Fraud Examination: Chapter 4

One way to create and communicate clear expectations about what is and is not acceptable in an organization is:

having a clearly defined code of conduct in place

A good fraud auditing involves four steps. What is the correct sequence?

Identifying fraud risk exposures; identifying the fraud symptoms of each exposure; building audit programs to proactively look for symptoms and exposures; and investigating fraud symptoms identified.

The correct order of the six elements of the fraud-fighting model is:

tone at the top; education and training; integrity risk and controls; reporting and monitoring; proactive detection; investigation and follow-up.

What are the key attributes for a low-fraud environment?

Honesty, openness, and assistance

In order to detect fraud at the earliest, a manager should pay attention to:

present lifestyle

One of the most important responsibilities of an employer is the hiring and retention of employees. Which of the following situations reflects the current market scenario?

High turnover, low loyalty

Developing and promoting a well-defined corporate code of conduct is related to which element of the fraud-fighting model?

Tone at the top

helps employees deal with substance abuse (alcohol and drugs), gambling, money management, and health, family, and personal problems?

Employee Assistance Programs

Which method will result in the biggest savings?

Fraud prevention—including EAP plans

Fraud is most commonly detected by:

tips and complaints

Recruitment interview questions that deal with an applicant’s race, sex, age, religion, color, national origin, or disability:

are usually prohibited unless the criterion is a bona fide occupational qualification

An employee recently bought three new cars and remodeled his/her home. These facts would be considered as a:

lifestyle symptom

Control activities can be grouped as preventive controls and detective controls.

independent checks

What is a purpose of proactive fraud auditing?

Its purpose is to deter employees from committing fraud

An operating condition that can contribute to a higher risk of fraud is:

management by crisis

An organization has a policy requiring the dual counting of all incoming cash receipts. Which control activity is being used here?

Segregation of duties

A company used computer auditing techniques to compare employees' telephone numbers with vendors' telephone numbers. This is an example of which step in a proactive fraud auditing?

Building audit programs to proactively look for symptoms and exposures

What does the acronym "EAP" stand for?

Employee Assistance Program

A "right-to-audit" clause:

alerts vendors that the company reserves the right to audit the vendor's books at any time.

When only a very small amount of money has been embezzled:

the perpetrator should be prosecuted.

What is the last stage in the current (default) model that most organizations typically use for dealing with fraud?

Resolution

What is the Pygmalion effect?

People generally perform according to a leader’s expectations.