Deck 12: Business Ethics, Fraud, and Fraud Detection

Question 1

Cash larceny involves stealing cash from an organization before it is recorded on the organization's books and records.

Answer 1

False

Question 2

Para computer ethics is the exposure to stories and reports found in the popular media regarding the good or bad ramifications of computer technology.

Answer 2

False

Question 3

Collusion among employees in the commission of a fraud is difficult to prevent but easy to detect.

Answer 3

False

Question 4

Database management fraud includes altering, updating, and deleting an organization's data.

Question 5

The trend toward distributed data processing increases the exposure to fraud from remote locations.

Question 6

Opportunity involves direct access to assets and/or access to information that controls assets.

Question 7

Computers can be misused in many ways.

Question 8

Business ethics is the analysis of the nature and social impact of computer technology, and the corresponding formulation and justification of policies for the ethical use of such technology.

Question 9

The fraud triangle represents a geographic area in Southeast Asia where international fraud is prevalent.

Question 10

Of the three fraud factors (situational pressure, ethics, and opportunity), situational pressure is the factor that actually facilitates the act.

Question 11

Internal control systems are recommended but not required to prevent fraud.

Question 12

Skimming involves stealing cash from an organization after it is recorded on the organization's books and records

Question 13

Defalcation is another word for financial fraud.

Question 14

Situational pressure includes personal or job related stresses that could coerce an individual to act dishonestly.

Question 15

Copyright laws and computer industry standards have been developed jointly and rarely conflict.

Question 16

Ethical issues and legal issues are essentially the same.

Question 17

Computer programs are intellectual property.

Question 18

Business bankruptcy cases always involve fraudulent behavior.

Question 19

Employees should be made aware of the firm's commitment to ethics.

Question 20

The ethical principle of justice asserts that the benefits of the decision should be distributed fairly to those who share the risks.

Question 21

All of the following are factors in the fraud triangle except

A) Ethical behavior of an individual
B) Pressure exerted on an individual at home and job related
C) Materiality of the assets
D) Opportunity to gain access to assets

Question 22

What fraud scheme is similar to the "borrowing from Peter to pay Paul" scheme?

A) expense account fraud
B) kiting
C) lapping
D) transaction fraud

Question 23

Which characteristic is not associated with software as intellectual property?

A) uniqueness of the product
B) possibility of exact replication
C) automated monitoring to detect intruders
D) ease of dissemination

Question 24

Cash larceny involves

A) stealing cash from an organization before it is recorded.
B) stealing cash from an organization after it has been recorded.
C) manufacturing false purchase orders, receiving reports, and invoices.
D) a clerk paying a vendor twice for the same products and cashing the reimbursement check issued by the vendor.

Question 25

The objective of SAS 99 is to seamlessly blend the auditor's consideration of fraud into all phases of the audit process.

Question 26

The most common access point for perpetrating computer fraud is at the data collection stage.

Question 27

Scavenging is a form of fraud in which the perpetrator uses a computer program to search for key terms in a database and then steal the data.

Question 28

Changing the Hours Worked field in an otherwise legitimate payroll transaction to increase the amount of the paycheck is an example of data collection fraud.

Question 29

Which ethical principle states that the benefit from a decision must outweigh the risks, and that there is no alternative decision that provides the same or greater benefit with less risk?

A) minimize risk
B) justice
C) informed consent
D) proportionality

Question 30

Skimming involves

A) stealing cash from an organization before it is recorded
B) Stealing cash from an organization after it has been recorded
C) manufacturing false purchase orders, receiving reports, and invoices
D) A clerk pays a vendor twice for the same products and cashes the reimbursement check issued by the vendor.

Question 31

Which of the following best describes lapping?

A) applying cash receipts to a different customer's account in an attempt to conceal previous thefts of funds
B) inflating bank balances by transferring money among different bank accounts
C) expensing an asset that has been stolen
D) creating a false transaction

Question 32

Individuals who acquire some level of skill and knowledge in the field of computer ethics are involved in which level of computer ethics?

A) para computer ethics
B) pop computer ethics
C) theoretical computer ethics
D) practical computer ethics

Question 33

For an action to be called fraudulent, all of the following conditions are required except

A) poor judgment
B) false representation
C) intent to deceive
D) injury or loss

Question 34

Employee fraud involves three steps. Of the following, which is not involved?

A) concealing the crime to avoid detection
B) stealing something of value
C) misstating financial statements
D) converting the asset to a usable form

Question 35

One characteristic of employee fraud is that the fraud

A) is perpetrated at a level to which internal controls do not apply
B) involves misstating financial statements
C) involves the direct conversion of cash or other assets to the employee's personal benefit
D) involves misappropriating assets in a series of complex transactions involving third parties

Question 36

A shell company fraud involves

A) stealing cash from an organization before it is recorded.
B) stealing cash from an organization after it has been recorded.
C) manufacturing false purchase orders, receiving reports, and invoices.
D) a clerk paying a vendor twice for the same products and cashing the reimbursement check issued by the vendor.

Question 37

Which of the following controls would best prevent the lapping of accounts receivable?

A) Segregate duties so that the clerk responsible for recording in the accounts receivable subsidiary ledger has no access to the general ledger.
B) Request that customers review their monthly statements and report any unrecorded cash payments.
C) Require customers to send payments directly to the company's bank.
D) Request that customers make the check payable to the company.

Question 38

Forces which may permit fraud to occur do not include

A) a gambling addiction
B) lack of segregation of duties
C) centralized decision making environment
D) questionable integrity of employees

Question 39

When certain customers made cash payments to reduce their accounts receivable, the bookkeeper embezzled the cash and wrote off the accounts as uncollectible. Which control procedure would most likely prevent this irregularity?

A) segregation of duties
B) accounting records
C) accounting system
D) access controls

Question 40

In balancing the risks and benefits that are part of every ethical decision, managers receive guidance from each of the following except

A) justice
B) self interest
C) risk minimization
D) proportionality

Question 41

Explain the pass through fraud.

Question 42

Business ethics involves

A) how managers decide on what is right in conducting business
B) how managers achieve what they decide is right for the business
C) both a and b
D) none of the above

Question 43

What is the objective of SAS 99?

Question 44

When it comes to losses from fraud,

A) the highest losses are from employees under 40 years of age
B) women tend to commit more frauds then men.
C) higher education levels mean higher losses from fraud
D) all of the above

Question 45

__________________________ are intentional mistakes while __________________________ are unintentional mistakes.

Question 46

When considering computer ethics, what are some of the environmental issues to consider?

Question 47

Explain the characteristics of management fraud.

Question 48

What are the main issues to be addressed in a business code of ethics required by the SEC?

Question 49

Explain the Pay and Return scheme.

Question 50

What is check tampering?

Question 51

Give two examples of employee fraud and explain how the theft might occur.

Question 52

What are some conclusions to be drawn from the ACFE fraud study regarding losses from fraud?

Question 53

Sarbanes-Oxley (SOX)

A) imposes new corporate disclosure requirements
B) imposes new criminal penalties for fraud
C) both a. and b.
D) none of the above

Question 54

The four principal types of fraud include all of the following except

A) bribery
B) gratuities
C) conflict of interest
D) economic extortion

Question 55

Computer fraud can take on many forms, including each of the following except

A) theft or illegal use of computer-readable information
B) theft, misuse, or misappropriation of computer equipment
C) theft, misuse, or misappropriation of assets by altering computer-readable records and files
D) theft, misuse, or misappropriation of printer supplies

Question 56

The text discusses many questions about personal traits of executives which might help uncover fraudulent activity. What are three?

Question 57

Operations fraud includes

A) altering program logic to cause the application to process data incorrectly
B) misusing the firm's computer resources
C) destroying or corrupting a program's logic using a computer virus
D) creating illegal programs that can access data files to alter, delete, or insert values

Question 58

Which of the following is not an issue to be addressed in a business code of ethics required by the SEC?

A) Conflicts of interest
B) Full and Fair Disclosures
C) Legal Compliance
D) Internal Reporting of Code Violations
E) All of the above are issues to be addressed

Question 59

What are the five conditions necessary for an act to be considered fraudulent?

Question 60

All of the following are conditions for fraud except

A) false representation
B) injury or loss
C) intent
D) material reliance

Question 61

Discuss what an auditor should look for in testing for payments to fictitious vendors and how ACL can be used to assist the process.

Question 62

Distinguish between skimming and cash larceny. Give an example of each

Question 63

What are the risk factors that relate to fraudulent financial reporting? What types of common schemes should auditors look for?

Question 64

Explain the shell company fraud.

Question 65

Explain the problems associated with lack of director independence

Question 66

Why are the computer ethics issues of privacy, security, and property ownership of interest to accountants?

Question 67

Explain why collusion between employees and management in the commission of a fraud is difficult to both prevent and detect.

Question 68

Name three forms of computer fraud.

Question 69

Define database management fraud.

Question 70

Explain the problems associated with Questionable Executive Compensation Schemes

Question 71

As a form of computer fraud, what is eavesdropping?

Question 72

What is scavenging?

Question 73

Define operational fraud.

Question 74

How does the auditor's judgements about the risk of material misstatements affect the audit?

Question 75

According to common law, there are five conditions that must be present for an act to be deemed fraudulent. Name and explain each.

Question 76

Explain the problems associated with lack of auditor independence.

Question 77

Four principal types of corruption are discussed. Name all four and explain at least two.

Question 78

Contrast management fraud with employee fraud.

Question 79

Misappropriation of assets can involve various schemes: expense reimbursement fraud, lapping, and payroll fraud. Explain each and give an example.

Question 80

Name three types of program fraud.