Question 1

An employee is authorizing refund checks without any supporting documentation. This is an example of:

Accepted Answer

A

Question 2

When an accounts receivable clerk is allowed to steal one customers payment and apply the next one toward that payment and so on, this is a violation of:

Accepted Answer

Segregation of duties is violated because the clerk has control over both the receipt and application of payments, allowing them to conceal theft.

Question 3

Hiring a relative that is untrained and paying them at a higher rate is an example of:

Accepted Answer

This is a clear example of payroll fraud, where the relative is being paid at a higher rate than they would normally receive, and may not have the required qualifications for the job.

Question 4

Which of the following is not part of the fraud triangle?

Accepted Answer

The fraud triangle consists of three components that contribute to fraudulent behavior: Pressure, Opportunity, and Rationalization. Greed is not considered a formal part of the fraud triangle.

Question 5

Unauthorized purchases, misappropriation of petty cash and abuse of company credit cards are all examples of:

Accepted Answer

Expenditure cycle fraud involves any fraudulent activity related to the purchase of goods or services by a company, including unauthorized purchases, misappropriation of petty cash, and abuse of company credit cards. Accounts receivable fraud involves fraudulent activity related to the collection of revenue owed to a company, such as lapping of accounts receivable. Custodial theft of money is a type of asset misappropriation involving the theft of cash or other valuable assets from a company.

Question 6

Whose responsibility is it to help assure that the audit trail is generated?

Accepted Answer

It is the responsibility of the internal auditor to help assure that the audit trail is generated. Internal auditors are responsible for evaluating and improving the effectiveness of risk management, control, and governance processes within an organization. They play a key role in maintaining and monitoring the audit trail to ensure the accuracy and completeness of financial transactions.

Question 7

Which of the following is actually part of the audit trail?

Accepted Answer

Chain of custody is directly related to the audit trail as it refers to the chronological record of evidence and data related to a particular transaction or process. The other options are important in maintaining a secure and controlled environment, but they are not directly related to the audit trail.

Question 8

If a company has poor pay, high pressure to perform and a hostile work environment, they are said to have:

Accepted Answer

A poor corporate culture can result in low pay, high pressure to perform, and a hostile work environment. It is important for companies to prioritize creating a positive work environment and treating employees fairly in order to attract and retain talented employees. Choices B and C are not applicable in this scenario as they suggest positive management practices, which are not present in a poor corporate culture.

Question 9

The most important element in detecting and catching employee fraud is:

Accepted Answer

An audit trail, which is a chronological record of activities or transactions, is a crucial element in detecting and catching employee fraud. It allows investigators to trace the steps of the fraudulent activity and identify the responsible parties. A chain of custody, authorization and approval, and physical security and monitoring are also important, but they are not as essential as an audit trail in fraud detection and prevention.

Question 10

An employee routinely throws excess raw materials in the dumpster outside the business and then takes it home with him after hours. This is an example of:

Accepted Answer

This is an example of production cycle fraud, specifically known as theft of inventory. The employee is stealing raw materials from the company's inventory and taking it for personal use.

Question 11

Which vendor fraud principle leads to $1,000 toilet seats?

Accepted Answer

Cost-plus billing is a vendor fraud principle where the vendor charges a percentage markup on the cost of goods or services provided. This markup can lead to inflated prices, such as $1,000 toilet seats, as there is no incentive for the vendor to control costs since they will always receive a markup on their expenses.

Question 12

What are some rationalizations for people to commit fraud or steal from a company?

Accepted Answer

Antisocial personality disorder and dissocial personality disorder can lead to a lack of empathy or concern for the wellbeing of others, making it easier for individuals to rationalize fraud or theft from a company. Additionally, pressure to conform to a toxic corporate culture that prioritizes profit over ethics can also contribute to rationalizations for fraud or theft.

Question 13

When an employee does not ring in a sale and simply pockets the cash, this is an example of:

Accepted Answer

This is an example of basic sales skimming, where an employee steals cash by not ringing in the sale and pocketing the money. Advanced sales skimming involves more complex methods such as manipulating the cash register or falsifying refunds. Short-change sales involve giving customers less change than they are owed, and cash stolen in transmission occurs when cash is stolen during transport between locations.

Question 14

"Skilled" cashiers can confuse or distract customers while they intentionally give them the wrong change. This is an example of:

Accepted Answer

This scenario describes short-change sales, where a cashier intentionally gives the wrong change to a customer to keep some of the money for themselves. Advanced sales skimming refers to more sophisticated methods of stealing from the till, robbing the till is a blatant theft of cash, and cash stolen in transmission would refer to money being stolen during the process of transferring it from one place to another.

Question 15

How is non-custodial theft of money best prevented?

Accepted Answer

The answer of How is non-custodial theft of money best...

Question 16

Insider trading is defined as:

Accepted Answer

Insider trading involves using undisclosed, non-public information to make trades in order to benefit from material gains. It is illegal because it gives an unfair advantage to individuals who possess information that is not available to the general public. A, B, and C are not related to insider trading.

Question 17

How does check washing occur?

Accepted Answer

Check washing involves chemically removing the ink from a check to allow the perpetrator to rewrite the check amount and payee.

Question 18

If the employer doesn't reconcile sales and collections for the cash box at the end of each shift, then the cashier may be free to steal from the cash box without restraint. This is an example of:

Accepted Answer

The scenario described is an example of robbing the till or stealing from the cash box. If the employer does not reconcile sales and collections, it creates an opportunity for the cashier to take money from the box without detection or restraint. The other options listed do not accurately describe this particular situation.

Question 19

Which of the following is an example of vendor fraud?

Accepted Answer

All of the options listed are examples of vendor fraud. Short shipments occur when the vendor delivers less than what was ordered. Balance billing involves charging the buyer for an amount that exceeds what was agreed upon. Substandard goods are items that do not meet the expected level of quality or performance.

Question 20

What is the estimated amount of loss due to fraud in the U.S. every year?

Accepted Answer

According to the Association of Certified Fraud Examiners' 2020 Report to the Nations, the estimated amount of loss due to fraud in the U.S. is approximately $3.6 trillion annually, which is in the hundreds of billions.

Quiz 13: Employee, Vendor, and Other Frauds Against the Organization