FRAUD
During an interview for information, if an accounting fraud examiner asks an employee the assessment question, "Why do you think someone around here might be justified in taking company property?" the accounting fraud examiner is expecting that a. the honest employee is more likely than the dishonest employee to not furnish an answer to this question, saying instead that, "I guess anyone could have a justification if they wanted to." b. the honest employee has a better sense of integrity, and is more likely to say, "yes." On the other hand, the dishonest employee is more likely to say, "no." c. the honest employee is more likely to say, 'There is no justification for stealing from the company. lt is dishonest." On the other hand, the dishonest employee is more Likely to attempt a justification, such as, "Everyone does it," or "The company should treat people better if they don't want them to steal." d. the honest employee is more likely than the dishonest employee to say, "How should 1 know?" It's not up to me," or, "If they were a good employee maybe we should give them another chance."
C
A corporative effort between the U.S. Treasury Department and the Society for Worldwide Interbank Financial Telecommunication (SWIFT) that tracks terrorist financing around the globe is a. marginally successful against high-level terrorist operatives. b. significantly successful against high-level terrorist operatives. c. marginally successful against lower- and mid-level terrorist operatives. d. not successful against all levels of terrorist operatives.
A
An accounting fraud examiner should be aware of certain Federal Statutes when obtaining information about an employee. Which of the following is not a true statement? a. Under the FCRA (Fair Credit Report Act) of 1971, an accounting fraud examiner can obtain information about an employee's "consumer report" from a consumer report agency without that employee receiving a written notice and signing a consent form. b. Under the FCRA (Fair Credit Report Act) of 1971 an accounting fraud examiner can obtain information about a suspected employee directly from the source. For example the accounting fraud examiner wants to check federal criminal records to see if the suspected employee has been convicted of any previous crimes and goes personally to the local courthouse and looks for the criminal records. c. Under the FCRA (Fair Credit Report Act), as amended in 1997, an "investigative consumer report" is a report containing information about an employee's character, general reputation, personal characteristics, or mode of living, which is obtained through personal interview by the accounting fraud examiner with neighbors, friends, or associates. If such a report is made, then a written notice and signed consent will need lo be obtained from the employee. d. Under the HIPAA (Health Insurance Portability and Accountability Act), if information about the health of an employee, or payments for services. becomes an issue during a fraud examination, the accounting fraud examiner should contact the human resources department to determine whether the employee is subject to the HIPAA's privacy mies and to assist him/her in compliance with those rules.
A
An accounting fraud examiner should be aware that each person's handwriting contains a unique and identifiable combination of acquired individual "personal" characteristics and shared "class" characteristics. Which of the following is not an individual "personal" characteristic of a person's handwriting? a. A person may adopt the general handwriting style of a respected teacher or parent, or one shared by their peers. b. No person writes exactly the same way twice. Thus, each person's handwriting has his/her fairly specific range of natural variation. c. A person may intentionally change or conceal his/her normal writings in an attempt to prepare writings that can later be disclaimed or that s/he hopes will be anonymous and cannot be traced to the source. d. A person may unintentionally change his/her normal writings beyond the range of natural variation. This may be caused by temporary impairment due to illness, injury to the writing hand, substance abuse, and extreme physical weakness.
A
During an interview for information, an accounting fraud examiner should be aware of several types of nonverbal communication from the interviewee. Which of the following describes a "Chronemics" type of nonverbal communication1 a. An interviewee uses time in interpersonal relationships to convey meaning, attitudes, and desires. For example, if the interviewee is late in keeping an appointment. s/he conveys a lack of interest in or avoidance of the interview. b. An interviewee uses space in interpersonal relationships to convey meaning. For example, if the interviewee is free to back away, s/he would do so when the topic becomes unpleasant or sensitive. c. An interviewee uses body movement to convey meaning. For example, the interviewee who feels shame normally will drop the eyes to avoid the glance of other. d. An interviewee uses volume, pitch, and voice quality to convey meaning. For example, a "no" answer might not really mean no; it depends on the way in which the "no" is said.
A
During the cross-examination phase of a trial, which of the following is not an attempt at psychological control by an opposing lawyer? a. The opposing lawyer avoids nonstop eye contact with the expert witness. b. The opposing lawyer uses physical presence to intimidate the expert witness. c. The opposing lawyer asks questions at a fast pace to confuse the expert witness. d. The opposing lawyer does not allow the expert witness to explain or deviate from the exact question.
A
If a company is found liable for fraud, the Corporate Sentencing Guidelines of 1991 provides for four types of remedies: fines, restitution, remedial orders, and probation. Fines are based on two factors: the seriousness of the fraud and the level of culpability by the company. The seriousness of the offense determines the base fine to be imposed. What would be the base fine to be imposed given the following data: (a) The monetary loss suffered by the victim is $300,000. (b) The pecuniary gain received by the defendant is $200,000. (c) An amount of$100,000 as set forth in the Offense Level Scale Individual Guidelines. a. $300,000 b. $200,000 c. $100,000 d. None of the above.
A
Once a fraud examination has been completed, the evidence assembled, and the written report prepared, an accounting fraud examiner often is called upon to: a. testify before judicial authorities regarding the findings. b. conduct interviews of witnesses and related parties. c. recommend appropriate policies and procedures to prevent fraud. d. give audit opinions regarding fraud examination matters.
A
Once evidence has been obtained and the appropriate witnesses have been interviewed, an accounting fraud examiner is responsible for a. writing clear, accurate, and unbiased reports reflecting the fraud examination results. b. conducting interviews of witnesses and related parties. c. recommending appropriate policies and procedures to prevent fraud. d. giving opinions regarding fraud examination matters.
A
Pursuant to the Bank Secrecy Act (BSA) of 1970. the U.S. Treasury Department requires financial institutions to have a written BSA-compliance program that designates a compliance officer(s). Which of the following does not apply to the compliance officer(s)? a. The compliance officer(s) should not conduct regular and ad hoc audits of the compliance program. b. The compliance officer(s) should conduct day-to-day monitoring of the compliance program. c. The compliance officer(s) should develop and refine the compliance program. d. The compliance officer(s) should monitor the training of employees about the compliance program.
A
There are several common thefts of inventory schemes. Which of the following best describes the so-called "false shipment scheme"? a. In this scheme, the employee creates false shipping documents and false sales documents for the stolen inventory. Based on these false documents, the employee then creates a false packing slip that instructs the shipping department to release the inventory for delivery to the employee or an accomplice. b. In this scheme, the employee charged with receiving goods on behalf of the company falsifies the records of incoming shipments. c. In this scheme, the employee requisitions materials for some work-related project. and then uses internal transfer paperwork to gain access to the material and ships off the materials to himself/herself. d. In this scheme, the employee overstates the amount of supplies or equipment it will take to complete his/her work and then ships the excess to himself/herself.
A
Which of the following is not an unique characteristic of terrorist financing that is different from money laundering? a. Terrorist financing involves taking the proceeds of only serious organized crime rackets, such as drug trafficking and people smuggling. and creating the illusion that the person who uses that money has obtained it by legal and lawful means. b. Money intended for terrorist financing does not necessary arise out of crime. Money may be raised by people who earn it legally in ordinary jobs and who pay money to a cause in which they believe. c. "Clean" money intended for terrorist financing does not move around the financial system as "dirty" money does. The money does not need to make rapid movements between accounts. across borders, through a range of currencies, or into and out of assets. d. Conventional tools and techniques for detecting and preventing money laundering are of very limited use in the case of terrorist financing. This is because they focus on the origins of the money but not the state of mind of the terrorists who control them.
A
Which of the following is not nonverbal signs of lying that an accounting fraud examiner must watch for while interviewing the management for fraud? a. None-blinking eyes and none-averting eyes. b. Crossing arms and leaning forward. c. Slow response and long answer. d. Biting lip and tapping feet.
A
An accounting fraud examiner in the expert witness stand should be aware of the strategies employed by the opposing lawyer to discredit him/her or to diminish the importance of his/her testimony. One of these strategies is the so called "sounding board" strategy. Which of the following best describes the "sounding board" strategy? a. The opposing lawyer first chooses not to attack the expert witness and hence lulls him/her into a false sense of security. Then, the opposing lawyer finds a small hole in the evidence that quickly can be en larged. b. The opposing lawyer uses the expert witness to provide constant nonstop agreement to the questions asked in order to reacquaint the jury with the favorable aspects of the opposing lawyer's case. c. The opposing lawyer uses leading questions to force the expert witness into a contradictory position. Alternatively, the opposing lawyer establishes the credibility of a potentially contradicting document or quote from other artic les written by other experts. d. The opposing lawyer introduces new information that the expert witness might not be aware of to introduce confusion in the expert witness' mind in the hope that slhe might contradict himself/herself or develop a series of alternate scenarios to show that the existing report and opinions are no longer of value.
B
An accounting fraud examiner should be aware of the legal prohibition under the ECPA (Electronic Communications Privacy Act) of 1986 when conducting surveillance of an employee that involves interceptions of electronic communications. However, there are recognized exceptions to the ECPA's legal prohibition. Which one of the following is legally prohibited? a. The accounting fraud examiner is permitted to monitor an employee's emails that are stored in the electronic communications services and systems provided solely by the employer, and as long as the monitoring is done during the ordinary course of business. b. The accounting fraud examiner is permitted to monitor an employee's emails that are stored in the electronic communications services and systems provided by an outside provider such as AOL, and as long as the monitoring is done during the ordinary course of business. c. The accounting fraud examiner is permitted to monitor an employee's phone calls as long as the monitoring is done for legitimate business purposes. such as quality control, preventing business losses or employee fraud. d. The account fraud examiner is permit to install silent video surveillance in open area such as around cash registers or in public hallways where employees do not have a legitimate expectation of privacy.
B
An accounting fraud examiner should give careful consideration to the pre-trial preparation of his/her expert witness report. Which of the following is not true? a. The expert witness repon should avoid ambiguity or inexact language. b. The expert witness report should not be brief. c. The expert witness report should avoid generali zation and be specific. d. The expert witness report should add chans or graphs where appropriate.
B
In order to establish a global framework for anti-money-laundering efforts. the Financial Action Task Force on Money Laundering (FATF) issued "The Forty Recommendations" in 1990. Which of the following is not a basic obligation of "The Forty Recommendations" that countries need to implement? a. Criminalizing the laundering of the proceeds of serious crimes (Recommendation 4) and enacting measures to seize and confiscate the proceeds of crime (Recommendation 7). b. Pass national legislation that will allow financial institutions to confiscate all financial clients' records, including records of any beneficial owners of property (Recommendations 10 to 12). c. Requiring financial institutions to report suspicious transactions to the competent national authority (Recommendation 15) and to implement a comprehensive range of internal control measures (Recommendation 19). d. Establishing international treaties or agreements and to pass national legislation that will allow countries to provide prompt and effective international cooperation at all levels (Recommendations 32 to 40).
B
Section 302 of the Sarbanes-Oxley Act of 2002 requires that all periodic filings with the SEC must be accompanied by a statement in which the CEO and CFO provide "civil certifications" for certain items. Which of the following is not one of the certified items? a. The CEO and CFO have evaluated the company's internal controls within 90 days prior to the filings. b. The CEO and CFO have disclosed to the auditors and the audit committee only material fraud that involves management or other employees who have a significant role in the company's internal controls. c. The CEO and CFO are responsible for designing, maintaining, and evaluating the company's internal controls. d. The CEO and CFO have indicated in the filings whether there have been significant changes in the company's internal controls.
B
Situations in which undercover operations work well do not include a. When there is reliable information about fraud or theft of asset, but insufficient detail for prevention or apprehension. b. When theft of asset is known to be occurring in an area, and there is information as to how they are occurring or who is responsible. c. When it is desirable to gather information concerning personal relationships or to identify the contacts made with or by certain suspects. d. When it is desirable to compare actual practices with supposed or required practices of the suspects.
B
The Sarbanes-Oxley Act of 2002 contains certain fraud prevention provisions by which fraud can be reported (the whistleblower protection). Which of the following is not one of the fraud prevention provisions? a. Section 806 of the Sarbanes-Oxley Act of 2002 creates civil liability for public companies that retaliate against employees who provide information or assist in the investigation of securities fraud. b. Section 404 of the Sarbanes-Oxley Act of2002 requires a company's CEO to report any retaliation against employees who provide information or assist in the investigation of securities fraud. c. Section 301 of the Sarbanes-Oxley Act of2002 requires audit committees to establish mechanisms for receiving complaints about irregularities in a company's accounting, auditing, or internal control systems. d. Section 1107 of the Act makes it a crime for public companies to retaliate against employees who provide information or assist in the investigation of securities fraud.
B
The prevention of billing fraud is difficult because the purchasing personnel often have the sole authority to conduct all the purchasing related activities. Which of the following is the most effective way of preventing billing fraud? a. Employees responsible for the purchasing decisions should be paid well enough to reduce the motive and rationalization for billing fraud. b. Employees responsible for the purchasing decisions should be educated well in ethics. c. Segregation of duties between the purchasing function and the payment function. d. Large or unusual purchases should be approved by an employee independent of the purchasing department
B
Which of the following is not true regarding the procedures for collecting photocopies samples? a. Without placing any document in the photocopy machine, make six " blank" copies. As the machine produces each "copy," remove it, turn it over and on the reverse side initial and number each in the same sequence they are produced by the photocopy machine. b. Place fingerprint powder on the glass document surface of the photocopy machine, close the cover, and make six copies to determine the standard amount of reduction or enlargement the photocopy machine makes when in the 1: 1 mode. c. Place the sample document on the glass document surface of the photocopy machine in the standard position, close the cover, and make six copies. As the machine produces each "copy," remove it, tum it over and on the reverse side initial and number each in the same sequence they are produced by the photocopy machine. d. Place all of the sample copies and sample documents into a large sturdy paper or cardboard envelope on which write the make, model, and location of the photocopy machine. Initial, date, and seal the envelope for later examination.
B
Which of the following is true when an accounting fraud examiner is collecting an un-dictated handwriting sample? a. Obtain one handwriting sample at a time on a separate sheet of papers. b. Obtain as contemporaneous as possible a handwriting sample to the date of the preparation of the evidence documents. c. Help the suspect to relax by starting with innocuous text such as his/her name and the date. d. Be alert for very rapid or slow handwriting in an attempt to disguise normal handwritings.
B
Which of the following statements best describes the vertical analysis in detecting financial statement fraud? a. For an account balance in a financial statement, the analysis starts with a base year, and each successive year for the account balance is compared with the base year. Any significant changes in the account balance from period to period is investigated to determine the reason for the change. b. The analysis calculates every account balance in a financial statement as a percentage of the largest account balance in the financial statement. Any significant changes in the account balances in the financial statement from period to period is compared to determine the reason for the change. c. The analysis calculates specific ratios for two or more successive years and converts them into indexes for comparison between manipulator and non-manipulator. d. The analysis calculates some common ratios to provide red flags.
B
Which of the following will not help the management in preventing financial statement fraud? a. Eliminate external pressures that might tempt accounting personnel to prepare fraudulent financial statements. b. Promote and strengthen related party transactions in the accounting function area. c. Establish a physical security system to secure company assets, including finished goods, cash, capital equipment, tools and other valuable items. d. Define clearly the company's accounting policies concerning any gray areas in accounting procedures.
B
According to the SEC's Staff Accounting Bulletin No. 10 I (SAB I 01), Revenue Recognition in Financial Statements, revenue generally is not recognized when a. delivery has occurred or services have been rendered. b. the seller's price to the buyer is fixed or determinable. c. collection is contingent upon some future events. d. persuasive evidence of an arrangement exists.
C
According to the SEC's Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial Statements, revenue generally is not recognized when a. delivery has occurred or services have been rendered. b. the seller's price to the buyer is fixed or determinable. c. the customer refuses to pay. d. persuasive evidence of an arrangement exists.
C
Accounting fraud examiners often called upon as expert wi tnesses to provide testimony in criminal and civil trials. In the witness box, an accounting fraud examiner should strive to be a credible witness by a. trying to be humorous or hip in answering question. b. staring off into space, at the tloor, or at the ceiling. c. looking directly at the question asked by the judge. jury, or attorneys. d. using professional jargon in answering question.
C
In 2004. recognizing the vital importance of taking action to combat terrorist financing, the Financial Action Task Force on Money Laundering (FATF) issued "The Nine Special Recommendations" on anti-terrorist financing. Which of the following is not one of the nine special recommendations on anti-terrorist financing? a. Each country should implement measures to freeze without delay funds or other assets of terrorists, those who finance terrorism and terrorist organizations in accordance with the United Nations resolutions relating to the prevention and suppression of the financing of terrorist acts. b. Each country should afford another country, on the basis of a treaty, arrangement or other mechanism for mutual legal assistance or information exchange. the greatest possible measure of assistance in connection with criminal, civil enforcement, and administrative investigations. inquiries and proceedings relating to the financing of terrorism, terrorist acts and terrorist organizations. c. Each country should take measures to require financial institutions. including money remitters, to include only the name of the originator on funds transfers and related messages that are sent. and only the name of the originator should remain with the transfer or related message through the payment chain. d. Each country should have measures in place to detect the physical cross-border transportation of currency and bearer negotiable instruments. including a declaration system or other disclosure obligation.
C
Money laundering is the disguising of the existence, nature, source, ownership, location, and disposition of property derived from criminal activity. The "washing" of money includes all forms of illegal activities and involves three typical steps. Which of the following is not one of the three typical steps? a. Placement of funds into a financial institution. b. Layering of a complex pattern of financial transactions in order to disguise the source of the money and to confuse the audit trail. c. Establishing ties with the ethnic base of a particular criminal group or with industries that have traditionally served as a base for criminal activity. d. Integration of the money back into the economy in such a way as to make it appear to be a legitimate business transaction.
C
One of the five components of internal control identi tied by the Committee of Sponsoring Organizations (COSO) is "Control environment." A proper control environment should not a. establish a code of ethics for the company. b. screen new job applicants. c. establish a non-defined set disciplinary measures. d. assign proper authority and responsibility.
C
One of the five components of internal control identified by the Committee of Sponsoring Organizations (COSO) is "Monitoring." Who is ultimately responsible for monitoring the quality of a control environment over time? a. Accounting fraud examiner. b. External auditor. c. Company Management. d. Internal auditor.
C
Section 302 of the Sarbanes-Oxley Act of 2002 requires the CEO and CFO to certify their quarterly and annual reports filed with the SEC that a. the reports do not contain any material misstatements that would render the financials misleading. b. the reports state the external auditor's responsibility for establishing and maintaining an adequate internal control structure and procedures for financial reporting c. to their knowledge the reports do not contain any material misstatements that would render the financials misleading. d. they have evaluated the controls within 60 days prior to the reports, and they have presented their conclusions about the effectiveness of those controls in the reports
C
Section 407 of the Sarbanes-Oxley Act of 2002 requires that the audit committee has at least one member who is a "financial expert." TI1e Act defines s "financial expert" as a person who, through education and experience as a public accountant or auditor, or a CFO, comptroller. chief financial officer or a similar position, has the following characteristics except: a. an understanding of generally accepted accounting principles (GAAP) and financial statements. b. experience in preparing or auditing financial statements of comparable companies and the application of such principles in accounting for estimates. accruals, and reserves. c. experience with fraud investigation. d. an understanding of audit committee functions.
C
The Corporate Sentencing Guidelines of 1991 suggests several steps to design, implement, and enforce an effective program to prevent fraud. One of the steps is that a company should use due care not to delegate substantial discretionary authority to individuals whom the company knew, or should have known through the exercise of due diligence, had a propensity to engage in fraudulent activities. This requires: I. careful screening of all applicants . II. thorough background checks on all applicants. Ill. effective monitoring of the performance of current employees. a. Ill. b. II and Ill. c. I, II , and Ill. d. I and Ill.
C
When examining documentary evidence, an accounting fraud examiner should be aware of several types of fabricated documents. Which of the following describes a so-called "alibi" document? a. A new will documents suddenly appears to supersede all other wills. It often leaves large portions of the estate to the person who found the new will documents. b. A phony historical document such as a faked handwritten rough draft of the U.S. Declaration of Independence. c. A document suddenly appears "from out of nowhere" and often late in the course of an investigation, inquiry, or trial. d. A fake collectible document such as a counterfeited rare baseball card.
C
Which of the following establishes that securities broker-dealers are required to file suspicious activity reports (SAR)? a. The anti-money laundering provisions under Title I of the BSA of 1970. b. The anti-whistle-blower provisions under Section 806 of the Sarbanes-Oxley Act of 2002. c. The anti-money laundering provisions under Title Ill of the USA Patriot Act of 2001. d. The anti-insider trading provisions under Regulation Fair Disclosure Rules of2003 promulgated by the SEC.
C
Which of the following is nor a common law protection in connection to an employee interviewed by an accounting fraud examiner for suspected asset misappropriation fraud? a. Intrusion into seclusion, for example. question an employee about activities not related to job performance. b. Public disclosure of private facts, for example. give unreasonable publicity to true, but private, information about an employee. c. Imprisonment, for example, an employee is detained for interview with consent and legal justification. d. Defamation. for example, make unfounded accusations where someone in addition to the employee and the accounting fraud examiner is present during the interview.
C
Which of the following is not a method used by an employee to avoid detection of cash larceny from the register? a. The employee alters the register tape to force a balance between the cash on hand and the actual cash received. b. The employee processes reversing transactions, such as false voids or refunds, which causes the register tape to reconcile to the amount of cash on hand alter the theft. c. When cash from a register is totaled and prepared for deposit. the employee records the correct amount of cash count so that the cash on hand appears to balance with the total on the register tape. d. The employee destroys register tapes that would implicate him/her of the cash larceny.
C
Which of the following is not a true statement about auditing and accounting fraud examination? a. Auditors are required to approach audits with professional skepticism whereas accounting fraud examiners are required to approach fraud examination with sufficient proof to support or refute an al legation of fraud . b. The audit process is non-adversarial in nature whereas the accounting fraud examination process is adversarial in nature because it involves efforts to affix blame. c. The scope of an audit is specific whereas the scope of a fraud examination is general. d. Audits are usually conducted based on an annual engagement whereas accounting fraud examinations are usually conducted on a sufficient predication
C
Which of the following is not a way to prevent cash larceny? a. Segregation of duty, for example. segregate duties between cash receipts and bank deposits. b. Job rotation and mandatory vacation. for example, during an employee's absence, his/her normal workload should be performed by another employee rather than remain undone. c. Adequate security procedures for cash. for example, periodic review of unfavorable expenditure trends. d. Surprise cash counts, for example, adhere to a communicated policy that cash will be counted on a sporadic and unscheduled basis.
C
Which of the following should an accounting fraud examiner not do when interviewing the management of a company? a. Ask questions instead of making accusations. b. Ask tough but not offending questions. c. Ask sensitive questions at the beginning of the interview. d. Phrase tough question hypothetically.
C
Which of the following should an accounting fraud examiner not do when interviewing the management of a company? a. Ask questions instead of making accusations. b. Ask tough but not offending questions. c. End an interview with non-threatening questions. d. Phrase tough questions hypothetically.
C
Which of the following statements about the prevention of fraud is not true? a. The management is primarily responsible for the prevention of fraud. b. The accounting fraud examiner is expected to assist the management in the prevention of fraud. c. The internal and external auditors are primarily responsible for the prevention of fraud. d. The accounting fraud examiner is expected to recommend appropriate policies and procedures to prevent fraud.
C
An accounting fraud examiner should be aware of an employee's right to privacy (Fourth Amendment) when conducting a search for evidence. However. there are recognized exceptions to the Fourth Amendment's legal protection. Which one of the following is not an exception? a. Government employers (public accounting fraud examiners) arc not generally required to obtain a warrant when they conduct searches of government employees for workplace fraud. but the search must be justified in its inception. b. When the public accounting fraud examiners' search is conducted pursuant to a valid, voluntary consent; that is, when the government employees waive their Fourth Amendment rights. c. When the evidence is in "plain view" of the public fraud examiners' search. For example, when evidence of another government-employee-fraud is inadvertently discovered during a search of a particular government-employee-fraud. d. Government employers (public accounting fraud examiners) are not generally required to obtain a warrant when they conduct searches of government employees for workplace fraud, but the search must be conducted in a way that is entirely not related in scope to the circumstances which justified the interference in the first place.
D
During the direct exam ination phase of a trial, an accounting fraud examiner, who testifies as an exper1 witness should a. not use articles, academic papers, professional texts, and consultations in rendering his/her opinion of the ca>e. b. not demonstrate his/her findings by using hypotheticals: fictional situations and analogous to the act in question. c. not recount the narrative background of a case, the tests and experiments that were performed during the investigation, and a summary of the findings. d. use special exhibits, such as charts, diagrams, annotated documents or photos to demonstrate facts about the case or some aspect of his/her opinion.
D
There are many red flags for detecting money laundering. Which of the following is not a red flag for detecting money laundering? a. Large purchase of a lump sum investment. b. Use of a third-party check to make a purchase or investment. c. Lump sum payments of an investment made by wire transfer or with foreign currency. d. Lack of concern for the early cancellation of an investment.
D
To be an effective interviewer, the accounting fraud examiner should understand the facilitators and inhibitors of communication. Which one of the following combinations is not a facilitator of communication? a. Altruistic appeals and new experience. b. Catharsis and recognition. c. Fulfilling expectat ions and sympathetic understanding. d. Loss of status and etiquette barrier.
D
To be an effective interviewer, the accounting fraud examiner should understand the facilitators and inhibitors of communication. Which one of the following combinations is not an inhibitor of communication? a. Forgetting and trauma. b. Ego threat and chronological confusion. c. Time pressure and etiquette barrier. d. Catharsis and recognition.
D
To prevent check tampering fraud, an accounting fraud examiner looks for a check integrity control of"micro line printing" that a. are extremely small images on the check in high resolution that is 2400 dots per inch or higher. b. has the word VOID printed on the check when it is photocopied. c. are small numbers printed on the check that will show up by a bright light held behind the check. d. are extremely small prints that become distorted when the check is photocopied.
D
Which of the following does not apply to the audit committee under the Sarbanes-Oxley Act of 2002? a. The audit committee is responsible for hiring, paying, and overseeing the work of the company's external auditors. b. The audit committee is responsible for establishing procedures for receiving and dealing with complaints and anonymous employee tips regarding fraud. c. At least one member of the audit committee is a financial expert. d. The audit committee reports to the external auditors any alternative accounting treatments within the GAAP that have been discussed with management.
D
Which of the following is least likely used in detecting financial statement fraud? a. Interview management. b. Apply analytical procedures. c. Use a fraud check list. d. Establish mobile surveillance.
D
Which of the following is not a recommendation of the National Commission on Fraudulent Financial Reporting (also known as the Treadway Commission) on fraud prevention? a. A mandatory independent audit committee made up of outside directors. b. A written charter which sets f011h the duties and responsibilities of the audit committee. c. The audit committee should have adequate resources and authorities to carry out its responsibilities. d. The audit committee should participate passively in fraud prevention.
D
Which of the following is not a true statement concerning a company's responsibility for fraud by its employees? a. A company is legally liable for fraud by its employees if those acts are done in the course and scope of their employment. b. A company is legally liable for fraud by its employees if those acts are done for the ostensible purpose of benefiting the company. c. A company is legally liable for fraud by its employees if the employees have actual or apparent authority to engage in those acts. d. A company is legally liable for fraud by its employees if the employees have no intention to benefit the company by engaging in those acts.
D
Which of the following is not a true statement concerning management's responsibility for fraud prevention? a. The legal doctrine of accountability suggests that if the management is aware of recurring fraud, it has the obligation to halt and prevent the fraud from recurring. b. The corporate sentencing guidelines provide heavy penalties for companies that fail to take voluntary action to redress apparent fraud by management. c. The Private Litigation Securities Refonn Act of 1955 holds the management legally liable for not responding to indication of fraud. d. The Racketeer Influenced and Corrupt Organization Act of 1970 (RICO) makes it legal for corrupt management to engage in a pattern of racketeering activity in a legitimate business.
D
Which of the following is not a way to detect check tempering? a. Bank reconciliations, for example, examine canceled checks and compare to the list of outstanding checks. b. Bank confirmation. for example. request a bank confirmation statement to confirm the balances of all accounts held in a bank as of the date of requested. c. Watch for red flags, for example. altered endorsements or dual endorsements of canceled checks. d. Bank cut-off statement analysis, for example. analyze a bank cut-off statement from the bank for 60 days after the accounting closing date in a particular month.
D
Which of the following is not an effective characteristic of an accounting fraud examiner? a. An accounting fraud examiner must be able to deal with people in a fair, impartial, lawful, and accurate manner. b. An accounti ng fraud examiner must be able to understand, simplify, and draw inferences from financial information. c. An accounting fraud examiner must be able to establish rappen with strangers. d. An accounting fraud examiner must be able to appreciate works of art.
D
Which of the following is not true regarding audio and/or video recording in an undercover operation? a. It is usually illegal to audio record conversations with eavesdropping devices. b. It is usually legal to video record a person in a public place if the video record is not to be used for commercial purposes. c. It is usually illegal to video record a person in a public place if the person has a "reasonable expectation" of privacy in such a place. d. In most jurisdictions, if an undercover operative or a witness is used to record telephone conversations, no written consent is required.
D
Which of the following is unlikely a red flag to a financial statement fraud that involves concealing liabilities and expenses? a. Recurring negative cash flows from operations or an inability to generate cash nows from operations. b. Unusual increase in gross margin or margin in excess of industry peers. c. Allowances for sales returns or warranty claims that are shrinking in percentage terms or are out of line with industry peers. d. Unusual growth in the number of days in accounts receivable turnover.
D
Which of the following will not help the management in preventing financial statement fraud? a. Remove operational obstacles that block effective financial performance such as working capital restraints, excess production volume, or inventory restrains. b. Monitor the business transactions and interpersonal relationships of suppliers, buyers, purchasing agents, sales representatives and others who interact in the transactions between financial units. c. Define the company's policies concerning honest and dishonest behavior among employees in the accounting function area. d. Set unachievable financial goals.
D
