acc 660 fraud chapter 1 updated

1. Q: What is the estimated global annual loss to fraud according to the ACFE?

A: $3.5 trillion (based on 5% of global revenue lost to fraud).

2. Q: What percentage of revenue is lost to fraud by U.S. organizations?

A: 5%

3. Q: How does fraud impact a company's income?

A: Fraud reduces net income dollar-for-dollar.

4. Q: What are the seven elements of fraud?

A: 1. Representation 2. About a material point 3. False 4. Intentionally/recklessly made 5. Believed 6.

Acted upon 7. Results in damage.

5. Q: What is the difference between fraud and error?

A: Fraud involves intent; error does not.

6. Q: What is a Ponzi scheme?

A: A scheme where returns to earlier investors are paid using money from new investors.

7. Q: Why is confidence critical in fraud?

A: Because victims must trust the perpetrator for the deception to work.

8. Q: What are the three main categories of occupational fraud (ACFE)?

A: 1. Asset misappropriation 2. Corruption 3. Fraudulent financial statements.

9. Q: What are the six types of fraud based on victim and perpetrator?

A: 1. Employee embezzlement 2. Vendor fraud 3. Customer fraud 4. Management fraud 5.

Investment/consumer fraud 6. Miscellaneous fraud.

10. Q: What is employee embezzlement?

A: When employees steal or misuse company assets.

11. Q: What is vendor fraud?

A: Fraud by vendors through overcharging, poor goods, or non-shipment.

12. Q: What is customer fraud?

A: When customers don't pay, pay less, or scam to get undeserved benefits.

13. Q: What is management fraud?

A: Fraud by top executives to misrepresent financial statements.

14. Q: What is investment or consumer fraud?

A: Scams targeting individual consumers like Ponzi, identity theft, etc.

15. Q: What is the most cost-effective way to reduce fraud?

A: Prevention.

16. Q: What does the term 'con' come from?

A: Confidence.

17. Q: What is the burden of proof in criminal cases?

A: Beyond a reasonable doubt.

18. Q: What is the burden of proof in civil cases?

A: Preponderance of evidence.

19. Q: What are the consequences of a civil case?

A: Restitution and damage payments.

20. Q: What are the consequences of a criminal case?

A: Jail and/or fines.

21. Q: How many jurors are typically in a criminal case?

A: 12 jurors with a unanimous verdict.

22. Q: Can civil cases have non-unanimous verdicts?

A: Yes.

23. Q: What are the requirements to become a CFE?

A: Bachelor's degree, 2 years fraud-related experience, pass exam, ACFE member.

24. Q: What are the four parts of the CFE exam?

A: 1. Fraud prevention & deterrence 2. Financial transactions & fraud schemes 3. Investigation 4. Law.

25. Q: What careers are available in fraud detection?

A: Auditor, CFE, forensic accountant, law enforcement, expert witness, government agent.

26. Q: What are examples of federal fraud statutes?

A: Mail fraud, bank fraud, securities fraud, RICO, FCPA, tax evasion.

27. Q: What does Title 26, U.S. Code §7201 prohibit?

A: Tax evasion.

28. Q: Can bribes be deducted as business expenses?

A: No.

29. Q: What is the most common occupational fraud?

A: Asset misappropriation.

30. Q: What is indirect fraud?

A: Fraud like kickbacks or bribes where assets are not directly stolen.

31. Q: What is direct fraud?

A: When the employee directly steals assets (cash, goods, etc.).

32. Q: How does fraud impact the cost of goods and services for consumers?

A: It increases the cost because companies pass losses to customers.

33. Q: What is the ACFE?

A: Association of Certified Fraud Examiners.

34. Q: What is the CFE credential?

A: Certified Fraud Examiner.

35. Q: What does CFE certification require besides education?

A: Two years of professional experience in a fraud-related field.

36. Q: What are acceptable fields for CFE experience?

A: Accounting, auditing, criminology, sociology, fraud investigation, law, loss prevention.

37. Q: Is a specific degree major required for CFE eligibility?

A: No, any bachelor's degree is accepted.

38. Q: What is occupational fraud?

A: Fraud committed by employees through misuse or theft of resources.

39. Q: What is asset misappropriation?

A: Theft or misuse of organization's assets by employees.

40. Q: What is corruption in occupational fraud?

A: Using influence for personal gain through bribery, conflicts of interest, etc.

41. Q: What is financial statement fraud?

A: Manipulating financial reports to mislead stakeholders.

42. Q: What is the purpose of civil law in fraud cases?

A: To provide restitution to the victim.

43. Q: What is the purpose of criminal law in fraud cases?

A: To punish the offender.

44. Q: What are common investment frauds?

A: Ponzi schemes, telemarketing fraud, Nigerian scams, identity theft.

45. Q: What is identity theft?

A: Stealing personal data to commit fraud.

46. Q: What is telemarketing fraud?

A: Scamming victims over the phone with false claims.

47. Q: What is advance fee fraud?

A: Victim pays a fee expecting something of value that never arrives.

48. Q: What is vendor collusion fraud?

A: Vendors and employees work together to defraud a company.

49. Q: What is an example of miscellaneous fraud?

A: Any deception that doesn't fit standard categories.

50. Q: How do most Ponzi schemes collapse?

A: They run out of new investor money.

51. Q: What is redemption fraud?

A: A scheme claiming people can access secret government accounts.

52. Q: What is the difference between vendor and customer fraud?

A: Vendors overcharge or deliver poor goods; customers avoid or underpay.

53. Q: What is the CFE exam format?

A: Online, 4 parts, 125 questions each, completed in 30 days.

54. Q: How long is each CFE exam section?

A: 2.6 hours.

55. Q: What topics are tested on the CFE exam?

A: Fraud prevention, fraud schemes, investigation, law.

56. Q: What is racketeering?

A: Organized fraudulent activity often prosecuted under RICO.

57. Q: What is mail fraud?

A: Using postal service to commit fraud.

58. Q: What is securities fraud?

A: Misleading investors through false financial information.

59. Q: What is the Foreign Corrupt Practices Act (FCPA)?

A: Law that prohibits U.S. companies from bribing foreign officials.

60. Q: What is the Anti-Kickback Act?

A: Prohibits subcontractors from providing bribes to obtain contracts.

61. Q: What does 18 U.S. Code § 201 cover?

A: Bribery of public officials.

62. Q: What does 41 U.S. Code §§ 8701-8707 (Anti-Kickback Act) prohibit?

A: Kickbacks involving federal government contracts.

63. Q: What does 18 U.S. Code § 1341 define?

A: Mail fraud - using postal services to commit fraud.

64. Q: What does 18 U.S. Code § 1343 define?

A: Wire fraud - using electronic communications to commit fraud.

65. Q: What does 18 U.S. Code § 1344 define?

A: Bank fraud - defrauding financial institutions.

66. Q: What does 15 U.S. Code § 78j(b) and 17 CFR § 240.10b-5 cover?

A: Securities fraud including insider trading.

67. Q: What does 18 U.S. Code §§ 1961-1968 (RICO) target?

A: Racketeering and organized criminal activity.

68. Q: What does 18 U.S. Code § 1030 define?

A: Computer fraud and unauthorized access.

69. Q: What does 15 U.S. Code §§ 78dd-1 to 78dd-3 cover?

A: Foreign Corrupt Practices Act - prohibits bribing foreign officials.

70. Q: What does 18 U.S. Code § 1028 prohibit?

A: Identity theft and document fraud.

71. Q: What does 31 U.S. Code §§ 3729-3733 cover?

A: False Claims Act - liability for defrauding government programs.