Deck 3: Fighting Fraud: An Overview

Question 1

Research has shown that __________ and __________ detect most frauds:

A) Employees and managers
B) Security and police
C) IRS and FBI
D) Auditors and Board of Directors

Answer 1

A
A: Correct

Question 2

Most frauds begin in ________ increments and then he/she becomes greedy; as a result, most frauds will ________ over time.

A) Small, increase slowly
B) Medium, increase slowly
C) Small, increase dramatically
D) Medium, increase dramatically

Answer 2

C
C: Correct

Question 3

Which of the following is (are) the primary ways to detect fraud?

A) By chance
B) By proactively searching for symptoms of fraud
C) By encouraging early recognition of symptoms
D) By asking all employees if they know of any fraud

Answer 3

A
A: Correct
B: Correct
C: Correct
D: Although interviewing can reveal fraud, it is not one of the primary methods.

Question 4

Which of the following is not part of the evidence square?

A) Management evidence
B) Documentary evidence
C) Personal Observation
D) Physical evidence

Question 5

Which of the following is the best way to create a culture of honesty and integrity?

A) Insist that top management model appropriate behavior
B) Hire the right kind of employees
C) Develop and maintain effective policies
D) All of the above

Question 6

Which of the flowing statement about fraud is not true?

A) Most frauds start small and, if not detected, continue to grow larger and larger.
B) Events that scare or threaten the perpetrator result in discontinuance of the theft.
C) When scare or threat disappear, the fraud perpetrator will test the system by stealing small amount of money.
D) None of above

Question 7

Which of the following is not one of the four types of evidence that can be collected in a fraud investigation?

A) Testimonial evidence
B) Documentary evidence
C) Physical evidence
D) Personal observation
E) None of the above

Question 8

Which of the following is not part of a good corporate fraud policy?

A) Insisting top management model appropriate behavior
B) Establishing a threshold for which frauds will be prosecuted
C) Creating a positive work environment
D) Hiring the right kind of employees

Question 9

The elements of fraud consist of all of the following except:

A) Concealment
B) Theft Act
C) Conversion
D) Conviction

Question 10

Organizations can eliminate opportunities to commit fraud by

A) Accurately identifying sources and measuring risks
B) Implementing appropriate preventative and detective controls
C) Creating widespread monitoring by employees
D) Installing independent checks and effective audits
E) All of the above.

Question 11

Which of the following helps to maintain a culture of honesty and integrity?

A) Train management about effective modeling
B) Pay salaries based upon the amount each person can prove they earned for the company in a year.
C) Reward "whistle-blowers" who help to find fraud with 25% of recovered assets.
D) Earn employee's trust by giving $100 gifts to the person in the department who was most efficient for the month.

Question 12

An example of kickback fraud is:

A) Fraud perpetrated by an employee and the vendor
B) Fraud perpetrated by two or more employees
C) Fraud that conceals cash shortages by transferring funds
D) None of the above

Question 13

What type of evidence does invigilation fall into?

A) Testimonial evidence
B) Documentary evidence
C) Physical evidence
D) Personal observation

Question 14

In order to prevent fraud, a company should create a corporate culture of honesty and integrity. Which of the following is helpful in creating this kind of culture?

A) Giving employees positive feedback and recognition of job performance.
B) Management conducted by a few key people who do not accept advice or participation from other employees
C) Conducting background checks before hiring a new employee
D) Both A and C

Question 15

Research shows that legal action is taken against fraud perpetrators in:

A) Almost all fraud cases.
B) More than half of fraud cases.
C) Less than half of fraud cases.
D) Almost no fraud cases.

Question 16

"Invigilation" is defined as:

A) Specific policies designed to provide management with assurance that its fraud prevention measures are effective.
B) Imposing strict temporary controls so that, during the observation period, perpetrating fraud is extremely difficult.
C) Circumstances that, taken as a whole, would suggest that fraud has occurred.
D) A structured interview of a suspect for the purpose of obtaining an admission of guilt.

Question 17

All of the following factors can be associated with high levels of fraud except:

A) Top management that does not pay attention to appropriate behavior
B) Lack of recognition of job performance
C) Unrealistically low pay
D) Lack of understanding of different department functions

Question 18

Which of the following best creates a culture of honesty and integrity in the workplace?

A) Hire the right kind of employees
B) Security cameras
C) Peer evaluations
D) Ergonomic furniture

Question 19

Which of the following are the most effective fraud detectors?

A) Auditors
B) Customers
C) Vendors
D) Employees

Question 20

Audits, public record searches, and net worth calculations are used to gather which type of evidence?

A) Testimonial
B) Forensic
C) Documentary
D) Observational

Question 21

Which is not one of the three basic elements of fraud?

A) Concealment
B) Theft
C) Opportunity
D) Conversion

Question 22

Many people who suspect that fraud is occurring in an organization won't come forward because:

A) They think someone else will report the fraud
B) They don't want to wrongly accuse someone
C) All of the above
D) None of the above

Question 23

Studies show that legal action against fraudsters is typically taken:

A) Less than 25 percent of the time.
B) Less than 50 percent of the time.
C) Less than 75 percent of the time.
D) Almost always.

Question 24

Research indicates that fraud occurs less frequently when employees have feelings of ___________ toward their organization than when they feel abused, threatened, or ignored.

A) Tenure
B) Avoidance
C) Ownership
D) Responsibility

Question 25

Civil suits are usually quiet rare in cases of employee fraud because:

A) Usually not enough evidence to prosecute
B) Employee fraud is a victimless crime
C) Difficult for a jury to unanimously decide on a conviction
D) Perpetrators have usually spent the money

Question 26

Communicating expectations about fraud throughout a company includes all of the following except:

A) Identifying appropriate values and ethics.
B) Fraud awareness training.
C) Consistent punishment for violators.
D) Insisting that top management model appropriate behavior.

Question 27

In recent years, corporations have used ________ to help detect fraud.

A) Tip hotlines
B) Physical evidence
C) Chance
D) Honesty tests

Question 28

In order to create a culture of honesty and integrity, all of the following should prevail except

A) Hire the right employees
B) Have an indulgent manager
C) Communicate expectations
D) Create a positive environment

Question 29

What groups of people detect the most frauds?

A) Employees
B) External Auditors
C) Internal Auditors
D) IRS
E) All of the above detect fraud equally

Question 30

In lieu of acting honestly and facing negative consequences many people will do which of the following?

A) Break down emotionally
B) Run away from the problem
C) Face the music
D) Act dishonestly

Question 31

Which of the following is not a critical element in communicating expectations?

A) Identifying appropriate values and ethics.
B) Fraud awareness training.
C) Local newspaper ads that identify fraud perpetrators.
D) Communicating consistent punishment of violators.

Question 32

Which of the following is false?

A) Most frauds start small and get larger and larger if not detected.
B) Research has shown that auditors-not employees and managers-detect most frauds.
C) The elements of fraud include concealment, theft act, and conversion.
D) Preventing fraud is the most cost-effective way to reduce losses from fraud.

Question 33

Which one of the following was not discussed as a way to create a culture of honesty and integrity?

A) Offer rewards for honest behavior
B) Communicate expectations throughout the organization
C) Create a positive work environment
D) Hire the right kinds of employees
E) None of the above

Question 34

Of the key activities related to fraud, which of the following is the most important and perhaps the most profitable?

A) Follow-up legal action/resolution
B) Early fraud detection
C) Fraud investigation
D) Fraud prevention

Question 35

Auditors detect most frauds.

Question 36

Which is one of the three basic elements of the fraud motivation triangle?

A) Concealment
B) Theft
C) Opportunity
D) Conversion

Question 37

The word to describe a business's susceptibility to fraud is known as:

A) Lack of a Control environment
B) Invigilation
C) Inherent risk
D) Internal Control Risk

Question 38

Which is not a type of evidence collected in fraud investigations?

A) Testimonial Evidence
B) Documentary Evidence
C) Electronic Evidence
D) Physical Evidence

Question 39

Which of the following is a component of The Evidence Square:

A) Rationalization
B) Perceived Pressure
C) Personal Observation
D) Perceived Opportunity

Question 40

Who wins when a fraud is committed?

A) The victim
B) The organization
C) Family
D) The fraudster
E) None of the above

Question 41

Most organizations and other victims of fraudulent activity take one of three legal remedies, which is not one of these remedies?

A) No legal action
B) Civil Remedies
C) Criminal Remedies
D) Justice Remedies

Question 42

Evidence that is gathered using interviewing techniques is referred to as:

A) Physical evidence
B) Interview evidence
C) Testimonial evidence
D) Observation evidence

Question 43

John, a CFE, was conducting an investigation on some accusations that Jim, the division manager, was involved in fraudulent activities. During the course of the investigation, in order to gather more information, John mentions Jim's name and tries to get additional information from some uninvolved underlings at a company party. John is guilty of:

A) Using questionable investigation techniques
B) Jumping to conclusions
C) Not reporting all facts objectively
D) Not insuring that those involved are on a "need to know" basis.

Question 44

According to research, what percent of frauds are detected by auditors?

A) 5%
B) 10%
C) 20%
D) 40%

Question 45

Of the following groups, which would pursue civil action to the furthest extent against not just the perpetrator but all parties involved?

A) Management
B) Stockholders and Creditors
C) Vendors
D) All of the above

Question 46

Stuart, a CFE, is investigating a possible management fraud. He found an email on an employee's computer to use as evidence in the case. Under which category of evidence would an email message fall?

A) Testimonial Evidence
B) Documentary Evidence
C) Physical Evidence
D) Personal Observation

Question 47

Which of the following is not one of the ways in which a fraud investigation must be conducted?

A) Investigators should be experienced and objective professionals.
B) Investigators should closely guard all hypotheses regarding guilt or innocence of individuals being investigated.
C) Investigators should not keep management apprised of the investigations process.
D) Investigators must be sure to follow appropriate investigative techniques.