chapter 5 acc 660 fraud

1 Which of the following is NOT a common symptom of journal entry fraud?

Journal entries made by authorized individuals only

2 What is one indication of faulty journal entries?

Journal entries made without documentary support

3 Which of the following is an example of an accounting anomaly?

Inaccuracies in ledgers

4 What is the basic accounting equation?

Assets = Liabilities + Owner's Equity

5 Which of the following is a signal of behavioral changes due to fraud?

Unusual irritability or suspiciousness

6 Which of the following is true about behavior changes in fraud perpetrators?

People may behave opposite of their usual behavior

7 What are the three parts of the fraud element triangle?

Theft Act, Concealment, Conversion

8 In fraud detection, which element might involve altered records or miscounts?

Concealment

9 Lifestyle changes like sudden luxury purchases typically point to which fraud element?

Conversion

10 What is the most common internal control weakness observed in fraud?

Overriding of existing controls

11 Which of the following is a symptom involving source documents?

Stale items on bank reconciliations

12 Analytical symptoms are identified through:

Unusual financial statement relationships or unrealistic patterns

13 Which of the following is NOT a typical analytical fraud symptom?

Verified increase in legitimate transactions

14 Why are auditors often unable to detect fraud?

Because fraud is hidden and auditors may not be in a position to see symptoms

15 Which symptom involves employees living beyond their means?

Extravagant lifestyle

16 What is the main reason most fraud perpetrators continue to steal?

To support an improved lifestyle

17 What symptom category includes complaints by coworkers?

Tips and complaints

18 What is a drawback of relying solely on tips and complaints?

Many are motivated by malice or personal reasons

19 What is required by the Sarbanes-Oxley Act regarding whistleblowers?

Public companies must implement a whistle-blower system

20 What is one benefit of the Dodd-Frank Act for whistleblowers?

Financial rewards for providing tips

21 Which of the following is a symptom of internal control weakness?

Lack of segregation of duties

22 Why do some people hesitate to report fraud?

Fear of reprisal or being seen as a whistle-blower

23 What is one red flag in ledger balances?

Debits do not equal credits

24 Which of the following would be considered a behavioral symptom of fraud?

Increased drinking or drug use

25 A person who becomes overly defensive and argumentative may be showing:

Behavioral changes due to fraud

26 Common fraud symptom found in journal entries near the end of a period is:

Timing manipulation or false adjustments

27 Which fraud symptom may indicate a forced balance?

Unexplained adjustments to reconcile accounts

28 What symptom is indicated by duplicate payments to the same vendor?

Unusual financial activity in the payables ledger

29 Why might fraudsters avoid vacations?

They fear their scheme will be discovered in their absence

30 Which of the following is a strong tip source in fraud detection?

Coworkers who notice lifestyle or behavior changes

31 Which system feature reduces the likelihood of fraud?

System-enforced segregation of duties

32 What is the significance of backdated journal entries?

They may indicate intentional misstatement of transaction timing

33 Why are unexpected budget variances important in fraud detection?

They may signal intentional manipulation or errors

34 Why might fraud symptoms go unnoticed during routine audits?

Symptoms are often subtle and hidden among legitimate activity

35 A mismatch between a vendor invoice and purchase order may signal:

Fictitious or inflated billing

36 An employee consistently overriding internal controls could indicate:

A management override used to commit fraud

37 In small businesses, internal control weaknesses are common because:

There are fewer employees to segregate duties

38 Which analytical symptom might raise a fraud red flag?

Unusual relationships between financial ratios over time

39 The concealment stage of fraud typically includes:

Forging documents or destroying evidence

40 What type of symptom is detected by comparing employee spending to income?

Lifestyle symptom

41 When comparing payroll records to actual employees, a red flag might be:

Phantom employees

42 What is an example of unusual behavior indicating fraud?

Sudden defensiveness or working excessive overtime

43 A sudden drop in inventory shrinkage following a termination may indicate:

The terminated employee was responsible for theft

44 Which type of symptom often leads directly to detection?

Tips and complaints

45 Why is comparing vendor addresses to employee addresses useful?

It can reveal conflicts of interest or shell companies

46 What should an organization do after detecting a fraud symptom?

Investigate using a structured process and document findings