Deck 5: Recognizing the Symptoms of Fraud

Question 1

Recording an expense to conceal fraud involves making a fictitious journal entry.A faulty journal entry is an example of which fraud symptom?

A)Accounting anomaly
B)Internal control weakness
C)Unusual behavior
D)Analytical anomaly

Answer 1

A

Question 2

Who in an organization is NOT in a good position to recognize fraud during the theft act?

A)Other employees
B)Managers
C)Auditors
D)Coworkers

Answer 2

C

Question 3

Fraud examiners must be able to recognize signals that a journal entry may have been manufactured to conceal a fraud.Which of the following is a common journal entry fraud symptom?

A)Journal entries with documentary support.
B)Journal entries that balance.
C)Adjustments to receivables or payables that are clearly explained.
D)Journal entries made near the end of an accounting period

Answer 3

D

Question 4

Common accounting anomaly fraud symptom involve problems with various data and books of accounts.Which of the following is NOT one among them?

A)Faulty journal entries
B)Inaccuracies in source documents
C)Rounding adjustments
D)Inaccuracies in ledgers

Question 5

Fraud occurs when perceived pressure,perceived opportunity and rationalization combine.Which of the following is related to the problem of segregation of duties?

A)Julie writes expense checks and Mark collects cash from customers.
B)Bob order office supplies and deposits the company's checks.
C)Steve records receivables and writes off bad debts.
D)Rebecca records journal entries and orders lunch.

Question 6

There are three simple procedures that small business owners should do on a timely basis to prevent fraud when they can't afford sufficient employees to guarantee effective segregation of duties..Which of the following is NOT one among them?

A)Pay everything by check so that there is a record.
B)Always open the bank statement and reconcile it themselves.
C)Allow one key employee to operate the bank account personally.
D)Sign every check themselves and not delegate the signing to anyone else.

Question 7

Document symptoms to some extent can signal out that embezzlement is taking place.Which among the following usually do NOT point to some problem with the source documents?

A)Photocopied documents
B)Different names or addresses of payees or customers
C)Excessive voids or credits
D)Increased past-due accounts

Question 8

An auditor noticed that company B had an exorbitant increase in sales and drastic decreases in its inventory and accounts receivables.The above statement symbolizes which fraud symptom?

A)Accounting anomaly
B)Internal control weakness
C)Analytical anomaly
D)Unusual behavior

Question 9

Which of the following is an example of accounting anomaly fraud symptom?

A)Missing documents
B)Excess purchases
C)Too many debit or credit memos
D)Inadequate accounting system

Question 10

Transactions happening at odd times or places;being performed by people who would not normally participate;or including odd procedures are typically associated with which type of fraud symptom?

A)Accounting anomaly
B)Internal control weakness
C)Analytical anomaly
D)Unusual behavior

Question 11

______ fraud symptoms are procedures or relationships that are unusual or too unrealistic to be believable.

A)Analytical
B)Accounting
C)Internal control
D)Environmental

Question 12

Research in psychology indicates that when people commit a crime (especially for the first time),they are initially overwhelmed by ____ and ____.

A)guilt,fear
B)anxiety,insomnia
C)confidence,rationalization
D)defensiveness,confession

Question 13

Increased scrap,excessive purchases,physical abnormalities,etc.are all examples of:

A)accounting anomalies.
B)external control weaknesses.
C)analytical anomalies.
D)unusual behavior.

Question 14

Which of the following is NOT an analytical fraud symptom?

A)Consistent cash shortages
B)Overriding of existing controls
C)Excess purchases
D)Unreasonably high expenses

Question 15

Inaccuracies in ledgers represent which type of fraud symptom?

A)Internal control weaknesses
B)Analytical anomalies
C)Accounting anomalies
D)Unusual behaviors

Question 16

How does a smart embezzler manipulate accounting records to conceal fraud?

A)By increasing assets.
B)By manipulating stock accounts.
C)By manipulating dividends.
D)By increasing expenses.

Question 17

In which stage do auditors have a good chance of detecting fraud,if the audit samples include altered documents and miscounts?

A)Theft act
B)Concealment
C)Conversion
D)Layering

Question 18

In most organizations,coworkers and others have knowledge or suspicions that fraud is occurring but do not come forward with their information.There are several major reasons for this hesitancy.Which of the following is NOT one among them?

A)It is usually impossible to know for sure that a fraud is taking place.
B)They are least bothered if whatever is happening is not affecting their work.
C)They fear reprisal for being a whistle-blower.
D)They often think that squealing on someone is wrong.

Question 19

Implementing a system of independent checks is one of the most effective ways to deter fraud.Which one of the following is NOT a way of providing independent checks on employees?

A)Employee transfers
B)Audits
C)Mandatory vacations
D)Single endorsement on checks

Question 20

Which of the following is an analytical fraud symptom?

A)Increase in past due accounts receivable
B)Significant increase or decrease in account balances
C)Lack of independent checks
D)Excessive voids or credits

Question 21

Which of the following is a highly suspicious financial statement relationship?

A)Increased revenues with increased cash flows
B)Increased volume with decreased cost per unit
C)Increased inventory with decreased payables
D)Increased inventory with increased warehousing costs

Question 22

All transactions related to specific accounts,such as cash or inventory,are summarized in a:

A)Journal
B)Ledger
C)Trial balance
D)Balance sheet

Question 23

Which of the following fraud symptoms are often the easiest to detect?

A)Analytical anomalies
B)Internal control weaknesses
C)Accounting anomalies
D)Lifestyle changes

Question 24

Which of the following appears to be common to most embezzlers who are caught?

A)Long-term focus
B)Investments made in low-risk instruments
C)Saving what they steal
D)Spending on lifestyle improvements

Question 25

Which of the following is NOT a "strange" financial statement relationship?

A)Increased revenues with decreased inventory
B)Increased revenues with decreased receivables
C)Decreased inventory with decreased payables
D)Decreased volume with decreased cost per unit

Question 26

What does the following journal entry indicate? Legal Expense..................2,900
Cash...............................2,900

A)$2,900 cash is due to an attorney.
B)A sum of $2,900 was received from attorney in advance.
C)$2,900 cash is due from an attorney.
D)An attorney was paid $2,900 in cash.

Question 27

Which of the following motivates embezzlers to indulge in a fraudulent activity?

A)Pursuit of immediate gratification.
B)Safeguard their future.
C)Cover expenses required to live.
D)Protection against uncertainties.

Question 28

_____ are relationships in financial or nonfinancial data that do not make sense,such as an unreasonable change in a volume,mix,or price.

A)Analytical anomalies
B)Accounting anomalies
C)Auditing anomalies
D)Control weaknesses

Question 29

After committing fraud,an individual often exhibits unusual and recognizable behavior patterns to cope with the stress.Perpetrators experience this behavioral signals in a particular sequence.Identify it.

A)Guilt - Stress - Fear - Behavior changes
B)Fear - Guilt - Stress - Behavior changes
C)Fear - Guilt - Behavior changes - Stress
D)Guilt - Fear - Stress - Behavior changes

Question 30

_______ involves the actual taking of cash,inventory,information,or other assets whereas _______ involves selling stolen assets or transferring them into cash and then spending the cash.

A)Conversion,coercion
B)Theft,conversion
C)Coercion,theft
D)Theft,coercion

Question 31

Which name refers to people who commit a fraud or another crime once in a while and does not feel stress?

A)Altruists
B)Utilitarians
C)Psychopaths
D)Agnostics

Question 32

Which of the following scenarios is least conducive to fraud?

A)Outstanding bills at home
B)Mandatory vacation time
C)Economic downturns
D)Moral decay in upper management

Question 33

Generally,at the conversion stage,________ are definitely not in the best position to detect fraud.

A)co-workers
B)friends
C)auditors
D)managers

Question 34

An employee decides to steal cash from his/her employer.What would be the best way to conceal such a fraud?

A)Record the stolen cash as an expense.
B)Writing down accounts payable for a supplier.
C)Increasing accounts receivable from a customer.
D)Writing down as dividend paid to shareholders.

Question 35

Which of the following is a highly suspicious financial statement relationship?

A)Increased revenues with decreased inventory.
B)Decreased production with decreased scrap.
C)Increased revenues with increased receivables
D)Decreased cost per unit with increased level of output

Question 36

Which of the following is not a fraud symptom related to internal control weaknesses?

A)Lack of segregation of duties
B)Lack of physical safeguards
C)Inadequate accounting system
D)Lack of proper authorization
E)Excessive turnover of executives

Question 37

A major difference between financial statement auditors and fraud examiners is that most financial statement auditors:

A)merely match documents to see whether support exists and is adequate.
B)determine whether the documents are real.
C)determine whether the expenditures make sense.
D)check whether all aspects of the documentation are in order.

Question 38

Lifestyle changes of fraud perpetrators are related to which of the following fraud elements?

A)Theft act
B)Concealment
C)Conversion
D)Confession