Corporate Governance
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Course Introduction
Corporate Governance explores the frameworks, principles, and processes by which corporations are directed and controlled. The course examines the roles and responsibilities of stakeholders such as shareholders, boards of directors, executives, and regulators, with a focus on ethical decision-making, accountability, and transparency. Students will analyze key issues including board structure, executive compensation, risk management, and regulatory compliance, as well as the impact of corporate governance practices on organizational performance and reputation. Case studies and real-world examples are used to illustrate both the challenges and best practices in domestic and international contexts.
Recommended Textbook Fraud Examination 3rd Edition by W. Steve Albrecht
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Chapter 1: The Nature of Fraud
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Q1) Which one of the following is not a characteristic of a criminal proceeding?
A) Offense against society
B) More guilty than not guilty
C) Jury of 12 individuals
D) Only one claim may be heard at a time
Answer: B
Q2) Indirect fraud occurs when-
A) Embezzled money is transferred to your relative's account
B) Misuse of company equipment ( i.e. surfing the web during work hours)
C) Receiving a kickback from a vendor
D) Paying for unapproved lunches with the company expense account.
Answer: C
Q3) Which of the following is not an example of a fraud-fighting career?
A) Working for the criminal investigation division of the IRS.
B) Serving as an expert witness.
C) Maintaining the security of public records.
D) Defending an organization being sued in a civil case.
Answer: C
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3
Chapter 2: Why People Commit Fraud
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Q1) A smart fraudster usually manipulates which financial record in order to better avoid an audit trail?
A) Income statement.
B) Balance sheet.
C) Statement of cash flows.
D) Both B and C are correct.
Answer: A
Q2) Teaching and Training are examples of
A) Modeling
B) Labeling
C) Physical Safeguards
D) Independent Checks
Answer: B
Q3) What are some of the vices closely related to financial pressures?
A) Gambling
B) Drugs & alcohol
C) Expensive extramarital relationships
D) All of the above
Answer: D
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Page 4
Chapter 3: Fighting Fraud: An Overview
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Q1) Which of the following is the best way to create a culture of honesty and integrity?
A) Insist that top management model appropriate behavior
B) Hire the right kind of employees
C) Develop and maintain effective policies
D) All of the above
Answer: D
Q2) Which is one of the three basic elements of the fraud motivation triangle?
A) Concealment
B) Theft
C) Opportunity
D) Conversion
Answer: C
Q3) Which of the following are the most effective fraud detectors?
A) Auditors
B) Customers
C) Vendors
D) Employees
Answer: D
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Chapter 4: Preventing Fraud
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Q1) The following elements are crucial in creating a culture of honesty except:
A) Hiring qualified individuals
B) Implementing employee assistance programs
C) Developing an organizational code of conduct
D) Promoting an open-door policy
Q2) Each of the following personnel policies, operating conditions, and procedures appear to contribute to a high fraud environment EXCEPT:
A) Perceived inequalities in the organization and inadequate pay.
B) Inadequate expense accounts and unreasonable budget expectations
C) Proactive management
D) Managers with impulsive, insensitive, dominant, or emotional personalities
E) High employee turnover.
Q3) Random auditing for fraud
A) Creates an awareness of monitoring among employees
B) Can be less-cost effective
C) Is required by Sarbanes-Oxley
D) All of the above
Q4) True or False. Internal controls are "fraud proof".
A)True
B)False
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Chapter 5: Recognizing the Symptoms of Fraud
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Q1) Which of the following entries are not common symptoms of fraud?
A) Journal entries made near the end of an accounting period
B) Journal entries without documentary support
C) Journal entries that do not balance
D) All of the above are common symptoms of fraud.
Q2) Which of the following is an analytical anomaly that could be related to fraud?
A) Journal entries that lack documentation
B) Late charges that are incurred on Accounts Payable
C) Increased scrap
D) The fraud perpetrator increases his smoking habit
Q3) An insurance company received claim forms from 22 phony doctors. The forms all originated from two addresses: a post office box and a business located in a nearby city and owned by the manager's husband. The manager used a limousine to pick up fellow employees from an expensive restaurant. What fraud symptoms are mentioned in this scenario?
A) Accounting anomalies
B) Extravagant lifestyles
C) Internal control weaknesses
D) Both a and b
E) All of the above
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Chapter 6: Data-Driven Fraud Detection
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Q1) When a vendor takes control of a purchasing relationship, prices increase usually result from which kind of fraud?
A) Asset fraud
B) Kiting
C) Management fraud
D) Kickback fraud
Q2) Which of the following frauds would require a contractor and the company committing fraud to be in collusion?
A) Billing at wrong rates
B) Charging for fake employees
C) Kickbacks for favors
D) Over billing for equipment used
Q3) Benford's Law is best exemplified by what type of distribution curve?
A) First digit numbers are evenly distributed
B) First digit numbers do not follow a defined pattern
C) Number sets will begin with a 1, more often than a 2, a 2 more often than a 3, and so on
D) None of the above
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8
Chapter 7: Investigating Theft Acts
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Q1) Undercover operations are costly and time-consuming and should be used with extreme care. In which of the following situations would it be ineffective to conduct an undercover operation?
A) When Law enforcement authorities are informed.
B) When the investigation can be closely monitored
C) When other investigation methods are applicable
D) When the investigation can remain secretive
Q2) Characteristics of invigilation include which of the following?
A) A method of creating a loosely monitored environment that catches the fraudulent action
B) An inexpensive method to monitor the suspect for a short time period.
C) A method comparing regular periods with a temporary period of enhanced controls
D) A method of watching and recording physical facts and movement
Q3) Which of the following should not be the first step you take in a fraud investigation?
A) Interview employees who are not suspects
B) Check company records
C) Search public records
D) Interview suspects
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Chapter 8: Investigating Concealment
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Q1) __________ are commonly used by attorneys involved in litigation to track documents
A) RFID tags
B) Bates numbers
C) Bar codes
D) All of the above
Q2) The risk that an auditor examines a fraudulent check and does not recognize it as being fraudulent is called:
A) Sampling Risk
B) Non-Sampling Risk
C) Discovery Sampling Risk
D) Population Sampling Risk
Q3) Which of the following is not a type of Financial Statement Fraud?
A) Overstated revenues
B) Understated revenues
C) Stealing company money
D) Early revenue recognition
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Chapter 9: Conversion Investigation Methods
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Q1) Mandy calls a local newspaper and pretends to be a neighbor who is away for the winter. She obtains account history and orders newspaper service for six months. Has Mandy committed fraud?
A) No. The newspaper has not yet been delivered nor paid.
B) Yes. She is in violation of the Gramm-Leach Bliley Act of 1999.
C) No. Her neighbor can obtain all of the newspapers when they return next spring.
D) Yes. She has engaged in mail fraud, Title 18, U.S. Code Section 1344.
Q2) The_________ is a database that contains arrest and criminal records on a nationwide basis.
A) National Crime Information Center
B) Interstate Identification Index
C) National Prison Bureau Database
D) None of the above
Q3) After 1999, how could you obtain information from a financial institution?
A) Court Subpoena
B) Search warrants
C) False pretenses
D) Both a and b
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Chapter 10: Inquiry Methods and Fraud Reports
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Q1) Which of the following is the correct sequence of reactions to crisis?
A) Denial, anger, rationalization, depression, acceptance
B) Rationalization, anger, depression, acceptance, denial
C) Denial, depression, anger, rationalization, acceptance
D) Rationalization, depression, anger, denial, acceptance
Q2) Which of the following is not considered a normal response to an ego threat?
A) Repression
B) Disapproval
C) Loss of Status
D) Trauma
Q3) Guilty people almost never confess when it is conveyed that they are what type of person?
A) Bad
B) Considerate
C) Good
D) Friendly
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Chapter 11: Financial Statement Fraud
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Sample Questions
Q1) Which of the following is true?
A) Most financial statement frauds occur in large historically profitable companies.
B) Most people who commit management fraud are first-time offenders.
C) An active board of directors or audit committee does little to deter fraud.
D) Perpetrating fraud is much easier in an organization with democratic leadership, where the decision making is spread among several individuals
Q2) Which of the following is not a common way that financial statement fraud is perpetrated?
A) Improper revenue recognition
B) Overstating of assets
C) Understating expenses
D) Overstating liabilities
Q3) Revenue frauds are perpetrated by:
A) Improperly timing transactions
B) Recording receivables to fictitious customers
C) Overestimating the extent to which the earnings process has been completed
D) All of the above
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Chapter 12: Revenue- and Inventory-Related Financial Statement
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Q1) Which fraud is most difficult to perpetrate for multiple years?
A) Overstating inventory - because last year's overstatement must be offset in the current year.
B) Overstating inventory - because physical assets are easily audited making it easy to detect inventory fraud in the long run
C) Overstating revenue - because auditors focus the most attention on revenue recognition
D) Overstating revenue - because it is difficult to create fake cash year after year
Q2) Inventory fraud often involves overstating inventory and/or understating cost of goods sold. The result is a decrease in the:
A) Gross profit ratio
B) Inventory turnover ratio
C) Number of days sales in inventory
D) Two of the above
E) All of the above
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14
Chapter 13: Liability, Asset, and Inadequate Disclosure
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Q1) Which of the following is NOT a method for understating liabilities?
A) Record unearned revenues as earned revenues
B) Recording payments in later periods, when they are actually paid
C) Borrow against equities in assets
D) Write off liabilities
Q2) Analytical symptoms for unrecorded notes payable involve which of the following?
A) Significant increases in recorded debt
B) Unreasonable relationships between interest expense and recorded liabilities
C) Reported notes appear too high
D) None of the above
Q3) Which of the following is usually the hardest fraud to detect?
A) Liability fraud.
B) Revenue fraud.
C) Asset fraud.
D) Disclosure fraud.
Q4) Which of the following is most helpful for detecting liability frauds?
A) Documents with banks and financial institutions
B) Interviews with shipping personnel
C) Lifestyle changes of upper management
D) Ratios that suggest liabilities are overstated
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Chapter 14: Fraud Against Organizations
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Q1) Lapping is:
A) Stealing one customer's payment and then crediting that customer's account with a subsequent customer's payment.
B) Stealing cash from an organization prior to the organization's accounting system recording the cash receipt.
C) Helping a vendor illegally obtain a contract that should have involved competitive bidding.
D) None of the above.
Q2) Thefts of inventory are divided into which of the following two groups:
A) Corruption and bribery
B) Expense scheme and skimming
C) Economic extortion and illegal gratuities
D) Larceny and misuse
Q3) According to the text, which of the following is the least costly of all disbursement schemes?
A) Check tampering schemes
B) Personal expense schemes
C) Billing schemes
D) Payroll schemes
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Page 16
Chapter 15: Consumer Fraud
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Q1) Cookies on the World Wide Web can be used to:
A) Force users to click on certain links to leave a web page
B) Gather personal and confidential information about a consumer
C) Steal social security numbers from email messages
D) Initiate popups to unknown sites
Q2) According to the Federal Trade Commission, the largest type of consumer fraud is:
A) Identity theft
B) Bogus MLMs
C) Magazine fraud
D) Telephone fraud
Q3) Common identity theft methods include all of the following, except:
A) Filing for bankruptcy in the victim's name
B) Opening new bank accounts in the victim's name
C) Changing a victim's mailing address
D) Destroying personal property, such as a home or car
Q4) Fraudsters might complete a change of address form at the local post office:
A) To redirect their mail when investigations are discovered
B) To have a victim's mail sent to an alternative address as part of an identity theft scheme
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Chapter 16: Bankruptcy, Divorce, and Tax Fraud
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Q1) Criminal bankruptcy fraud cases are generally prosecuted by the:
A) U.S. Attorney's office
B) FBI
C) CIA
D) District Attorney's office
Q2) The Concealment of Assets, False Oaths and Claims, and Bribery section of the USC makes it a crime to "knowingly and fraudulently" do all of the following EXCEPT:
A) Receive property from the debtor after bankruptcy is filed
B) Conceal records or property
C) Transfer property to the debtor
D) Make a false statement
Q3) In dealing with divorce and bankruptcy, when books and records of the debtor/marital partner have been destroyed or are hard to locate it generally means:
A) Fraud has caused the bankruptcy or divorce
B) The bankruptcy or divorce is used to perpetrate the fraud
C) The bankruptcy or divorce is used to conceal the fraud
D) None of the above
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Chapter 17: Fraud in E-Commerce
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Q1) Which of the five elements of internal controls is least effective in preventing fraud in e-commerce?
A) Monitoring
B) the control environment
C) risk assessment
D) control activities and procedures
Q2) Which of the following is not a risk associated with doing e-business?
A) Data Theft
B) Sniffing
C) Spoofing
D) Vendor impersonation
E) All of the above are risks associated with doing e-business
Q3) Which activity is used legitimately by companies to monitor network traffic, but may also be used illegally to capture confidential information?
A) Sniffing
B) Spoofing
C) Hijacking
D) Impersonation
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19
Chapter 18: Legal Follow-Up
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Q1) In every civil case there are four basic stages. Which of the following is not one of the basic stages?
A) Investigation and pleadings
B) Discovery
C) Motion practice and negotiation
D) All are correct
Q2) Which of the following is not a difference between civil and criminal law?
A) Juries in civil cases may have as many as 6 jurors compared to the 12 required by criminal cases.
B) Civil cases are often heard by judges instead of jurors.
C) Criminal law deals with offences of a public nature whereas civil law deals with offences against society as a whole.
D) A unanimous jury decision is required in criminal cases but not in civil cases.
Q3) A written declaration given under oath is known as:
A) an affidavit
B) an admission
C) a deposition
D) a testimony
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