Deck 1: The Nature of Fraud

Question 1

Which of the following statements about criminal fraud and civil fraud 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) Both criminal cases and civil cases require 12 jurors.
C) Both criminal cases and civil cases can require a fraud perpetrator to go to jail.
D) None of above.

Answer 1

A
A: Correct
B: Incorrect, because only criminal cases require 12 jurors. For civil cases, it may consist of fewer than 12 jurors.
C: Incorrect, because only criminal cases may require a fraud perpetrator to go to jail. Civil cases result in restitution and damage payments.
D: Incorrect, A is the correct answer

Question 2

According to chapter 1, what is the estimated average organization's loss from various types of fraud?

A) "About 5 - 6% of total company revenues"
B) "Approximately 20 - 30% of revenues"
C) "Greater than 50% of revenues"
D) "Average losses cannot be estimated due to incomplete information"

Answer 2

A
A: Correct, average loss is estimated to be 5-6% of total company revenues.
B: Incorrect
C: Incorrect
D:Incorrect

Question 3

Which one of the following is not a characteristic of a criminal proceeding?

A) Offense against society
B) More guilty than not guilty
C) Jury of 12 individuals
D) Only one claim may be heard at a time

Answer 3

B
A: A crime is considered as an offense against society as a whole.
B: In a criminal proceeding, the jury must find evidence "beyond a reasonable doubt." In a civil proceeding the threshold is more guilty than not guilty.
C: A criminal jury consists of 12 jurors.
D: Only one claim is heard at a time, whereas in a civil case many claims may be joined into one action.

Question 4

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

Question 5

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 receive damage

Question 6

Management fraud is typically perpetrated by:

A) Stealing inventory
B) Manipulating financial statements
C) Overcharging for goods or services
D) Charging for goods not delivered

Question 7

Which of the following is not a common classification of fraud:

A) Investment scams.
B) Government fraud.
C) Miscellaneous fraud.
D) Customer fraud.

Question 8

Which of the following is not a primary reason why frauds are becoming increasingly frequent?

A) The advent of computers
B) Complex accounting systems
C) Globalization of corporations
D) The Internet

Question 9

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 may be deducted as legitimate business expenses.
D) All of the above are elements of Title 26, U.S. Code Section 7201.

Question 10

Customer fraud includes all of the following EXCEPT:

A) Get something for nothing
B) Pay for goods purchased
C) Involves top management
D) Deceive organization into giving them something they should not

Question 11

In a Ponzi scheme, how is confidence in the perpetrator established?

A) By obtaining a written note from an auditor that "validates" the services
B) By issuing notarized certificates
C) By initially paying returns on investments
D) Confidence does not need to be established for a Ponzi scheme to be successful

Question 12

Convicted criminals in a _____ case will likely be required to pay restitution and damage payments.

A) Civil
B) Criminal

Question 13

Which legal code makes the bribing of public officials illegal?

A) Title 18, US Code Section 201
B) Title 41, US Code Section 51 to 58
C) Title 18, U.S. Code Section 1341
D) 18, U.S. Code Section 1344

Question 14

Which of the following is not an element of a Ponzi scheme?

A) Gaining other's confidence.
B) Promising abnormally high returns.
C) Invested money is invested in high-risk government bonds.
D) Investment principle is partially used to make interest payments.

Question 15

Fraud has a direct dollar for dollar impact on a company's:

A) Revenues
B) Net income
C) Profit margin
D) Stock price per share
E) All of the above

Question 16

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.

Question 17

Fraud is deception that includes all of the following except:

A) False representation
B) Tricky and/or cunning tactics
C) Confidence in the perpetrator
D) Unintentional Errors

Question 18

Which would most likely be a civil charge?

A) Racketeering
B) Mail fraud
C) Defamation
D) Perjury

Question 19

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

Question 20

The burden of proof in a criminal case must be

A) "Beyond a Reasonable Doubt"
B) A "Preponderance of Evidence"

Question 21

Which of the following statements is most true?

A) Fraud is often less harmful than robbery because it affects fewer people.
B) Fraud usually involves smaller amounts of money than robbery.
C) Fraud always involves deception, confidence and trickery where robbery is more violent and traumatic.
D) Organizational losses from fraud are less than losses from robbery.

Question 22

Vendor fraud can involve all of the following except:

A) An overcharge for purchased goods
B) The shipment of inferior goods
C) Non-payment of goods by the customers
D) Non-shipment of goods even though payment has been made

Question 23

The difference between fraud and error is:

A) Fraud involves numbers
B) Fraud is found in business
C) Error can only be made by humans
D) Fraud involves intent

Question 24

The Anti-Kickback Act of 1986 intends to prevent:

A) Bribery, by punishing perpetrators with up to 15 years in prison
B) Any scheme to defraud federally insured financial institutions
C) The giving or receiving of any thing of value by a subcontractor to a prime contractor.
D) Individuals from using information to purchase or sell the company's securities.

Question 25

Who are the primary victims of financial statement fraud?

A) Employees and middle management.
B) Organizations that buy goods or services.
C) Analysts and pundits.
D) All Stockholders

Question 26

Company C contracts from Company T to obtain a temp employee (Employee A). Employee A steals money from company C. Which type of fraud occurred?

A) Employee embezzlement or occupational fraud
B) Management fraud
C) Investment scams
D) Vendor fraud
E) Customer fraud

Question 27

True or false: If a company experiences a $1,000 fraud, it will have to generate $1,000 in additional revenue to make up for the fraud.

A) True
B) False

Question 28

The most common type of fraud committed on behalf of organizations is usually perpetrated by:

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

Question 29

What type of fraud was the ZZZZ Best fraud?

A) Employee Embezzlement
B) Investment Scams
C) Vendor Fraud
D) Management fraud

Question 30

Which of the following federal law enforcement agencies is involved in fighting fraud?

A) DEA
B) US Marshals
C) CIA
D) ATF
E) ACFE

Question 31

The most common fraud committed on behalf of an organization is:

A) Vendor fraud
B) Employee embezzlement
C) Fraudulent financial reporting
D) Customer fraud

Question 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.

Question 33

Which of the following organizations is not a possibility for a future career in fraud?

A) CPA Firms
B) Government
C) Universities
D) None of the above

Question 34

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.

Question 35

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

Question 36

What is the difference between civil and criminal prosecution as it relates to fraud ?

A) They have a different purpose.
B) They have different burdens of proof.
C) Only civil prosecution can result in restitution and monetary payments
D) All of the above
E) A and B

Question 37

Which of the following is the most commonly committed type of fraud?

A) Occupational fraud committed against the organization.
B) Fraud committed on behalf of the organization
C) Fraud committed by an organization against employees.
D) Fraud committed by government agencies.

Question 38

An example of a vendor committing fraud by itself is:

A) An overcharge for purchased goods
B) The shipment of inferior goods
C) Non-shipment of goods even though payment is made
D) All of the above

Question 39

What is the most cost-effective way to minimize the cost of fraud?

A) Prevention
B) Detection
C) Investigation
D) Prosecution

Question 40

Which of the following is not a key activity in occupational fraud?

A) The activity is clandestine.
B) The activity is committed for the purpose of direct or indirect financial benefit to the employee.
C) The activity always involves two or more employees.
D) The activity costs the employing organization assets, revenues, or reserves.

Question 41

Investment scams consist of:

A) Selling of worthless partnership interests
B) Advertising above average returns
C) Promising no transaction fees but taking a percentage of growth
D) Stealing money from your employer

Question 42

According to the text, the largest group of fraud perpetrators are:

A) Between age 25 and 32
B) Between age 36 and 45
C) Between age 53 and 65
D) All age groups are equal groups of perpetrators

Question 43

Fraud statistics come from the all of the following sources except:

A) Government agencies
B) Researchers
C) Insurance Companies
D) Victims
E) All of the above are sources for statistics

Question 44

Customer fraud is usually perpetrated in all of the following ways except:

A) Customers don't pay for goods purchased
B) Customers get something for nothing
C) Customers deceive organizations into giving them something they should not have
D) Customers give kickbacks in order to manipulate organizations

Question 45

Which of the following are possible fraud-related careers:

A) Postal Inspector
B) Expert Witness
C) Internal Auditing
D) U.S. Marshalls
E) All of the above

Question 46

Which of the following is not a true statement with regard to fraud:

A) Confidence is the single most critical element for a fraud to be successful
B) Losses from fraud exceed losses from robbery
C) The largest group of fraud perpetrators are over fifty
D) All of the above are true

Question 47

Indirect fraud occurs when-

A) Embezzled money is transferred to your relative's account
B) Misuse of company equipment ( i.e. surfing the web during work hours)
C) Receiving a kickback from a vendor
D) Paying for unapproved lunches with the company expense account.

Question 48

Which of the following is NOT considered fraud?

A) A man armed with a weapon that demands that you hand over your wallet.
B) Recklessly prepared financial statements that are incorrect and used by investors.
C) Tricking your friend to do your laundry for $20 and then not paying the money.
D) Setting up a phantom vendor to impersonate a real vendor.

Question 49

Which of the following does not include one of the six types of fraud classification schemes as described in chapter 1?

A) Employee embezzlement
B) Government fraud
C) Investment scams
D) Customer fraud

Question 50

Vendor fraud usually results in all of the following except:

A) An overcharge for purchased goods
B) The shipment of inferior goods
C) Non-payment of goods by customers
D) Non-shipment of goods even though payment has been made.

Question 51

Company X's management team convinces Company Y to give them 100 shares of Company Y's stock. The management team claimed that the Company owes them the stock from a pre-existing agreement (such an agreement never existed). Upon receiving the stock, the management team splits the stock up amongst themselves to sell on the open market. This is an example of what type of fraud?

A) Occupational Fraud
B) Management Fraud
C) Investment Scams
D) Customer Fraud

Question 52

Which of the following is an example of vendor fraud?

A) You were overcharged for a hotdog that you bought on the street
B) The "new book" you ordered just arrived and contains writing on the inside cover
C) You never received a book you ordered and paid for online
D) All of the above

Question 53

According to the text, what percentage of fraud perpetrators are caught?

A) Only 5%-10%
B) 15%-25%
C) 40%-50%
D) It is impossible to know

Question 54

Which of the following is not one of the important skills that a fraud-fighting professional should have as discussed in chapter 1:

A) Researching skills
B) Communication skills
C) Technology skills
D) Analytical skills

Question 55

A man walks into a bank and convinces the bank manager to give him a $400,000 cashiers check even though he only has $10,000 in his account. The man then uses the cashiers check to purchase diamonds and flees the country. Which of the following is true with respect to this fraud?

A) The fraud is a criminal offense
B) The fraud is a civil offense
C) This fraud can be classified as "customer fraud"
D) All of the above are correct.

Question 56

The word "con," which means to deceive, comes from:

A) Converse
B) Conserve
C) Conceded
D) Confidence

Question 57

In recent years, the size (in dollar amounts) of fraud cases has increased. Which of the following is NOT a reason for increase in the size of discovered frauds

A) Complex accounting systems
B) It is no longer necessary to remove the physical assets
C) The advent of the internet
D) All of the above have contributed to an increase in the size of frauds