Deck 5: Fraud Examination and Fraud Management

Question 1

Fraud detection includes several standalone processes such as fraud prevention,investigation,correction,reporting,and recovery.

Answer 1

False

Question 2

CEO/owner,legal counsel,and the internal auditors are among the possible candidates to receive notifications regarding a fraud investigation.

Answer 2

True

Question 3

The fraud engagement process includes various steps in which evidence is collected in support of the scope and objectives of the investigation.

Answer 3

False

Question 4

Evidence is anything that relates to the truth or falsity of an assertion made in an investigation or legal proceeding.

Question 5

Fraud examination and fraud investigation both refer to the application of accounting and other specialized skills to the prevention,detection,investigation,correction,and reporting of fraud.

Question 6

Type 2 errors result in unnecessary fraud investigations.

Question 7

Fraud detection is often an imperfect process.

Question 8

Fraud prevention requires implementing control checklists that contain items such as firewalls and anti-virus software.

Question 9

A company-generated incident report may serve as the basis of a probable-cause justification that would be required to obtain subpoenas,search warrants,and even arrest warrants.

Question 10

Total fraud cost is defined as the summation of costs of prevention,costs of investigations,costs of detections,and costs of losses.

Question 11

A fraud incident report can be anything from a red flag to a formal report written by a responsible person.

Question 12

The ISO 27000 family of standards has over 5,000 controls.

Question 13

COBIT standard is based on 16 high-level objectives that are broken down into 318 detailed control objectives.

Question 14

Benford analysis exploits the pattern relating to the first digit of numbers appearing in a random data set.

Question 15

The first question a fraud investigator should always ask is "why."

Question 16

Fraud detection software and services often use sophisticated statistical techniques.

Question 17

Data-driven fraud detection involves the formal analysis of small sets of data in search for fraud indicators.

Question 18

Type 1 error occurs when a fraud indicator fails to signal fraud.

Question 19

The external auditor is a good candidate to receive tips.

Question 20

Fraud detection involves identifying indicators of fraud that suggest a need for further investigation.

Question 21

A fraud theory provides answers to the basic question regarding who,what,when,where,how,and why.

Question 22

A subpoena is an order from a government agency or officer of a court that compels the recipient,under penalty,to produce physical evidence,documents,or testimony.

Question 23

Discovery is a process in which opposing parties can require each other and relevant parties to produce out-of-court evidence

Question 24

Tracing involves beginning with a source document and following the related transaction through the entire accounting cycle.

Question 25

Expert consultants provide expert opinions and analyses to attorneys.

Question 26

Polygraphs may sometimes be used to detect dishonesty in fraud investigations.

Question 27

Loss recovery options include accepting the loss,collecting insurance if available,and pursuing the perpetrator in court.

Question 28

The fraud report presents conclusions regarding a suspect's guilt.

Question 29

Calibration is part of the fraud triangle.

Question 30

Invigilation is a technique used by fraud investigators to authenticate documentation.

Question 31

Individuals who respond more to audio stimuli typically look down and to the right,or simply vertically to the right,when recalling information.

Question 32

A well-prepared interview conducted by a skilled interviewer can sometimes result in a confession that completely unwinds a complicated case.

Question 33

Physical and document evidence include audio or video recordings of suspects' activities.

Question 34

Observational evidence can be the most powerful form of evidence.

Question 35

Fraud investigator should immediately present the suspect with a written confession to sign once an oral confession is obtained.

Question 36

Vouching begins with numbers in accounts and follows them backward to the source documents.

Question 37

Evidence should be collected in a specific order.

Question 38

A search warrant is an order from a government agency or officer of a court that compels the recipient,under penalty,to produce physical evidence,documents,or testimony.

Question 39

Physical and document evidence include things such as fingerprints,trace evidence,and forged or incriminating documents.

Question 40

It is common for fraud investigators to question the authenticity or authorship of documents.

Question 41

________ ________ typically involves using a stolen customer check to make a payment on account.

Question 42

Computer forensics is the application of computer science to computer-related matters that might come before a court.

Question 43

It is not possible for fraudsters to crack any passwords or encryption keys.

Question 44

Half of all financial statement frauds involve overstating inventory.

Question 45

The solution to prevent employees from stealing cash in the mailroom is to have ________ employees work together.

Question 46

________ ________ ________ occur when a dishonest purchasing agent purchases from a friend even though to do so is not in the best interest of the company.

Question 47

Earnings management is always illegal and can never be justified by GAAP.

Question 48

Internal auditors should report directly to the audit committee and operate completely independent of the CEO,the CFO,and top management.

Question 49

Expert qualifications include things such as race,gender,and social status.

Question 50

Swapping checks for cash is a cash-register fraud that involves removing cash from the cash register and replacing it with bogus checks.

Question 51

Managers can legally manipulate or manage reported financial statement figures within GAAP.

Question 52

IP tracing is not a foolproof method.

Question 53

In the United States,employee fraud represents a small percentage of loss for most organizations.

Question 54

The solution in preventing lapping of accounts receivable is ________ ________ ________ ________.

Question 55

________ ________ ________ typically involves an employee pocketing cash but not recording its collection.

Question 56

________ ________ involves using chemicals to remove a check's payment details and then adding new details for the payee,date,or amount of payment.

Question 57

________ ________ ________ ________ requires that the bookkeeper for accounts receivable also handle incoming payments for customer accounts.

Question 58

Stock option is an executive mechanism to prevent financial statement fraud.

Question 59

________ ________ ________ ________ may occur when cash register receipts are not reconciled with sales receipts per each individual cash register.

Question 60

The corporate culture plays a key role in fostering employee dishonesty.

Question 61

________ ________ ________ can involve misappropriation of waste,scrap,and spoiled goods.

Question 62

Evidence is collected in a specific order.First,________ evidence is collected,then ________ are conducted,and finally the ________ are conducted.

Question 63

________ ________ options include accepting the loss,collecting insurance if available,and pursuing the perpetrator in court.

Question 64

The method that involves beginning with a source document and following the related transaction through the entire accounting cycle is called ________.

Question 65

Locating and extracting data of interest from computer-storage devices is known as a(n)________ ________.

Question 66

The observation technique that involves observing a suspect's behavior before,during,and after an announced investigation is called ________.

Question 67

________ ________ represents the gaining of access to files or communications that are encrypted or protected by passwords.

Question 68

The three sides of the fraud triangle are: ________,________,and ________.

Question 69

The widely accepted principle of ________ requires that investigations be started or continue only when there is a reasonable basis to do so.

Question 70

The method that begins with numbers in accounts and follows them backward to the source documents is called ________.

Question 71

Pulling the plug can defeat certain ________ techniques sometimes used by sophisticated fraudsters.

Question 72

Some hackers would connect through ________ server chains in order to hide their IP addresses

Question 73

Content analysis determines the ________ of computer files and electronic communications.

Question 74

A(n)________ ________ is a court order that authorizes law enforcement to search for and seize evidence.

Question 75

In many cases,the investigator will seek to find the ________ location associated with a computer device that is used to communicate over the Internet.

Question 76

Fraud investigators would prepare a(n)________ ________ at the conclusion of an investigation.

Question 77

Individuals who provide expert opinions and analyses to attorneys under the umbrella of attorney-client privilege are called ________ ________.

Question 78

________ ________ are individuals who specialize in analyzing questioned documents.They can detect document alterations by analysis of things such as the paper,the ink,and typefaces.

Question 79

________ ________ may involve improper hiring,improper changes to employee personnel files and pay rates.

Question 80

________ ________ are normally issued to individuals and organizations through Internet service.