Question 1

Poor credit could become a ____ that could lead to fraud.
A)Financial pressure
B)Social pressure
C)Family pressure
D)​Financial threat

Accepted Answer

Poor credit can create financial pressure, which may lead individuals to commit fraud as a means to alleviate their financial difficulties.

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

Accepted Answer

Perceived opportunity refers to the situation where an employee has the opportunity to commit fraud because of their job responsibilities. In this case, the employee has the responsibility of both writing checks and making bank deposits, which gives them the opportunity to steal money by writing checks to themselves and then depositing the money into their own account.

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

Accepted Answer

The fraud perpetrator is committing kiting, which involves intentionally writing a check from an account with insufficient funds and then depositing it into another account and withdrawing the funds before the check is returned due to insufficient funds. The perpetrator takes advantage of the time it takes for banks to clear checks and process transactions, creating the illusion of having more money than they actually do.

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.

Accepted Answer

The answer of Which of the following is NOT a...

Question 5

Financial statement fraud is typically committed by:
A)Employees with access to company assets
B)Top management
C)Customers
D)Vendors

Accepted Answer

Financial statement fraud is usually committed by top management who have access to high-level financial information and have the ability to manipulate it for personal gain. Employees with access to company assets may commit other types of fraud, such as asset misappropriation, but are less likely to commit financial statement fraud. Customers and vendors are generally not involved in financial statement fraud.

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

Accepted Answer

Trust is not an element of a good control environment as trust alone cannot ensure effective control. In fact, a good control environment operates under the assumption that human error and misconduct can happen, therefore control mechanisms are necessary to mitigate the risks associated with such occurrences. The other options listed, such as modeling, appropriate hiring, and management's communication are all important elements of a good control environment.

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.

Accepted Answer

Research has shown that there is no one particular profile of a fraud perpetrator and that their profiles are similar to those of non-perpetrators. Therefore, option C is the only true observation. Options A, B, and D are all false.

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

Accepted Answer

Perceived pressure, perceived opportunity, and rationalization are all key elements common to all frauds, as stated in the fraud triangle theory. Perceived inequality, however, is not listed as a key element.

Question 9

The fraud triangle includes all of the following EXCEPT:
A)Validation
B)Perceived opportunity
C)Rationalization
D)Perceived pressure

Accepted Answer

The fraud triangle consists of three elements: perceived opportunity, perceived pressure, and rationalization. Validation is not included in the fraud triangle.

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

Accepted Answer

Greed, living beyond one's means, and high bills are all related to financial pressure, which can lead individuals to engage in fraud.

Question 11

When fraud occurs,the most common reaction to those affected by the fraud is:
A)Anger
B)Acceptance
C)Denial
D)Retribution

Accepted Answer

The answer of When fraud occurs,the most common reaction to...

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.

Accepted Answer

The statement describes a well-defined control environment where responsibilities and procedures are clear, which is not an abuse of the control environment.

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.

Accepted Answer

Management fraud typically involves overstating assets and net income in an attempt to appear more profitable and successful than the company actually is. This can be accomplished through methods such as inflating sales revenues, recording fictitious transactions, or understating liabilities.

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

Accepted Answer

Modeling and labeling are part of the control environment, which is the foundation of an organization's internal control system, setting the tone for the organization and influencing the control consciousness of its people.

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

Accepted Answer

Management's role and example set the tone for the entire organization and influence the behavior and actions of employees. Without strong, ethical leadership and a commitment to following and enforcing controls, any other element in the control environment will be less effective. Communication, hiring, and internal audit are all important components, but they rely on strong leadership to be most effective.

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

Accepted Answer

All of the other options are common rationalizations for fraud perpetrators, but the idea that "no one will care" is not as common because it implies that the perpetrator does not think their actions are significant or impactful enough to be noticed or cared about. However, this does not mean that no fraud perpetrators ever use this type of rationalization.

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

Accepted Answer

The answer of An effective accounting system is designed to...

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

Accepted Answer

The Sarbanes-Oxley legislation, also known as the Public Company Accounting Reform and Investor Protection Act, requires every public company to establish a code of ethics for senior financial officers and to disclose any changes made to the code or any waivers granted. This legislation was enacted in response to a number of financial scandals in the early 2000s, including Enron and WorldCom.

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.

Accepted Answer

An effective accounting system may help detect or deter fraud, but it cannot completely prevent "kickbacks," which are often related to unethical practices outside the scope of accounting controls.

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

Accepted Answer

Internal audit department is not a primary control procedure to minimize the occurrence of fraud, but rather a secondary control procedure that helps to detect and reduce the impact of fraud after it has occurred. Primary control procedures include dual custody, systems of authorization, and documents and records, which aim to prevent fraud from occurring in the first place.

Quiz 2: Who Commits Fraud and Why

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

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

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?

Which of the following is NOT a possible control activity?

Financial statement fraud is typically committed by:

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

Which is following observations is TRUE?

Which of the following is NOT one of the key elements common to all frauds?

The fraud triangle includes all of the following EXCEPT:

Greed,living beyond one's means and high bills all describe what type of fraud-related pressure?

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

Each of the following is an example of an abuse of a control environment EXCEPT:

When management fraud occurs,companies usually:

Modeling and labeling are sub-components of which fraud-related element of an organization?

What is the most important element in a control environment?

Which of the following is NOT a common rationalization of fraud perpetrators?

An effective accounting system is designed to provide which of the following to help discover fraud?

___________ requires every public company to have a code of ethics to help deter wrongdoing.

Which of the following statements about accounting systems is incorrect?

Which of the following is NOT a primary control procedure to minimize the occurrence of fraud?