Deck 2: Who Commits Fraud and Why

Question 1

Poor credit could become a ____ that could lead to fraud.

A)Financial pressure
B)Social pressure
C)Family pressure
D)​Financial threat

Answer 1

A

Question 2

An employee who has the responsibilities of both writing checks and making bank deposits would have ____.

A)Financial pressure
B)Perceived opportunity
C)Rationalization

Answer 2

B

Question 3

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

Answer 3

D

Question 4

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.

Question 5

Financial statement fraud is typically committed by:

A)Employees with access to company assets
B)Top management
C)Customers
D)Vendors

Question 6

Which of the following is NOT an element of a good control environment?

A)Trust
B)Modeling
C)Appropriate hiring
D)Management's communication

Question 7

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.

Question 8

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

Question 9

The fraud triangle includes all of the following EXCEPT:

A)Validation
B)Perceived opportunity
C)Rationalization
D)Perceived pressure

Question 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

Question 11

When fraud occurs,the most common reaction to those affected by the fraud is:

A)Anger
B)Acceptance
C)Denial
D)Retribution

Question 12

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.

Question 13

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.

Question 14

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

Question 15

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

Question 16

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

Question 17

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

Question 18

___________ 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

Question 19

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.

Question 20

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

Question 21

Studies show that in advanced countries,levels of honesty are:

A)Generally stable
B)Increasing
C)Decreasing

Question 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.

Question 23

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

Question 24

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

Question 25

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.

Question 26

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 look out 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

Question 27

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.

Question 28

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.

Question 29

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.

Question 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

What is the strongest factor in deterring future fraud activity?

A)Legal prosecution.
B)Sanctions.
C)Termination.
D)Counseling.

Question 35

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.

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

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

Question 41

Every fraud is comprised of all the following elements EXCEPT:

A)The theft act
B)Concealment
C)Conversion
D)Assault

Question 42

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

Question 43

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

Question 44

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

Question 45

​Studies reveal that honesty levels in advaned 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.

Question 46

​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.

Question 47

​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

Question 48

​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

Question 49

​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.

Question 50

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

Question 51

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

Question 52

​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.

Question 53

____________ 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

Question 54

​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.

Question 55

_____ 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

Question 56

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.

Question 57

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