enforcement officials and are generally used only in criminal cases. a. Subpoenas b. Voluntary consents c. Search warrants d. Interviews
c. Search warrants
31. Name the government agency whose information is valuable in tracing assets, establishing conflicts of interest, identifying dummy companies, and determining changes in financial status. a. Department of Business Regulation b. Permit Department c. Secretary of State d. County clerk
c. Secretary of State
39. Which of the following is the most efficient method to reduce the negative effects of the etiquette barrier of communication? a. Showing a generally accepted and sympathetic attitude toward respondents. b. Telling respondents that information will be handled confidentially. c. Selecting an appropriate interviewer and a proper setting for the interview. d. Convincing respondents that the interview is a good use of their time.
c. Selecting an appropriate interviewer and a proper setting for the interview.
3. Which of the following is NOT a characteristic of a good interview? a. The interview is of sufficient length and depth to get relevant facts b. The interview focuses on pertinent information c. The interview is conducted as far away from the event as possible d. The interviewer includes extraneous facts
c. The interview is conducted as far away from the event as possible
1. When is searching through someone's garbage considered as a legal activity ? a. When the trash is left unattended inside the suspect's home. b. When the trash is in the possession of the suspect. c. When the trash has left the suspect's home or sidewalk. d. Searching through a person's trash is never considered as a legal activity.
c. When the trash has left the suspect's home or sidewalk.
12. An audit is part of which type of investigative method? a. theft b. conversion c. concealment d. Inquiry
c. concealment
9. To find marital and voting record, one would need to look at the records maintained by: a. county sheriff and other officers b. Social Security Administration c. county clerk d. local courts
c. county clerk
18. Assessment questions seek to: a. gain an admission. b. find out specific details related to the fraud. c. establish credibility of the respondent. d. obtain facts previously unknown.
c. establish credibility of the respondent.
28. Once investigators enter their indicators into the centralized database, the software performs _______ to find connections between people, places, and events. a. regression analysis b. search analysis c. link analysis d. correlation analysis
c. link analysis
17. What is the most common way to obtain private documents (either oral or written)? a. subpoena b. search warrant c. voluntary consent d. Audit
c. voluntary consent
38. Which of the following is NOT a form of database access? a. Subscription-based fees apply before access is granted. b. There is a per-use fee charged. c. A set number of searches are free followed by a daily charge for use thereafter. d. Unlimited free access to search is granted.
c. A set number of searches are free followed by a daily charge for use thereafter.
40. The FBI's Document Conversion Lab does NOT do which of the following? a. It saves an incredible amount of time searching documents. b. It increases search capabilities regarding relevant documents. c. It increases the amount of documentation evidence available. d. It enables the sharing of document information.
c. It increases the amount of documentation evidence available.
36. Computer-based queries of accounting and other data bases are utilized in which of the following investigation methods? a. theft b. conversion c. concealment d. Inquiry
c. concealment
58. When is the fraud report prepared? a. as an ongoing part of the investigation b. in the final stage of the investigation c. once the investigation is completed d. as soon as the suspect orally confesses
c. once the investigation is completed
38. Which of the following is NOT an action by the fraud perpetrators to hide/conceal their illegal act(s)? a. manipulating documentary evidence b. modifying records in computer databases c. photocopying fraud-related documents d. deleting records in computer databases
c. photocopying fraud-related documents
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. $4.14 billion
30. Identify the formula used to calculate z-score. a. (Mean - Value)/Standard Deviation b. (Mean - Value)/(Mean + Value) c. (Value - Mean)/Standard Deviation d. (Value - Mean)/Median
c. (Value - Mean)/Standard Deviation
42. A company was the victim of several frauds that totaled approximately $10 million in one year. With a profit margin of 10 percent, and assuming that the company's product sold for $1,000 per unit, how many additional units must the company sell to compensate for the fraud losses? a. 1 million b. 100 million c. 100,000 d. 10,000
c. 100,000
11. Inaccuracies in ledgers represent which type of fraud symptom? a. Internal control weaknesses b. Analytical anomalies c. Accounting anomalies d. Financial statement weaknesses
c. Accounting anomalies
1. Which of the following statements is NOT true? a. In recent years there have been many cases of financial statement fraud. b. Proactive fraud detection methods are in their infancy. c. Accounting anomalies indicate fraud has or is occurring. d. Fraud investigation involves determining who committed the fraud, the schemes used and how much money or assets were taken.
c. Accounting anomalies indicate fraud has or is occurring.
5. There are three simple procedures that small business owners should do on a timely basis to prevent fraud when they can't afford sufficient employees to guarantee effective segregation of duties.. Which of the following is NOT one among them? a. Pay everything by check so that there is a record. b. Always open the bank statement and reconcile it themselves. c. Allow one key employee to operate the bank account personally. d. Sign every check themselves and not delegate the signing to anyone else.
c. Allow one key employee to operate the bank account personally.
9. Which of the following statements about accounting systems is incorrect? a. An effective accounting system provides an audit trail that allows frauds to be discovered. b. An effective accounting system makes concealment difficult. c. An effective accounting system can effectively prevent "kickbacks." d. Without a good accounting system, it is often difficult to distinguish between actual fraud and unintentional error.
c. An effective accounting system can effectively prevent "kickbacks."
18. An auditor noticed that company B had an exorbitant increase in sales and drastic decreases in its inventory and accounts receivables. The above statement symbolizes which fraud symptom? a. Accounting anomaly b. Internal control weakness c. Analytical anomaly d. Unusual behavior
c. Analytical anomaly
19. Transactions happening at odd times or places; being performed by people who would not normally participate; or including odd procedures are typically associated with which type of fraud symptom? a. Accounting anomaly b. Internal control weakness c. Analytical anomaly d. Unusual behavior
c. Analytical anomaly
1. Who in an organization is NOT in a good position to recognize fraud during the theft act? a. Other employees b. Managers c. Auditors d. Coworkers
c. Auditors
26. A mathematical algorithm that predicts the percentage of the time each digit will appear in a sequence of numbers is: a. inductive fraud detection. b. deductive fraud detection. c. Benford's law. d. horizontal analysis.
c. Benford's law.
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.
c. By paying returns to investors initially.
45. Individuals often participate in fraud because they believe that by not participating in the fraud scheme, they may lose their job. Which type of power is at play here? a. Expert power b. Legitimate power c. Coercive power d. Reward power
c. Coercive power
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.
c. Collected money is invested.
37. Lifestyle changes of fraud perpetrators are related to which of the following fraud elements? a. Theft act b. Concealment c. Conversion d. Confession
c. Conversion
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. Conversion
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. Criminal convictions are only successful if there is overwhelming, undeniable proof that the perpetrator "intentionally" stole money or other assets.
28. Which of the following is NOT a "strange" financial statement relationship? a. Increased revenues with decreased inventory b. Increased revenues with decreased receivables c. Decreased inventory with decreased payables d. Decreased volume with decreased cost per unit
c. Decreased inventory with decreased payables
40. Studies show that in advanced countries, levels of honesty are: a. Generally stable b. Increasing c. Decreasing
c. Decreasing
15. Which among the following frauds is most likely to be a civil charge? a. Racketeering b. Mail fraud c. Defamation d. Perjury
c. Defamation
12. When fraud occurs, the most common reaction to those affected by the fraud is: a. Anger b. Acceptance c. Denial d. Retribution
c. Denial
3. Audits, public record searches, and net worth calculations are used to gather what type of evidence in fraud investigation? a. Testimonial b. Forensic c. Documentary d. Observational
c. Documentary
28. In the ethical maturity model, instilling in others a desire to develop ethical awareness and courage is referred to as: a. Personal codes of ethics. b. Ethical motivation. c. Ethical leadership. d. Application of ethics to business situations.
c. Ethical leadership.
22. According to the Sarbanes-Oxley legislation, current changes to, or waivers of codes of ethics should be disclosed in: a. Form 10-K. b. Form 1120. c. Form 8-K. d. Form 10-Q.
c. Form 8-K.
30. Which of the following statements is true? a. Fraud usually results from unintentional errors. b. Fraud is more violent and traumatic than robbery. c. Fraud always involves deception, confidence and trickery. d. Losses from fraud are less than losses from robbery.
c. Fraud always involves deception, confidence and trickery.
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.
c. Fraud perpetrated through collusion between buyers and vendors.
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. Fraudulent financial reporting
29. What are the key attributes for a low-fraud environment? a. Rules, control, and consequences. b. Recognition, prosecution, and restitution. c. Honesty, openness, and assistance. d. Rules, consequences, and rewards.
c. Honesty, openness, and assistance.
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. Increased centralization of businesses
23. Which of the following is a highly suspicious financial statement relationship? a. Increased revenues with increased cash flows b. Increased volume with decreased cost per unit c. Increased inventory with decreased payables d. Increased inventory with increased warehousing costs
c. Increased inventory with decreased payables
44. Identify a recent business trend that could be contributing to the increased number of collusive frauds. a. Reducing costs and product quality by using same suppliers. b. Advances in technology that simplify the process of conducting business. c. Increasing frequency of supplier alliances, and closer relationships between buyers and suppliers. d. Increased competition amongst suppliers.
c. Increasing frequency of supplier alliances, and closer relationships between buyers and suppliers.
1. Control activities can be grouped as preventive controls and detective controls. Which of the following is a detective control? a. System of authorizations b. Segregation of duties c. Independent checks d. Physical safeguards
c. Independent checks
1. Which of the following is NOT a primary control procedure to minimize the occurrence of fraud? a. Dual custody b. Systems of authorization c. Internal audit department d. Documents and records
c. Internal audit department
14. Which of the following is NOT one of the ways in which a fraud investigation must be conducted? a. Investigators should be experienced and objective professionals. b. Investigators should closely guard all hypotheses regarding guilt or innocence of individuals being investigated. c. Investigators should inform management of only the basics of the investigations in case they are involved. d. Investigators must be sure to follow appropriate investigative techniques.
c. Investigators should inform management of only the basics of the investigations in case they are involved.
33. Which of the following observations concerning occupational fraud is NOT true? a. It is clandestine. b. It is committed for the purpose of direct or indirect financial benefit to the employee. c. It usually involves two or more employees. d. It costs the employing organization assets, revenues, or reserves.
c. It usually involves two or more employees.
26. Jim was a crook. He embezzled $450,000 from his employer. When his employer found out about his misdeeds, before even conducting a thorough investigation, he went and gave all the details to a local newspaper agency. The next day Jim read his own story, with his own name, in the newspaper. Which of the following is correct? a. The company did the right thing by publishing Jim's identity in the newspaper because it punished him for stealing as well as served a warning to his neighbors who might also be at the risk of being defrauded. b. The company should not have put Jim's name and story in the paper because when other employees will come to know about it, they might leave the organization. c. Jim may have been misrepresented in the story by the newspaper agency and the company might face legal consequences. d. Publishing the story in the newspaper was a wrong thing to do because Jim's family will be embarrassed.
c. Jim may have been misrepresented in the story by the newspaper agency and the company might face legal consequences.
8. Which of the following is NOT a characteristic of management fraud? a. Top management deception. b. Manipulation of financial statements. c. Kickbacks or bribes. d. Pressure to earn year-end bonuses.
c. Kickbacks or bribes.
26. Which of the following factors creates an opportunity for fraud? a. Greed b. Living beyond one's means c. Lack of an audit trail d. The organization owes it to me
c. Lack of an audit trail
53. Studies reveal that honesty levels in advanced countries are decreasing. What do these findings indicate for the future regarding fraud? a. Rationalizations will become more sophisticated. b. Pressures to commit fraud will increase. c. Less perceived opportunity will have to be present. d. Honesty tests in the workplace will increase.
c. Less perceived opportunity will have to be present.
32. Which of the following is NOT an example of a fraud-fighting career? a. Working for the criminal investigation division of the IRS. b. Serving as an expert witness. c. Maintaining the security of public records. d. Defending an organization being sued in a civil case.
c. Maintaining the security of public records.
48. Which of the following best describes an action that can cause a whistle-blowing system in place in the organization to fail? a. The organization requires employees to report all suspicious activity. b. The employee suspecting fraud reports directly to his/her supervisor's manager. c. Management is slow to act on reports of suspected fraud. d. An extensive code of ethics is in place and on file in order to answer employee inquiries.
c. Management is slow to act on reports of suspected fraud.
5. Which is following observations is TRUE? a. Research shows that only people with a criminal mind set commit fraud. b. Fraud perpetrators usually can be distinguished from others on the basis of psychological characteristics. c. Most fraud perpetrators have profiles that are similar to those of other people. d. When fraud does occur, the most common initial reaction by those involved in the fraud is confession.
c. Most fraud perpetrators have profiles that are similar to those of other people.
10. Which of the following elements listed is one of the three basic elements of the fraud motivation triangle? a. Concealment b. Theft Act c. Opportunity d. Conversion
c. Opportunity
34. Which of the following explains the Pygmalion effect? a. Employees who commit fraud are likely to do so more than once. b. The probability of fraud detection increases with the number of people involved. c. People generally perform according to a leader's expectations. d. Absence of controls leads to increased incidents of dishonesty.
c. People generally perform according to a leader's expectations.
7. Which of the following is a component of the evidence square? a. Rationalization b. Perceived pressure c. Personal observation d. Perceived opportunity
c. Personal observation
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. Physical evidence
40. ______ are a two dimensional view with cases in one dimension and the calculations in the other. a. N-grams b. Z-scores c. Pivot Tables d. Soundex algorithms
c. Pivot Tables
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 d. Investigation
c. Predication
17. Which of the following environments will be LEAST conducive to fraud? a. Perceived inequalities in the organization and inadequate pay b. Unreasonable budget expectations c. Proactive management d. High employee turnover
c. Proactive management
34. Which term refers to people who commit a fraud or other crime and do not feel guilt or stress? a. Altruists b. Utilitarians c. Psychopaths d. Agnostics
c. Psychopaths
47. _____ is the ability of the perpetrator to relate to the potential co-conspirator. a. Expert power b. Legitimate power c. Referent power d. Reward power
c. Referent power
31. Which of the following is a step that organizations should undertake while recruiting employees? a. Conduct a covert investigation on the background of each candidate. b. Consider the candidate's word as truth to ensure a culture of trust and honesty. c. Require candidates to certify that all information on their résumé is accurate. d. Verify the candidate's race, age, and religion during the interview.
c. Require candidates to certify that all information on their résumé is accurate.
9. Common accounting anomaly fraud symptoms involve problems with various data and books of accounts. Which of the following is NOT one among them? a. Faulty journal entries b. Inaccuracies in source documents c. Rounding adjustments d. Inaccuracies in ledgers
c. Rounding adjustments
26. Which legislation makes it compulsory for every public company to have a code of conduct to convey expectations about what is and is not appropriate for its directors and officers? a. Sherman Act b. Glass-Steagall Act c. Sarbanes Oxley Act d. Gramm-Leach-Bliley Act
c. Sarbanes Oxley Act
17. Which of the following is a control problem related to segregation of duties? a. Julie writes expense checks and Mark collects cash from customers. b. Bob order office supplies and deposits the company's checks. c. Steve records receivables and writes off bad debts. d. Rebecca records journal entries and orders lunch.
c. Steve records receivables and writes off bad debts.
19. What defines an extension of stratification? a. Matosas matrix b. A pivot table c. Summarization d. Soundex
c. Summarization
37. Documents and records are an important control activity. Which of the following statements concerning this activity is true? a. They serve as excellent preventive controls. b. Adequate accountability can exist even in their absence. c. The entire accounting system serves as a documentary control. d. They are poor detective controls.
c. The entire accounting system serves as a documentary control.
37. What is the primary advantage of the data-driven approach? a. The investigator makes hypotheses and tests to see if each one holds true. b. It is less expensive and time intensive than the traditional approach. c. The investigator takes charge of the fraud investigation process. d. Data-driven fraud detection is proactive in nature.
c. The investigator takes charge of the fraud investigation process.
5. Which of the following is true for accounting anomalies? a. They are primarily caused by lack of training. b. They represent intentional sabotage of controls. c. They are problems caused by failures in systems, procedures, and policies. d. They represent fraud.
c. They are problems caused by failures in systems, procedures, and policies.
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.
c. They provide only those statistics related to their jurisdiction.
48. Which of the following may result from a careful review of a Matosas Matrix? a. This action identifies indicators that have been circumvented. b. This action identifies indicator information that has been incorrectly input. c. This helps investigators improve the set of indicators utilized. d. This helps investigators identify fraud perpetrators.
c. This helps investigators improve the set of indicators utilized.
36. Which of the following ratios can be used to assess a company's solvency? a. Current Ratio b. Return on assets c. Times-interest-earned d. Inventory turnover
c. Times-interest-earned
9. Developing and promoting a well-defined corporate code of conduct is related to which element of the fraud-fighting model? a. Investigation & follow-up b. Education & training c. Tone at the top d. Proactive fraud detection
c. Tone at the top
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.
c. Whistle-blowing systems should include an anonymous hotline.
37. Employee embezzlement can be direct or indirect. Indirect fraud occurs when: a. an employee uses company assets to run his/her private business. b. employees establish dummy companies and have their employers pay for goods that are not actually delivered. c. an employee receives a kickback from a vendor. d. an employee steals company cash, inventory, tools, or other assets.
c. an employee receives a kickback from a vendor.
4. Increased scrap, excessive purchases, physical abnormalities, etc. are all examples of: a. accounting anomalies. b. external control weaknesses. c. analytical anomalies. d. unusual behavior.
c. analytical anomalies.
49. Which of the following is NOT a perceived pressure that can lead to employee fraud? a. experiencing high medical bills because of illness in family b. frustration with a co-worker c. anticipated actual financial reports that are below published expectations d. a challenge to beat the system
c. anticipated actual financial reports that are below published expectations
34. Benford's law: a. applies to numbers that have built-in limits. b. is most effectively used with assigned numbers. c. applies best to numbers that occur naturally. d. uses ratios to detect fraud.
c. applies best to numbers that occur naturally.
36. Which category of individuals are least likely to detect fraud at the conversion stage? a. co-workers b. friends c. auditors d. managers
c. auditors
20. The red-flag that is generally identified when vendors with invoices for the same amount on the same day are found is: a. dummy vendors. b. employees purchasing goods for personal use. c. billing more than once for the same purchase. d. providing poor-quality goods.
c. billing more than once for the same purchase.
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.
c. bribes paid may be deducted as business expenses.
48. Which of the following would NOT be acceptable as fraud-related experience to satisfy the education requirements to apply for CFE certification? a. auditor (internal or external) b. investigator for law enforcement agency or private sector c. experience in the Human Resources department of an organization d. paralegal for a prosecuting attorney
c. experience in the Human Resources department of an organization
12. In an organization, individuals who suspect fraud usually don't come forward because they: a. feel that perpetrator will get caught anyway. b. do not want to accuse someone. c. fear being branded as a whistle-blower. d. will lose the friendship of the perpetrator.
c. fear being branded as a whistle-blower.
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
c. industry characteristics
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. interviews
16. Organizations and individuals that have proactive fraud prevention measures usually find that their prevention efforts: a. help in training employees about appropriate behavior. b. often prompt smaller frauds. c. pay big dividends. d. aid in punishing fraud perpetrators.
c. pay big dividends.
44. The GDP in the economy of Ponziland was $5 billion in the year prior to the frauds (year 1). The economy were growing at 4 percent. Frauds during the year reduce aggregate income by $200 million. During the year, the economy has: a. shrunk by 1 percent. b. grown by only 1 percent. c. remained flat. d. grown by 4 percent.
c. remained flat.
39. Which of the following actions would most likely create an opportunity for fraud? a. requiring all documents over seven years old be shredded b. requiring that the department manager authorize purchase orders only for purchase amounts for more than $100 c. requiring one password code for each entire department to enter the storeroom d. using a manual accounting system
c. requiring one password code for each entire department to enter the storeroom
11. A good internal control system includes: a. open work environments. b. rigid rules. c. segregation of duties. d. following strict hiring procedures.
c. segregation of duties.
38. While methods like high-low slope, average slope, handshaking, and Box-Jenkins exist, one of the most popular techniques for summarizing the slope of a graph is _______ . a. summarization b. stratification c. statistical regression. d. arithmetic progression
c. statistical regression.
42. Specific implementations of delimited text are called TSV. What does TSV stands for? a. toxicity screening value b. time segmented volume c. tab separated values d. tactical secure voice
c. tab separated values
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 anything 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.
c. the giving or receiving of anything of value by a subcontractor to a prime contractor in contracts.
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. the misrepresentation is known to the victim.
25. When only a very small amount of money has been embezzled: a. taking no action is the best course of action. b. the perpetrator should be punished by publishing the details of the fraud in the local newspapers. c. the perpetrator should be prosecuted. d. the company should transfer the perpetrator to a position with more supervision.
c. the perpetrator should be prosecuted.
27. Using the data below, calculate living expenses. Assets $100,000 Liabilities 37,500 Prior years's net worth 32,500 Income 55,000 a. $57,500 b. $17,500 c. $20,000 d. $25,000
d. $25,000
36. Refer Data Set 9-1. The income from unknown sources for years 2 and 3 respectively are: a. $255,200; $300,200 b. $171,200; $307,200 c. $73,800; $179,800 d. $65,800; $47,800
d. $65,800; $47,800
45. Which of the following would be considered a form of denial while reacting to a crisis? a. A person's anger is directed at friends, relatives, or co-workers. b. After an attempt to resolve the problem fails, a person's hope diminishes. c. A person's anger is replaced by disappointment or embarrassment. d. A person insists that there is some mistake.
d. A person insists that there is some mistake.
24. Which of the following elements is NOT true regarding a confession? a. The confession can be changed in ink, with everyone's initials. b. A written confession must be completely voluntary. c. A written confession must contain elements of the fraudster's intent. d. A written confession should be drafted by the confessor.
d. A written confession should be drafted by the confessor.
14. Which of the following is the last stage in the model for understanding an individual's reaction to crisis? a. Depression b. Anger c. Rationalization d. Acceptance
d. Acceptance
11. Interviewers should demonstrate all but which characteristic during interviews? a. Be businesslike b. Politeness toward the perpetrator c. Courtesy d. Admiration of the perpetrator
d. Admiration of the perpetrator
21. Which of the following is NOT considered a normal response to an ego threat? a. Repression b. Disapproval c. Loss of Status d. Anger
d. Anger
26. Which of the following observations about discovery sampling is TRUE? a. It is one of the more difficult statistical sampling variations to understand. b. Auditors using this method can always be certain that fraud does not exist in a population of checks. c. It allows an auditor to generalize and make inferences from the population to the sample. d. Auditors can quantify both the risk and samples until they have sufficient evidence that fraud does not likely exist.
d. Auditors can quantify both the risk and samples until they have sufficient evidence that fraud does not likely exist.
53. What is the term for the process by which we obtain release from unpleasant emotional tensions by talking about the source of these tensions. a. Acceptance b. Denial c. Negation d. Catharsis
d. Catharsis
8. Which of the following is the term for keeping a record of when a document is received and what has happened to it since its receipt. a. Organization of custody b. Evidence chain c. Coordination of custody d. Chain of custody
d. Chain of custody
15. Mark owns a 24-hour convenience store. Lately he has noticed that the liquor inventory purchases have gone up by huge amounts, although sales proceeds from this category haven't increased. He suspects his two night-shift employees. Which is the best investigative method to uncover such a fraud? a. Electronic investigation b. Conversion investigation c. Inquiry investigation d. Concealment investigation
d. Concealment investigation
20. While reacting to crisis, an individual usually becomes withdrawn, uncooperative, or embarrassed in the ____ stage. a. Denial b. Anger c. Rationalization d. Depression
d. Depression
20. ________ is a simple, statistically based method of analyzing a subset of transactions from a larger pool. a. Structured sampling b. Probability sampling c. Cluster sampling d. Discovery sampling
d. Discovery sampling
21. What of the following makes the net worth method ineffective in some situations? a. It gives a conservative estimate of stolen funds which are not readily accepted as evidence by courts. b. It rarely facilitates obtaining confessions from the suspects. c. When people have income, they either purchase additional assets, pay off liabilities, or improve their lifestyle, thus increasing living expenses. d. Embezzlers typically spend their money on food, jewelery, vacation, and other luxuries that are difficult to track.
d. Embezzlers typically spend their money on food, jewelery, vacation, and other luxuries that are difficult to track.
19. Which of the following is something that an interviewee might do or feel while in the denial phase? a. Insult, harm, or slander the interviewer b. Attempt to justify the act of the fraud c. Become sad, withdrawn, or lose interest in the environment d. Failure to comprehend what has been said
d. Failure to comprehend what has been said
0. Name the major database maintained by the FBI. a. CIA b. UCC filings c. DEA d. NCIC
d. NCIC
3. Which of the following is NOT one of the major credit reporting agency? a. Experian b. Equifax c. TransUnion d. ProQuest
d. ProQuest
36. Which of the following refers to the use of interpersonal space to convey meaning? a. Chronemic communication b. Paralinguistic communication c. Kinetic communication d. Proxemic communication
d. Proxemic communication
41. The feeling of a General Manager that he can "save" an employee who has committed a fraudulent act is an indication that the manager is in the _____ stage of crisis reaction. a. Denial b. Acceptance c. Depression d. Rationalization
d. Rationalization
23. Which response to ego threats is characterized by respondents not only refusing toadmit information, but also refusing to admit the information inwardly? a. Denial b. Disapproval c. Loss of Status d. Repression
d. Repression
17. Which of the following agencies is responsible for protecting the president of the United States and other federal dignitaries? a. CIA b. NCIC c. FBI d. Secret Service
d. Secret Service
13. Interviewers can control the length of time after respondents finish a sentence before they pose another question. What is this called? a. Theme development b. Manipulator c. Admission-seeking d. Silent probe
d. Silent probe
25. Which of the following statements is true of an admission-seeking interview? a. There must be physical barriers preventing the target from leaving. b. Private investigators must give Miranda Warnings before this interview. c. Attorneys should be present and be allowed to ask questions or object. d. The interviewer should attempt to interrupt any denial.
d. The interviewer should attempt to interrupt any denial.
56. Many times the information sought in an interview is closely related to the respondent's inner conflicts and tensions. Which element of conversation will he helpful in releasing this? a. Expression b. Deduction c. Rituals d. Therapy
d. Therapy
38. Which of the following observations concerning pencil-and-paper honesty tests is true? a. They are written tests that require elaborate answers. b. They are used most frequently as crime determining tools. c. They are considered to be 90 to 98 percent accurate. d. They are ideal for applicant screening.
d. They are ideal for applicant screening.
9. Which of the following does NOT appear on a check that has been cashed? a. Teller number b. Date of the transaction c. Transaction number d. Time of the transaction
d. Time of the transaction
23. Which of the following is a primary reason for conducting conversion searches? a. To find out suspect's feelings about the organization. b. To understand the suspect's reaction to crisis. c. To check the extent of sudden changes in lifestyle. d. To gather evidence that can be used in interrogations to obtain a confession.
d. To gather evidence that can be used in interrogations to obtain a confession.
28. Probably the most common rationalization for criminal activity in general (and fraud in particular) is in fraudsters' attempts to ______. a. be efficient b. victimize others c. gain sympathy d. achieve equity
d. achieve equity
26. The Department of Vital Statistics maintains: a. licensing information. b. military records. c. fraud related information. d. birth records.
d. birth records.
22. The least reliable method of obtaining documentary evidence is: a. through traditional audits. b. through computer-based queries c. by using statistical techniques. d. by accident.
d. by accident.
31. What is another term used for discovery sampling? a. investigative sampling b. probability sampling c. statistical random sampling d. stop-and-go
d. stop-and-go
25. Orders issued by a court or a grand jury to produce documents are called: a. writs of certiorari. b. search warrants. c. voluntary consent. d. subpoenas.
d. subpoenas.
42. Which amendment provides the right of the people against unreasonable searches and seizures? a. First b. Second c. Third d. Fourth
d. Fourth
34. Which of the following is NOT utilized to make determinations about the document being examined? a. forensic chemistry b. microscopy c. photography d. Radiology
d. Radiology
39. Which of the following is a FALSE statement regarding how the testimony of witnesses can be problematic? a. Witnesses can forget important facts. b. Witnesses can be confused by opposing attorneys. c. Witnesses can commit perjury. d. Witnesses may depend on their written summary of the facts.
d. Witnesses may depend on their written summary of the facts.
37. Which of the following is an example of secondary evidence? a. testimony of recipient of stolen assets b. confession outside vendors who paid bribes c. testimony of witnesses of the fraud act d. photocopies of improper documents
d. photocopies of improper documents
37. Which Act governs the information maintained by credit-reporting agencies? a. the Sarbanes-Oxley Act of 2002 b. the Gramm-Leach-Bliley Act of 1999 c. the Fair and Accurate Credit Transactions Act of 2003 d. the Fair Credit Reporting Act of 1971
d. the Fair Credit Reporting Act of 1971
32. Which of the following people is most likely to have opportunities to commit fraud? a. Rob is a convicted bank robber who has been out of jail for 7 years and is working for a small firm whose manager knows about Rob's criminal background. b. Jane is a recent high school graduate who loves shopping. She is on the lookout for a job. c. Steve was just hired by his company but he is always acting suspicious d. 62 year old Dave has loyally worked up his company's corporate ladder for the past 24 years
d. 62 year old Dave has loyally worked up his company's corporate ladder for the past 24 years
36. Identify a situation that could usually lead to a conflict of interest. a. A manager has to choose between two of his best employees for the post of assistant manager. b. A sales supervisor has to allocate targets to her team members, based on revenue generation probability per region. c. A market analyst is asked to create a comparative growth forecast for four firms in an industry. d. A purchase manager in a company runs an operation that produces the raw materials required by the company.
d. A purchase manager in a company runs an operation that produces the raw materials required by the company.
31. What does the following journal entry indicate? Legal Expense..................2,900 Cash...............................2,900 a. $2,900 cash is due to an attorney. b. A sum of $2,900 was received from attorney in advance. c. $2,900 cash is due from an attorney. d. An attorney was paid $2,900 in cash.
d. An attorney was paid $2,900 in cash.
20. A person may have very strong ethics in the way he or she treats family and friends, but not understand how failure to submit tax withholdings to the government affects peoples' lives or constitutes unethical or fraudulent behavior. This is an ethical issue encountered in which level of the ethical maturity model? a. Personal ethical understanding b. Ethical courage c. Ethical leadership d. Application of ethics to business situations
d. Application of ethics to business situations
41. Every fraud is comprised of all the following elements EXCEPT: a. The theft act b. Concealment c. Conversion d. Assault
d. Assault
3. Implementing a system of independent checks is one of the most effective ways to deter fraud. Which one of the following is NOT a way of providing independent checks on employees? a. Employee transfers b. Audits c. Mandatory vacations d. Authorization required for purchases of over $2,000 or more
d. Authorization required for purchases of over $2,000 or more
10. How does a smart embezzler manipulate accounting records to conceal fraud? a. By increasing assets. b. By manipulating stock accounts. c. By manipulating dividends. d. By increasing expenses.
d. By increasing expenses.
39. The word "con," which means to deceive, comes from the word: a. Contract. b. Conserve. c. Confuse. d. Confidence.
d. Confidence.
19. ____ focuses more on creating a culture of openness than eliminating opportunities. a. Proactive auditing b. Installing good internal controls c. Monitoring employees d. Creating a positive work environment
d. Creating a positive work environment
21. ____ include statistical summaries of each column that include control totals, mean, maximum, minimum, standard deviation, number of zero values, number of empty records, etc. a. Captions b. Histograms c. Headings d. Descriptives
d. Descriptives
27. Which of the following is NOT a common financial pressure associated with fraud? a. Living beyond one's means b. High bills or personal debt c. Personal financial losses d. Desire to hurt employer financially
d. Desire to hurt employer financially
2. All of the following are methods that organization can adopt to proactively eliminate fraud opportunities EXCEPT: a. Accurately identifying sources and measuring risks. b. Implementing appropriate preventative and detective controls. c. Creating widespread monitoring by employees. d. Eliminating protections for whistle blowers.
d. Eliminating protections for whistle blowers.
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
d. Employee embezzlement
1. Research has shown that ______ detect most frauds. a. Auditors b. Customers c. Vendors d. Employees
d. Employees
35. Which of the following frauds is usually the most expensive? a. Vendor fraud b. Customer fraud c. Occupational fraud d. Financial statement fraud
d. Financial statement fraud
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.
d. Fraud control costs are less than the known costs that would have been lost through fraud.
9. Which of the following key activities related to fraud, is the most important and cost-effective way to reduce losses from fraud? a. Follow-up legal action b. Early fraud detection c. Fraud investigation d. Fraud prevention
d. Fraud prevention
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
d. Fraud reporting hotline
30. After committing fraud, an individual often exhibits unusual and recognizable behavior patterns to cope with the stress. Perpetrators experience these behavioral signals in a particular sequence. Identify it. a. Guilt - Stress - Fear - Behavior changes b. Fear - Guilt - Stress - Behavior changes c. Fear - Guilt - Behavior changes - Stress d. Guilt - Fear - Stress - Behavior changes
d. Guilt - Fear - Stress - Behavior changes
13. Which of the following is a sign of a positive work environment? a. Rigid rules followed by the organization b. Managers who care about the employee work ethic c. Careful hiring policies d. Having positive personnel and operating procedures
d. Having positive personnel and operating procedures
21. Which of the following should be emphasized in an employee-reporting program? I. Fraud, waste, and abuse occur in few companies. II. The company actively encourages employees with information to come forward. III. The name of the employee reporting the fraud must be known. IV. The report need not be made to one's immediate supervisor. a. II and III. b. I, II, III, and IV. c. I, II, and IV. d. II and IV.
d. II and IV.
42. An organization requires that employees in its accounting department take mandatory two-week long continuous vacations once a year. It allows no exceptions to this rule. Which control activity is the company using? a. Segregation of duties b. Proper authorizations c. Physical safeguards d. Independent checks
d. Independent checks
28. Which of the following statements is true about the characteristics of real-time analysis? a. With real-time analysis in place, there is no need for continual improvement and updating of indicators. b. It is a distinct technique because it specifically analyzes each transaction for correctness rather than for fraud. c. It does not allow real-time modification and deletion of less-effective indicators. d. Indicators are hard-coded into the system.
d. Indicators are hard-coded into the system.
35. While using financial statement analysis, which ratio will be most useful in assessing the company's operational efficiency? a. Current Ratio b. Quick ratio c. Cost of goods sold percentage d. Inventory turnover
d. Inventory turnover
7. Fraud examiners must be able to recognize signals that a journal entry may have been manufactured to conceal a fraud. Which of the following is a common journal entry fraud symptom? a. Journal entries with documentary support. b. Journal entries that balance. c. Adjustments to receivables or payables that are made monthly. d. Journal entries made near the end of an accounting period
d. Journal entries made near the end of an accounting period
4. A fraud perpetrator uses the float time between banks to give the impression that he had money in his accounts. Which crime is he committing? a. Floating b. Strip c. Spinning d. Kiting
d. Kiting
45. Company X has a good whistle-blowing program in place. Sara used the whistle-blowing system to alert the management about a fraud being committed by a senior employee in the human resource department. The company investigated the allegation and punished the fraudster. However, Sara was shocked to find later that everyone in her team knew that she was the one who blew the whistle. What could be a major issue with the program at the company? a. Unclear policies regarding whistle blowing b. Lack of awareness about the program c. Management inaction regarding anonymity policies d. Lack of adherence to anonymity policies
d. Lack of adherence to anonymity policies
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.
d. Legal action stops future frauds.
25. Which of the following fraud symptoms is often the easiest to detect? a. Analytical anomalies b. Internal control weaknesses c. Accounting anomalies d. Lifestyle changes
d. Lifestyle changes
33. One way to view the results of multiple indicators is to use a chart called a ____________ . a. Soundex algorithm b. summarization chart c. pareto chart d. Matosas matrix
d. Matosas matrix
2. Which of the following is NOT a common rationalization of fraud perpetrators? a. The organization owes me b. I'm only borrowing the money c. No one will get hurt d. No one will care
d. No one will care
6. Which of the following is the most direct method of focusing on changes in the company's balance sheet and income statement? a. Calculating key ratios and comparing them from period to period b. Comparing account balances in the statements from one period to the next c. Performing a vertical analysis d. Performing a horizontal analysis
d. Performing a horizontal analysis
36. Investigative techniques under which approach include invigilation, surveillance, and covert operations? a. Documentary evidence b. Testimonial evidence c. Physical evidence d. Personal observation
d. Personal observation
24. Perpetrators of some fraud schemes often target conspiracy theorists, promising access to the "secret" investments used by the Rothschild 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.
d. Prime bank schemes.
37. All of the following are part of the fraud element triangle EXCEPT: a. Theft act b. Concealment c. Conversion d. Rationalization
d. Rationalization
56. Which of the following about rationalization is NOT true? a. Rationalization is a form of self-justification. b. Rationalization is a way to lie to one's self. c. People who rationalize feel they are basically honest people. d. Rationalizing is unnecessary when there are multiple opportunities present to commit fraud.
d. Rationalizing is unnecessary when there are multiple opportunities present to commit fraud.
44. A fraud perpetrator is able to convince a potential victim that he will receive a large bonus if he supports him in a fraud scheme. Which type of power is the fraud perpetrator using? a. Expert power b. Coercive power c. Legitimate power d. Reward power
d. Reward power
25. Identify the true statement about detecting fraud using financial statement reports. a. Performing horizontal analysis requires converting the Income statement balances to percentages of gross sales. b. Vertical analysis is the most direct method of focusing on changes from period to period. c. Before performing any data-driven analysis that targets fraud and corruption in financial statements, the numbers in all three types of financial statements need to be converted to percentages. d. Small frauds may not affect the summarized financial statements significantly to be detected.
d. Small frauds may not affect the summarized financial statements significantly to be detected.
38. Which of the following appears to be common to most embezzlers who are caught? a. Long-term focus b. Investments made in low-risk instruments c. Saving what they steal d. Spending on lifestyle improvements
d. Spending on lifestyle improvements
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. Stockholders
18. Which of the following is NOT a possible control activity? a. Having separate authorization, bookkeeping, and custody functions. b. Protecting access to important information with a password. c. Requiring two individuals to work on the same task. d. Supervisory review of each task completed by employees.
d. Supervisory review of each task completed by employees.
23. Which of the following is the largest employee group in most organizations? a. Employees who display ethical leadership b. Group of employees who will always be honest c. Group of employees who will be dishonest anytime it benefits them d. Swing group of employees who could be honest or dishonest
d. Swing group of employees who could be honest or dishonest
47. Which of the following in the most complete definition of a Matosas Matrix? a. The Matosas Matrix is a table of data useful during audits. b. The Matosas Matrix is a compromise between prior and real-time data. c. The Matosas Matrix is a high-level chart that lists a specific group of items (i.e., contracts) with their demographics over a specific period of time.. d. The Matosas Matrix is a high-level chart listing possible fraud indicators related to a group of items (i.e., contracts) for a specific period of time.
d. The Matosas Matrix is a high-level chart listing possible fraud indicators related to a group of items (i.e., contracts) for a specific period of time.
44. What is a unique feature of Picalo, the data analysis toolkit that differentiates it from other packages? a. Picalo includes sampling techniques. b. The primary focus of Picalo is auditing. c. The Picalo program makes automation of procedures possible. d. The Picalo program is free.
d. The Picalo program is free.
3. Each of the following is an example of an abuse of a control environment EXCEPT: a. The HR department failed to check an applicant's background and hired someone who had committed fraud in the past. b. A manager instructs employees not to share passwords, and then shares her passwords with her immediate assistant. c. A company has established codes of conduct and conducts training meetings to teach employees to distinguish between acceptable and unacceptable behavior. Attendance is voluntary. d. The employees know who has responsibility for each business activity. Procedures to follow are in place.
d. The employees know who has responsibility for each business activity. Procedures to follow are in place.
27. Which of the following statements is TRUE? a. External auditors are usually specifically trained to detect fraud. b. Audits of books and records rarely discover frauds. c. Less than 5 percent of all frauds are detected by auditors. d. The presence of auditors provides a major deterrent effect.
d. The presence of auditors provides a major deterrent effect.
3. The proactive method of fraud detection is a six-step process. Which of the following is the correct process sequence? a. Identify possible frauds that could exist; catalog possible fraud symptoms; understand the business; use technology to gather data about symptoms; automotive detection procedures; analyze results; and investigate symptoms b. Catalog possible fraud symptoms; understand the business; identify possible frauds that could exist; analyze results; use technology to gather data about symptoms; and investigate symptoms c. Understand the business; identify possible frauds that could exist; catalog possible fraud symptoms; investigate symptoms; use technology to gather data about symptoms; and analyze results d. Understand the business; identify possible frauds that could exist; catalog possible fraud symptoms; use technology to gather data about symptoms; analyze results; and investigate symptoms
d. Understand the business; identify possible frauds that could exist; catalog possible fraud symptoms; use technology to gather data about symptoms; analyze results; and investigate symptoms
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.
d. a proper example is set by management.
24. A "right-to-audit" clause: a. provide rights to the vendor to audit the company's books at any time. b. gives an external auditor the right to audit the company's books. c. is considered in civil court as an invasion of privacy. d. alerts vendors that the company reserves the right to audit the vendor's books at any time.
d. alerts vendors that the company reserves the right to audit the vendor's books at any time.
32. Recruitment interview questions that deal with an applicant's race, sex, age, religion, color, national origin, or disability: a. are allowed in most circumstances. b. are allowed as long as the interviewee has verbally agreed. c. are prohibited unless the criterion is pre-approved by the company management. d. are usually prohibited unless the criterion is a bona fide occupational qualification.
d. are usually prohibited unless the criterion is a bona fide occupational qualification.
36. Civil claims begin when one party files a complaint against another, usually for the purpose of: a. having a penalty imposed. b. sending the perpetrator to prison. c. proving the perpetrator guilty. d. being awarded financial restitution.
d. being awarded financial restitution.
51. Some researchers have added a fourth element to the fraud triangle making it a fraud diamond. What is that element? a. propensity toward illegal acts b. lack of self-respect c. greed d. capability
d. capability
38. Which of the following describes the overall tone of the organization that management establishes through its modeling and labeling, organization, communication, and other activities? a. detection framework b. risk mitigation channel c. support network d. control environment
d. control environment
31. Benford's law can help detect fraud by: a. establishing weaknesses in the accounting control system. b. identifying accounting anomalies. c. focusing on unexplained changes. d. identifying possible attempts by fraudsters to make stolen amounts look random.
d. identifying possible attempts by fraudsters to make stolen amounts look random.
34. The theory behind _____ is that if people know their work or activities will be monitored by others, the opportunity to commit and conceal a fraud will be reduced. a. documentation b. segregation of duties c. system of authorizations d. independent checks
d. independent checks
11. Communicating expectations about honesty and integrity throughout a company includes all of the following elements EXCEPT: a. identifying appropriate values and ethics. b. fraud awareness training. c. consistent punishment for violators. d. insisting that top management model appropriate behavior.
d. insisting that top management model appropriate behavior.
17. One of the disadvantages of Benford's law in detecting fraud is: a. potential suspects are more likely to know you are trying to detect fraud than if you use such detection techniques. b. users must be thoroughly trained in its complexities to implement and use. c. that those cases with the lowest probabilities do not match Benford's law and may need further investigation. d. it only broadly identifies the possible existence of fraud; it fails to narrow possibilities to a manageable field of promising leads.
d. it only broadly identifies the possible existence of fraud; it fails to narrow possibilities to a manageable field of promising leads.
40. Allowing the clerk who checked out customer A handle a return by that same individual without presenting the receipt would NOT be an example of which of the following internal controls? a. lack of segregation of duties b. lack of requiring proper documents and records c. lack of independent checks d. lack of an adequate accounting system
d. lack of an adequate accounting system
5. All of the following factors can be associated with high levels of fraud and detract from a positive work environment EXCEPT: a. top management that does not pay attention to behavior of employees. b. lack of recognition of job performance. c. unrealistically low pay. d. low turnover.
d. low turnover.
41. One of the most common errors investigators make when analyzing time trends is: a. incorrect data preparation. b. focusing only on one variable, time (the x-axis if graphed). c. not monitoring the time taken. d. not standardizing for time.
d. not standardizing for time.
27. The ACFE does NOT include which of the major categories of occupational fraud listed below? a. asset misappropriations. b. corruption. c. fraudulent statements. d. pension fraud.
d. pension fraud.
8. Civil suits are usually quite rare in cases of employee fraud because: a. there is usually not enough evidence to prosecute. b. employee fraud is a victimless crime. c. it is difficult for a jury to unanimously decide on a conviction. d. perpetrators have usually spent the money.
d. perpetrators have usually spent the money.
18. An appropriate red flag search to detect kickbacks or other fraud being committed by vendors would include: a. invoices without valid purchase order. b. employee and vendor telephone numbers are the same. c. purchase orders with zero dollar amounts by buyer. d. price increases greater than 20% for several consecutive years.
d. price increases greater than 20% for several consecutive years.
44. Which of the following acts by management could discourage someone from reporting an observed act of fraud? a. providing clear instructions of who to contact b. providing assurance of anonymity c. providing clear instructions on how to convey the information d. providing a clear list of possible consequences
d. providing a clear list of possible consequences
16. Fraud is most commonly detected by: a. monitoring employees. b. auditors. c. discouraging collusion. d. tips and complaints.
d. tips and complaints.
46. Which of the following is the role of an internal auditor in an organization? a. to establish the controls for the organization b. to write the code of ethical business conduct for the organization c. to test the system of internal controls in order to attest that there are no material weaknesses d. to assist management with the evaluation of internal controls currently in place
d. to assist management with the evaluation of internal controls currently in place
4. One way to create and communicate clear expectations about what is and is not acceptable in an organization is: a. having separate, nonintegrated personnel and operating policies. b. creating an expectation of punishment. c. following a reactive management style. d. to have a clearly defined code of conduct in place.
d. to have a clearly defined code of conduct in place.
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
d. watching those employees whose honesty test results were suspicious
36. Segregation of duties, as a control procedure, is most often used a. when the task involved is complex. b. when it is impossible for one person to complete a task. c. when appraisals are conducted. d. when cash is involved.
d. when cash is involved.
37. All of the following are true concerning polygraphs except: a. Polygraphs are more complicated than voice stress analyzers b. They rarely detect psychopathic liars c. Individuals who pass polygraph tests are probably innocent d. Investigators must inform suspects that they do not have to take a polygraph e. Failure to pass the test implies certain guilt.
e. Failure to pass the test implies certain guilt.
31. Use of all of the following methods will help an interviewer deal with difficult people, EXCEPT: a. Disarm the interviewee using surprise b. Change tactics c. Make it hard to say "No" d. Don't react e. Try to reason
e. Try to reason
33. Which of the following is NOT a fraud symptom related to internal control weaknesses? a. Lack of segregation of duties b. Lack of physical safeguards c. Inadequate accounting system d. Lack of proper authorization e. Excessive turnover of executives
e. Excessive turnover of executives
46. Fraud statistics come from all of the following sources EXCEPT: a. Government agencies b. Researchers c. Insurance Companies d. Victims e. Fraud perpetrator
e. Fraud perpetrator
29. Which racial group is most likely to commit fraud? a. Caucasian b. African American c. Asian d. Hispanic e. People of every race commit fraud
e. People of every race commit fraud
Concealment
A divisional manager is suspected of adding ghost employees to the payroll. Which investigative method can most easily uncover this type of fraud? a. Undercover operations b. Theft c. Concealment d. Conversion
Vulnerability chart
A(n) ____ is a tool for explicitly considering all aspects of the fraud and for establishing fraud theories. a. Vulnerability chart b. Perceptual map c. Surveillance log d. Pareto chart
Stationary surveillance
An investigator locates the scene that should be observed, anticipates the action that is most likely to occur at the scene, and keeps detailed notes on all activities involving the suspect. Which type of surveillance is being used here? a. Static surveillance b. Electronic surveillance c. Stationary surveillance d. Moving surveillance
c. It is most commonly used in such high-risk areas as expensive inventor
Characteristics of invigilation include which of the following? a. A method of creating a loosely monitored environment to catch fraudulent activities. b. It is an inexpensive method to monitor all employees during the investigation process. c. It is most commonly used in such high-risk areas as expensive inventory. d. A method of watching and recording physical facts, acts, and movements
There is usually no direct documentary evidence
Concealment investigative techniques do not work well in kickback situations. Why? a. The parties in the transaction will be hard to trace. b. Results of concealment investigative techniques are not admissible as evidence in courts. c. There is usually no direct documentary evidence. d. The risk involved in such investigations is unusually high.
Concerns regarding employees' privacy
Electronic surveillance may have only limited value in the investigation of employee frauds and many other white- collar crimes. Why? a. Lack of adequate technology b. Concerns regarding employees' privacy c. Prohibitively high cost of installation and maintenance d. Relative ease of tampering evidence
for at least 14 day
Experts recommend that invigilation must continue: a. for at least 7 days. b. for at least 14 days. c. for at least 21 days. d. for an indefinite period determined by the individual investigator
rationalization
For fraud to occur, usually three elements are necessary: pressure, opportunity, and _______. a. excitement b. guidance c. rationalization d. money
Check personnel records, interview former employers, search public records, ,interview other buyers, and interview suspect
Identify the best pattern/order to go about a theft investigation. a. Search public records, check personal records, interview suspect, interview former employers, and interview other buyers. b. Check personnel records, interview former employers, search public records, ,interview other buyers, and interview suspect. c. Interview suspect, interview former employers, search public records, check personal records, and interview other buyers. d. Interview other buyers, check personal records, interview former employers, interview suspect, and search public records
Seizure of the device
Identify the first step in any electronic evidence collection process. a. Seizure of the device b. Automated search of the device c. Clone the device d. Do a manual reconnaissance
Checking personal and company records
In most investigations of a fraud suspect, investigators should begin by: a. Confronting the suspect. b. Checking personal and company records. c. Interviewing co-workers. d. Performing invigilation.
Preparation of a surveillance log
Several factors are considered in deciding whether or not to investigate fraud. Which of the following is NOT one of them? a. The signal that investigation or noninvestigation will send to others in the organization. b. Perceived cost of the investigation. c. Exposure or amount that could have been taken. d. Perceived strength of the predication. e. Preparation of a surveillance log
Fourth Amendment
Subjects of covert operations are protected against unreasonable breaches of privacy under the ______ of the constitution. a. Fourth Amendment b. Fifth Amendment c. Second Amendment d. Seventh Amendment
Theft acts
Surveillance is usually used to investigate: a. Theft acts. b. Concealment possibilities. c. Conversion possibilities. d. Key internal controls.
MD5 and SHA-1
The two primary checksum methods used today are: a. E-TTL I and E-TTL II. b. SSFDC and SDHC. c. MD5 and SHA-1. d. SSFDC and RS-232
When other investigation methods are available
Undercover operations are costly and time-consuming and should be used with extreme care. In which of the following situations would it be ineffective to conduct an undercover operation? a. When law enforcement authorities are informed b. When the investigation can be closely monitored c. When other investigation methods are available d. When the investigation can remain secretive
large scale fraud is likely and other investigation methods fail
Undercover operations should be used only when: a. large scale fraud is likely and other investigation methods fail. b. controls are made so strict that opportunities to commit fraud are virtually impossible. c. the investigation cannot be kept a secret. d. there is a need to develop theories about what kind of fraud has occurred
A theft investigation technique which involves close supervision of the suspects during the examination period
What is invigilation? a. A theft investigation technique which records the physical evidence, facts, and movements, which form part of a fraud. b. A theft investigation technique which involves close supervision of the suspects during the examination period. c. A theft investigation technique which is used when large scale fraud is likely and other methods of investigation fail. d. A theft investigation technique which involves confiscating and searching computers and other electronic sources of information.
cyclic redundancy check number
What is the term for a calculation (using encryption technologies) based on the contents of a disk or file that are engineered so that even small changes in the source data will produce significantly different checksum results? a. cyclic random check number b. cyclic redundancy check number c. cyclic repetition check number d. random variable check number
computer forensics
What is the term for gathering and analyzing electronic evidence? a. confiscating computers b. computer forensics c. electronic surveillance d. electronic investigation
Checksums
What is used in court cases to prove that data has not been adversely affected during analysis? a. Arithmetic mean b. Deviation measure c. Random sampling d. Checksums
the specific type of fraud committed
What usually dictates which of the four common ways frauds are investigated is utilized? a. the method in which the selected investigator possesses the strongest expertise b. the method preferred by the investigator (the one he or she is most familiar with) c. the level of authority of the suspected perpetrator within the company d. the specific type of fraud committed
