Modules 8-15: Quiz Questions

Which of the following is not a method of honesty testing? - graphology - voice stress analysis - body language test - pencil-and-paper test

Body-language test.

What are the four types of corruption?

- Conflict of interest - Bribery - Illegal gratuities - Extortion

Why is data a target for theft in the e-commerce environment?

- Data can be converted to cash in another market - Information is replicable - Data can be transferred quickly and easily - Many managers lack technological expertise to prevent and detect data theft

Every criminal case involves what seven basic states?

- Filing criminal charges - Arresting and charging the defendant - Preliminary hearings - Arraignment - Discovery - Pretrial motions - Trial and appeal

Inventory related financial statement fraud schemes are a result of manipulating which accounts?

- Inventory - Accounts Payable - Cash - Cost of Goods Sold - Inventory Shrinkage

Every civil case involves what four basic states?

- Investigation and pleadings - Discovery - Motion practice and negotiation - Trial and appeal

What are the four elements of the fraud exposure rectangle?

- Management and the board of directors - Relationships with other entities - Relationships between the organization and the related industry - Financial results and operating characteristics

What are the three ways disclosure fraud can be categorized into?

- Misrepresentation about the overall nature of the company or its products - Misrepresentations in the MD&A and other non financial information in the financial reports - Misleading footnote disclosures

"Wartrapping" is: - using a key to "lock" a message and another key to "unlock" it - a signature sent over the internet - a "free" internet access point set up by hackers and used to steal passwords and other important information - illegal or unauthorized viewing of information as it passes along a network communication channel.

A "free" internet access point set up by hackers and used to steal passwords and other important information

Many indicators of fraud are circumstantial; that is, they can be caused by non-fraud factors. This fact can make convicting someone of fraud difficult. Which of the following types of evidence would be most helpful in proving that someone committed fraud? - missing documentation - a repeated pattern of similar fraudulent acts - analytical relationships that don't make sense - a general ledger that is out of balance

A repeated pattern of similar fraudulent acts

Which of the following ratios would not generally be used to look for inventory and COGS related frauds? - Accounts payable turnover - Gross profit margin - Inventory turnover - Number of days' sales in inventory

Accounts payable turnover

When looking for financial statement fraud, auditors should look for indicators of fraud by... - examining financial statements - evaluating changes in financial statements - examining relationship the company has with other parties - all of answers choices given are true.

All of answers choices given are true.

Proactively searching for analytical symptoms related to financial statement fraud means that we are looking for accounts that appear... - too low - too high - unusual - all of the answers.

All of the answers

Which of the following is not a way to under-record liabilities? - borrowing but not disclosing debt incurred on existing lines of credit - claiming that existing debt has been forgiven by creditors - not recording loans incurred - all of the answers given are ways to under-record liabilities

All of the answers given are ways to under-record liabilities

Which of the following is an indicator of possible hiding of assets in a divorce? - assets transferred to an off-site location - changing the title to assets - payments made to fictitious individuals - all of the answers shown are indicators of possible hiding of assets

All of the answers shown are indicators of possible hiding of assets

Confrontational interviews should usually be conducted when... - police decide that the suspect is guilty - the examiner is starting the investigation - all other investigative procedures have been completed - the investigation is taking too long.

All other investigative procedures have been completed.

Which of the following is among the do's and don'ts" suggested in the text for expert witnesses during a deposition or trial? - Answer questions honestly and convincingly. - Memorize answers to questions you expect to be asked in order to minimize the chances for mistakes. - Bluffing is often a good strategy if you are not sure of an answer since an expert should be well-versed in most topics posed to him/her. - Respond to statements, observations, and questions.

Answer questions honestly and convincingly.

Bankruptcy courts do not have which of the following responsibilities? - appointing trustees, examiners, and committees - supervising bankruptcy petitions - approving reorganization plans - conducting hearings and trials to resolve disputes

Appointing trustees, examiners, and committees

Fraud investigators can assist in a case in are of the following ways except... - by investigating the fraud - by preparing questions to ask opposing witnesses during depositions - by evaluating whether documents produced by the opposing side satisfy a production request - by assisting in the preparation of a production request because of their knowledge of a case.

By investigating the fraud.

Of the following, the most difficult account for management to intentionally misstate is... - Cash - Income Taxes Payable - Securities - Prepaid Expenses

Cash

Comparing recorded amounts in the financial statements with the real-world assets they are supposed to represent would be most effective in detecting... - cash and inventory fraud - accounts payable fraud - revenue-related fraud - accounts receivable fraud.

Cash and inventory fraud

Overstating cash is usually difficult because... - cash balances can be easily confirmed with banks and other financial institutions - cash is hard steal - cash is normally not a fraudulent account - cash is usually a small asset.

Cash balances can be easily confirmed with banks and other financial institutions

Which of the following is not one of the most common billing schemes? - setting up dummy companies to submit invoices to the victim organization - changing the quantity or price on an invoice to favor a customer - altering or double-paying non-accomplice vendor's statements - making personal purchases with company funds

Changing the quantity or price on an invoice to favor a customer

Primarily occurring at the end of the year in an attempt to inflate sales, the practice of shipping more items to distributors than they can sell in a reasonable time period is known as... - lapping - channel stuffing - bill-and-hold transactions - consignment sales.

Channel Stuffing

At the arraignment... - charges against the defendant are read - the defendant must plead "nolo contendere" or post bail - the grand jury hears evidence of wrongdoing - depositions are performed on all major witnesses.

Charges against the defendant are read.

Which of the following statements is true? - Most fraud cases are tried in federal courts. - Civil cases can be heard by judges or juries consisting of at least six jurors. - State courts hear bankruptcy cases. - Parties in a civil case cannot negotiate a settlement during the litigation process.

Civil cases can be heard by judges or juries consisting of at least six jurors.

All of the following ratios are useful in detecting large revenue frauds except... - gross profit margin - current ratio - working capital turnover - accounts receivable turnover.

Current ratio

What are the sequences of reactions towards a perpetrator of fraud?

Denial, Anger, Rationalization, Depression, and Acceptance.

Which of the following reactions frequently involves appearing temporarily stunned, insisting there is some mistake, or not comprehending what has been said? - anger - rationalization - denial - depression

Denial.

The discovery stage of a civil case includes... - the filing of a counterclaim by the defendant - depositions and subpoenas - the defendant requesting, and receiving, a jury trial - all of the choices are true of the discovery stage of a civil case.

Depositions and subpoenas.

The Criminal Investigation division's chief responsibility is to... - detect taxpayers who willfully and intentionally violate their known legal duty of voluntarily filing an income tax return - check the accuracy of tax returns - detect fraud in public corporations' tax filings - detect fraud in U.S. citizens' tax filings.

Detect taxpayers who willfully and intentionally violate their known legal duty of voluntarily filing an income tax return

Which of the following types of controls is least often used to protect IT processing equipment? - physical controls - authorization controls - independent checks or reference - documents and records

Documents and records

The person appointed by a bankruptcy judge in a Chapter 11 proceeding who investigates allegations of fraud or misconduct by the debtor or its principals is a(n)... - creditor - adjuster - auditor - examiner

Examiner

Horizontal Analysis is a method that... - examines financial statement numbers form period to period - examines percent changes in account balances from period to period - examines transactions from period to period - none of the answers provided are correct.

Examines percent changes in account balances from period to period

Financial statement fraud is usually committed by which of the following... - executives - managers - outsiders

Executives AND Managers

Concealment of assets typically occurs on a larger scale for individuals filing for bankruptcy protection than it does for businesses filing for protection. True or False?

False

Most email users understand the importance of encrypted email messages and use one of the easily accessible encryption protocols for their emails. True or False?

False

The purpose of civil laws is to "right a wrong" or send someone to jail or have them pay fines, whereas the purpose of criminal laws is to seek monetary remedies or recover stolen funds. True or False?

False

The theft of money is the primary goal in an electronic environment. True or False?

False

E-business presents unique pressures and opportunities for fraud including... - proven business models that generate cash flows - extensive personal contact which increases customer satisfaction with the purchase - heightened privacy due to the ability to conduct business from home or office - lack of "brick-and-mortar" and other physical facilities.

Lack of "brick-and-mortar" and other physical facilities.

Which of the following is not one of the common stages of a criminal case? - filing a criminal charge - filing a complaint - discovery - trial and appeal

Filing a complaint.

Which of the following honesty testing techniques deals with the study of handwriting for the purpose of character analysis? - Polygraph - Graphology - Paper and Pencil Test - Voice Stress

Graphology

What does "https" stand for? - hypertext transfer protocol (secure) - hypertext transfer point (sight) - hypertext transfer protocol (system) - hypertext transfer protocol (sign)

Hypertext transfer protocol (secure)

Recording fictitious receivables will usually result in... - Sales return percentage that remains constant - Increased sales discount percentage - Increase in accounts receivable turnover - Increase in the number of days in receivables

Increase in the number of days in receivables

Which of the following is not a good thing to do during an interview? - conduct the interview in private - establish the purpose of the interview - interview more than one person at once - do not invade body space

Interview more than one person at once.

A Trojan Horse... - sends email or pop-up messages to users asking for personal information in inventive ways - is a program that claims to do something useful, but which also contains hidden behavior - changes information in an email header or an IP address to hide identities - all of the choices are true regarding Trojan horses.

Is a program that claims to do something useful, but which also contains hidden behavior

Overstating ending inventory tend to be the most common type of manipulation because...

It makes the income statement and balance sheet look good because of the impact on COGS as well as inventory count.

Which of the following is not a positive effect on the financial statements due to recognizing something as a revenue instead of as a liability? - it understates liabilities - it overstates revenues - it overstates net income - it overstates assets

It overstates assets

Recognizing something as a revenue instead of as a liability has a positive effect on the reported financial statements because...

It understates liabilities, overstates revenues, and overstates net income.

Planning for interviews should not involve... - judging the guilt of the suspect based on available documents - establishing a location and time for the interview - ascertaining in advance as many facts as possible about the offense - understanding the attitude of the interviewee.

Judging the guilt of the suspect based on available documents.

Which of the following is a major difference between larceny and skimming? - Larceny is committed after the cash is entered into the accounting system, while skimming is committed before the cash is entered into the system. - Larceny is committed before the cash is entered into the accounting system, while skimming is committed after the cash is entered into the system. - Larceny involves fraudulent disbursements of cash, while skimming involves fraudulent receipts of cash. - Larceny involves fraudulent receipts of cash, while skimming involves fraudulent disbursements of cash.

Larceny is committed after the cash is entered into the accounting system, while skimming is committed before the cash is entered into the system.

All of the following are indicators of financial statement fraud except... - unusually rapid growth of profitability - threat of a hostile takeover - dependence on one or two products - large amounts of available cash.

Large amounts of available cash

The Fourth Amendment requires that probable cause exist before a defendant is arrested or searched. Which of the following levels of evidence is necessary to show probable cause? - less than certainty, but more than speculation or suspicion - speculation or suspicion - beyond a reasonable doubt - preponderance of the evidence

Less than certainty, but more than speculation or suspicion.

What is one way to determine if a website is secure or not? - look for the official logo of the company you want to deal with - look for an "s" after the "http" in the URL of the Web site - click on a link to see if it works - call the FTC and ask about the ISP address of the Web site

Look for an "s" after the "http" in the URL of the Web site

Which of the following is a characteristic of a good interview? - make the interview as concise as possible - the interviewer should announce his or her bias at the outset, because the interviewee will cooperate better when the interviewee knows the type of information the interviewer is seeking - friendly interviewees appear very helpful, but they may have hidden motives and may provide bad information - it is important to schedule interviews ahead of time, especially if you are planning to interview a potentially hostile interviewee

Make the interview as concise as possible.

Most financial statement frauds occur in smaller organizations with simple management structures, rather than in large, historically profitable organizations. This is because... - it is easier to implement good internal controls in a small organization - smaller organizations do not have investors - management fraud is more difficult to commit when there is a more formal organizational structure of management - people in large organizations are more honest.

Management fraud is more difficult to commit when there is a more formal organizational structure of management

Information questions are designed to... - Establish the interview theme - Establish rapport - Assess culpability - None of the above

None of the above.

The most common fraud involving car companies and the warranties they offer would most likely be... - understating accrued liabilities - recognizing unearned revenue - not recording or under-recording future obligations - not recording or under-recording various types of debt.

Not recording or under-recording future obligations

The Gram-Leach-Bliley Act gives you the right to... - opt out of having your personal information sold to organizations - receive a yearly stipend to cover the losses incurred as a victim of identity fraud - claim your high credit report although an identity fraudster has damaged it severely - sue the perpetrator for more money than he or she defrauded from you.

Opt out of having your personal information sold to organizations

Which of the following is not a type of transaction that can create liabilities for a company? - purchasing inventory - borrowing money - selling purchased goods - paying a loan

Paying a loan

Which of the following is not a way that individuals can commit tax fraud? - overstating the amount of deductions - keeping two sets of books - paying the least amount of taxes the individual owes - making false entries in books and records

Paying the least amount of taxes the individual owes

Which of the following is not listed in the chapter as a common characteristic of Nigerian scam letters? - the promise of money to lure victims - urgency to invest quickly - picture of perpetrator to assure victims - strong ties to high-ranking foreign officials to lure victims

Picture of perpetrator to assure victims

Which of the following is true of both civil and criminal law? - a plaintiff must prove the "preponderance of the evidence" to be successful - juries may have between 6-12 jurors - plaintiffs and defendants may call expert witnesses - all of the choices are true of both civil and criminal law

Plaintiffs and defendants may call expert witnesses.

Which of the following is the least likely symptom of a bust-out? - company's only listed address is a post office box - dramatic increase in size of credit orders - public notice of change in management - sudden decrease in inventory

Public notice of change in management

Which of the following types of disbursement fraud occurs least frequently? - expense tampering - payroll schemes - register disbursement schemes - billing schemes

Register disbursement schemes

Which of the following is not an inventory-related documentary symptom? - duplicate purchase orders - missing inventory during inventory counts - unsupported inventory sales transactions - reported inventory balances that are increasing too fast

Reported inventory balances that are increasing too fast

The asset turnover ratio measures... - the average time an asset is used by the company - the average useful life of capital assets - sales that are generated with each dollar of the assets - assets that are purchased with each dollar of sales.

Sales that are generated with each dollar of the assets

Which of the following is least likely to be considered a financial reporting fraud symptom or red flag? - gray directors - family relationships between directors or officers - large increases in accounts receivable with no increase in sales - size of the firm

Size of the firm

Which of the following is not one of the ACFE's types of fraudulent disbursement? - check-tampering schemes - skimming disbursement schemes - expense schemes - register disbursement schemes

Skimming disbursement schemes

What is the most important factor in control effectiveness? - clear policies regarding controls - an understanding of e-business networks - the use of random monitoring - the "tone at the top"

The "tone at the top"

Which of the following fraud risks involves changing IP addresses? - spoofing - sniffing - false web sites - customer impersonation

Spoofing

In order to analyze financial statements for fraud, an auditor or fraud examiner should consider all of the following except... - the types of accounts that should be included in the financial statements - the types of fraud to which the company is susceptible - the nature of the company's business and industry - the auditor should consider all of the answers given.

The auditor should consider all of the answers given

Which of the following is not true of billing schemes? - the perpetrator takes physical possession of his or her employer's cash - the perpetrator often sets up a "dummy" company - it is one of the most commonly committed disbursement schemes - it usually involves dealing with the victim organization's purchasing department

The perpetrator takes physical possession of his or her employer's cash

Interviewing as discussed in the textbook is... - the systematic questioning of individuals who have knowledge of events, people, and evidence involved in a case under investigation - the process of answering questions from an interviewer for the purpose of finding a job - by far the least common technique used in investigation and resolving fraud - similar to ordinary conversation.

The systematic questioning of individuals who have knowledge of events, people, and evidence involved in a case under investigation.

The three aspects of management that a fraud examiner needs to be aware of include all of the following except... - their backgrounds - their religious convictions - their motivations - their influence in making decisions for the organization.

Their religious convictions

The educator failures element of the perfect fraud storm includes all of the following except... - educators not teaching students about fraud - educators not providing sufficient ethics training to students - too few educators with the CFE credentials - the way educators have taught accounting failed to instill analytical skills in students.

Too few educators with the CFE credentials

A common motion filed in criminal trials is a request to suppress evidence that was illegally obtained. True or False?

True

A person acting as an officer in a bankruptcy case is prohibited from purchasing any property of the debtor's estate. True or False?

True

Controls over inventory should be closely examined when searching for fraud symptoms. True or False?

True

Michael "Mickey" Monus and Patrick Finn of Phar-Mor used three methods of income statement fraud: account manipulation, overstatement of inventory, and accounting rules manipulations. True or False?

True

Segregation of duties is an important control in preventing e-business fraud. True or False?

True

Two reasons revenue-related financial statement fraud is so prevalent are because revenue recognition can be highly subjective and because revenue is so easily manipulated. True or False?

True

Understatement of liability fraud is usually more difficult to find than overstatement of asset fraud. True or False?

True

Without a confession, forged documents, or repeated fraudulent acts that establish a pattern of dishonesty, convicting someone of fraud is often difficult. True or False?

True

Which of the following depicts the correct progression of a case through the federal court system? - Supreme Court - Circuit Court of Appeals (one of twelve) - U.S. District Court

U.S. District Court -> Circuit Court of Appeals (1 of 12) -> Supreme Court

When examining whether a company has under-recorded accounts payable, each of the following rations is helpful except... - Acid-test ratio - Accounts payable/Purchases - Accounts payable/Cost of goods sold - Unearned revenue/Accounts payable

Unearned revenue/Accounts payable

Each of the following is a clue that an interviewee is dishonest except... - In order to add credibility to false statements, liars request that the interviewer obtain character testimony from other people. - Liars often refuse to implicate possible suspects - or, in other words, honest people are more willing to name others involved in misdeeds. - Upon repeated accusations, a dishonest person's denials become more vehement. - Dishonest people frequently cover their mouths with their hands or fingers during deception.

Upon repeated accusations, a dishonest person's denials become more vehement.

Biometrics is... - use unique features of the human body to create secure access controls - include a signature sent over the internet - use "Security through Obscurity" to prevent unauthorized access to networks - include Trojan horses, cross site scripting (CSS), and database query (SQL) injections.

Use unique features of the human body to create secure access controls

Phishing is the method of... - using e-mail or other Internet applications to deceive people into disclosing valuable personal information - convincing a person to divulge personal information over the telephone - hacking into another's computer files to access personal information - hiring a con artist to steal personal information from a person.

Using e-mail or other Internet applications to deceive people into disclosing valuable personal information

People in the rationalization stage of reaction to a fraud... - make great interviewees because they want to punish the suspect - want to give the suspect one more chance - believe without a doubt that the suspect is guilty - have no sympathy for the suspect.

Want to give the suspect one more chance.

Which of the following is a possible scheme for manipulating revenue when returned goods are accepted from customers? - understate allowance for doubtful accounts (thus overstating receivables) - record bank transfers when cash is received from customers - write off uncollectible receivables in a later period - avoid recording of returned goods form customers

Write off uncollectible receivables in a later period

To work as an entry-level CI special agent... - you must be a U.S. citizen - you must not be older than 37 years of ages - you must have completed a four-year course of study or earned a bachelor's degree - you must meet all of the conditions provided.

You must meet all of the conditions provided.

Which of the following is usually the hardest fraud to detect? - liability fraud - revenue fraud - asset fraud - disclosure fraud

disclosure fraud