Question 1

Fraud statistics come from all of the following sources EXCEPT:
A) government agencies.
B) insurance companies.
C) victims.
D) fraud perpetrators.

Accepted Answer

Fraud perpetrators would not voluntarily report their own fraudulent activities, hence they are not a source of fraud statistics. Government agencies, insurance companies, and victims are common sources of fraud statistics.

Question 2

The study conducted by the Association of Certified Fraud Examiners in 2016 estimated that organizations lose percent of their annual revenues to fraud.
A) 8
B) 5
C) 23
D) 17

Accepted Answer

The Association of Certified Fraud Examiners (ACFE) in 2016 estimated that organizations typically lose 5% of their annual revenues to fraud.

Question 3

What is the single most critical element for a fraud to be successful?
A) Criminal intent
B) Confidence
C) Greed
D) Compulsion

Accepted Answer

While criminal intent, greed, and compulsion can all contribute to fraudulent behavior, confidence is the most critical element for a fraud to be successful. A fraudster must be able to convince their victims that what they are selling or promoting is legitimate in order to successfully execute their scheme.

Question 4

Which of the following skills would be LEAST beneficial in a career as a fraud-fighting professional?
A) Analytical skills
B) Mechanical skills
C) Communication skills
D) Technological skills

Accepted Answer

Mechanical skills are the least beneficial in a career as a fraud-fighting professional as it does not typically require knowledge of machinery or mechanical work. The other skills, such as analytical, communication, and technological skills, are necessary for investigating and preventing fraud.

Question 5

Which of the following would NOT be acceptable as fraud-related experience to satisfy the education requirements to apply for CFE certification?
A) Auditor (internal or external)
B) Investigator for a law enforcement agency or in the private sector
C) Experience in the Human Resources department of an organization
D) Paralegal for a prosecuting attorney

Accepted Answer

Experience in Human Resources department of an organization may be useful for preventing and detecting fraud but it is not directly related to fraud investigations or forensic accounting. The other choices (A, B, and D) indicate relevant experience in fraud-related fields.

Question 6

Which individual listed is most likely to commit financial statement fraud in order to benefit an organization?
A) An executive
B) An internal auditor
C) A floor manager (line supervisor)
D) The company treasurer

Accepted Answer

Financial statement fraud involves intentional misrepresentation of financial information, and thus requires access and influence over the financial reporting process. An executive typically has the authority and responsibility to make decisions affecting financial reporting, and may have incentive to manipulate financial statements to benefit the organization or themselves.

Question 7

A company was the victim of several frauds that totaled approximately $10 million in one year. With a profit margin of 10 percent, and assuming that the company's product sold for $1,000 per unit, how many additional units must the company sell to compensate for the fraud losses?
A) 1 million
B) 100 million
C) 100,000
D) 10,000

Accepted Answer

To compensate for the $10 million loss at a 10% profit margin, the company needs to generate an additional $100 million in sales ($10 million / 0.10). Since each unit sells for $1,000, the company must sell an additional 100,000 units ($100 million / $1,000 per unit) to compensate for the fraud losses.

Question 8

Which of the following statements regarding fraud on behalf of an organization is true?
A) Middle management is usually the perpetrator.
B) This type of fraud benefits top executives as it generally increases stock price.
C) This type of fraud includes deflating expenses in order to save on corporate income taxes.
D) Financial statement fraud is common among publicly traded companies that are experiencing windfall profits.

Accepted Answer

This type of fraud often benefits top executives by artificially inflating the stock price, which can increase the value of stock-based compensation and make the company appear more financially healthy than it actually is.

Question 9

The GDP in the economy of Ponziland was $5 billion in the year prior to the frauds (Year 1). The economy was growing at 4 percent. Frauds during the year reduce aggregate income by $200 million. During the year, the economy has:
A) shrunk by 1 percent.
B) grown by only 1 percent.
C) remained flat.
D) grown by 4 percent.

Accepted Answer

The answer of The GDP in the economy of Ponziland...

Question 10

Given below are the profit margins and fraud-related losses of four economies. Which economy will have to generate the maximum dollar amount of additional revenues to recover the loss to aggregate income? Economy A: 10%, $225 million Economy B: 10%, $150 million Economy C: 5%, $100 million Economy D: 2%, $50 million
A) Economy A
B) Economy D
C) Economy C
D) Economy B

Accepted Answer

Economy D needs to generate the maximum dollar amount of additional revenues to recover the loss because it has the lowest profit margin (2%). To recover a $50 million loss, it needs to generate $2.5 billion in additional revenues ($50 million / 2%).

Quiz 1: The Nature of Fraud

Fraud statistics come from all of the following sources EXCEPT:

The study conducted by the Association of Certified Fraud Examiners in 2016 estimated that organizations lose percent of their annual revenues to fraud.

What is the single most critical element for a fraud to be successful?

Which of the following skills would be LEAST beneficial in a career as a fraud-fighting professional?

Which of the following would NOT be acceptable as fraud-related experience to satisfy the education requirements to apply for CFE certification?

Which individual listed is most likely to commit financial statement fraud in order to benefit an organization?

A company was the victim of several frauds that totaled approximately $10 million in one year. With a profit margin of 10 percent, and assuming that the company's product sold for $1,000 per unit, how many additional units must the company sell to compensate for the fraud losses?

Which of the following statements regarding fraud on behalf of an organization is true?

The GDP in the economy of Ponziland was $5 billion in the year prior to the frauds (Year 1) . The economy was growing at 4 percent. Frauds during the year reduce aggregate income by $200 million. During the year, the economy has: