Fraud Examination Exam 1

Future careers in fraud will most likely be:

in high demand and financially rewarding.

When fraud is committed, criminal prosecution usually proceeds before civil litigation.

True

Fraud involves using physical force to take something from someone.

False

Which of the following is required to become a CFE?

All of these are required to become a CFE

Which of the following is not true regarding the ACFE.

A negative outcome in a civil lawsuit usually results in jail time for the perpetrator.

False

It is most often people who are not trusted who commit fraud.

False

Fraud fighting can include which of the following type(s) of careers?

Professors

b. Lawyers

c. CPA firms

d. All of thes

Most experts agree that fraud-related careers will be in demand in the future.

True

People who commit fraud are usually:

trusted individuals

When perpetrators are criminally convicted of fraud, they often serve jail sentences and/or pay fines.

True

Which of the following is not an important element of fraud?

Intelligence

Which of the following is the least reliable resource for fraud statistics?

Fraud perpetrators

Why does fraud seem to be increasing at such an alarming rate?

Computers, the Internet, and technology make fraud easier to commit.

Studying fraud will help you:

Learn evidence-gathering skills.

b. Avoid high-risk and fraudulent activities.

c. Learn valuable interviewing skills.

d. All of these.

Which of the following is not a form of vendor fraud?

Not paying for goods purchased

Management fraud is when managers intentionally deceive their employees about the potential of raises, vacations, and other perks.

False

The only group/business that must report employee embezzlement is the federal government.

false

Identity theft is an example of employee embezzlement.

false

Advances in technology have had no effect either on the size or frequency of fraud or on the detection or investigation of fraud.

false

Which of the following is not an element of fraud?

Accidental behavior

Manufacturing companies with a profit margin of 10 percent must usually generate about 10 times as much revenue as the dollar amount of the fraud in order to restore net income to its pre-fraud level.

true

One of the most common responses to fraud is disbelief by those around the fraud.

True

Companies that commit financial statement fraud are often experiencing net losses or have profits that are significantly lower than expectations.

True

Unintentional errors in financial statements are a form of fraud.

false

The use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization's resources or assets" is the definition of which of the following types of fraud?

Employee embezzlement or occupational fraud

Fraud is considered to be:

a serious problem that continues to grow.

Which of the following is not true of civil litigation?

It must be heard by 12 jurors.

Fraud losses generally reduce a firm's income on a dollar-for-dollar basis.

True

Investment scams most often include:

a. worthless investments or assets sold to unsuspecting investors.

"Intentional manipulation of financial statements" describes which kind of fraud?

Management fraud

A Ponzi scheme is considered to be a type of investment scam.

True

In vendor fraud, customers don't pay for goods purchased.

False

Indirect fraud occurs when a company's assets go directly into the perpetrator's pockets without the involvement of third parties.

False

A fraud may be perpetrated through an unintentional mistake.

False

Which of the following statements is true?

b. Fraud is often labeled the fastest-growing type of crime.

Corporate employee fraud-fighters:

prevent, detect, and investigate fraud within a company.

Management fraud is deception perpetrated by an organization's top management.

True

Occupational fraud is fraud committed on behalf of an organization.

False

What is the best way to minimize fraud expense within an organization?

d. Effective prevention of fraud

Civil law performs which of the following functions?

Remedy for violation of private rights

All frauds that are detected by organizations are made public.

False

In civil cases, fraud experts are rarely used as expert witnesses.

False

There is no difference between a Certified Fraud Examiner (CFE) and a Certified Public Accountant (CPA).

False

Despite intense measures meant to impede it, fraud appears to be one of the fastest-growing crimes in the United States.

True

Which of the following is not an example of employee embezzlement?

Angry employees vandalizing the building with spray paint

Many companies try to hide their losses from fraud rather than make them public.

True

Which of the following characters is least likely to be involved in a fraud?

d. A long-haired teenager wearing leather pants

Which of the following is not an example of vendor fraud?

c. A vendor has much higher prices than its competitors.

What is the most important element in successful fraud schemes?

b. Confidence in the perpetrator

Perpetrators use trickery, confidence, and deception to commit fraud.

True

Fraud perpetrators are often those who are least suspected and most trusted.

True

The ACFE is a nonprofit organization dedicated to the prevention and dedication of fraud throughout the world.

True

Which of the following is not a common type of fraud?

Executives embezzling from petty cash

Power is rarely used to influence another person to participate in an already existing fraud scheme.

False

Some frauds are allowed to be perpetrated because victims don't have access to information possessed by the perpetrators.

True

A proper system of authorization will help ensure good internal controls.

True

An individual who owns their own business and is the sole employee needs many internal control activities.

False

Appropriate hiring will not decrease an organization's risk of fraud.

False

Many organizations merely dismiss dishonest employees because of the expense and time involved in prosecuting them.

true

Fraud perpetrators who are prosecuted, incarcerated, or severely punished usually commit fraud again.

false

Fraud can be perpetrated to benefit oneself or to benefit one's organization.

True

The greater the perceived opportunity or more intense the pressure, the less rationalization it takes for someone to commit fraud.

True

Effective fraud-fighters usually put most of their time and effort into minimizing the pressures for fraud perpetrators to commit fraud.

False

Good internal controls will often increase opportunities for individuals to commit fraud within an organization.

False

Management's example or modeling is of little importance to the control environment.

False

The three elements of the fraud triangle are a perceived pressure, a perceived opportunity, and rationalization.

True

When hiring, it is usually difficult to know which employees are capable of committing fraud, especially without performing thorough background checks.

True

Which of the following is an example of referent power?

Your friend asks you to do a special favor for them.

Which of the following is an example of legitimate power?

Your boss tells you to do something.

Which of the following is not an element of most frauds?

Breaking and entering

Which of the following is not a way that management can establish a good internal control environment?

All of these are ways that management can establish a good internal control environment.

Which of the following is not a common vice that motivates people to commit fraud?

e. All of these are vices that motivate people to commit fraud.

Which of the following is not an internal control activity (procedure)?

Appropriate hiring procedures

On what element of the fraud triangle do most fraud-fighters usually focus all or most of their fraud preventive efforts?

Perceived opportunity

It is the_____ and _____of existing controls, not the _____of controls, that allows most frauds to be perpetrated.

d. overriding, ignoring, lack

Which of the following is not a primary control activity?

c. Decreasing work-related pressure

Which of the following kinds of pressures are most often associated with fraud?

b. Financial pressures

How frequently do most people rationalize?

often

Who generally has the highest risk of becoming a fraud victim?

b. Older, less educated people

Which of the following non-control factors provides opportunities for fraud?

e. All of these provide opportunities for fraud.

Which of the following is not one of the three elements of the control system of an organization?

Management

Fraud opportunity involves:

. opportunity to conceal fraud.

b. opportunity to avoid being punished for fraud.

c. opportunity to commit fraud.

d. All of these.

Which of the following is probably the least common type of fraud pressure?

. Pressure to outsmart peers

If pressures and opportunities are high and personal integrity is low, the chance of fraud is:

high

Which of the following is a common perceived pressure?

A financial need

Which of the following is not one of the three elements of the fraud triangle?

Intelligence

Fraud perpetrators:

have profiles that look like most honest people.

Most investigators rely heavily on interviews to obtain the truth.

True

Fraud prevention involves two fundamental activities: (1) a hotline for tips and (2) assessing the risk of fraud and developing concrete responses to mitigate the risks and eliminate opportunities for fraud.

False

The most effective way to reduce losses from fraud is:

preventing fraud from occurring.

Factors that are usually associated with high levels of employee fraud include all of the following except:

d. long and difficult hours shared equally by everyone in the organization.

"Predication of fraud" is defined as:

b. reasonable belief that fraud has occurred or is occurring.

Once predication is present, an investigation is usually undertaken to determine whether or not fraud is actually occurring.

True

The best way for management to model appropriate behavior is to:

set an example of appropriate behavior.

No matter how well an organization has developed a culture of honesty and high ethics, most organizations will still have some fraud.

True

Investigating fraud is the most cost-effective way to reduce losses from fraud.

False

Legal action taken by an organization can affect the probability of whether fraud will recur.

True

Which of the four types of evidence includes interrogation and honesty testing?

Testimonial

Physical evidence includes evidence gathered from paper, computers, and other written documents.

False