Course Introduction
Fraud Examination
Final Test Solutions
Fraud Examination introduces students to the principles and methodologies used to detect, investigate, and prevent fraudulent financial activities within organizations. The course covers types of occupational fraud, common schemes, legal aspects, and the role of ethics and corporate governance in combating fraud. Students learn to examine internal controls, conduct interviews, analyze red flags, and use forensic accounting techniques to uncover fraudulent behavior. Emphasis is placed on real-world cases, the responsibilities of fraud examiners, and the steps involved in compiling evidence for litigation or organizational action.
Recommended Textbook Fraud Examination 3rd Edition by W. Steve Albrecht
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18 Chapters
929 Verified Questions
929 Flashcards
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Page 2
Chapter 1: The Nature of Fraud
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Sample Questions
Q1) Which legal code makes the bribing of public officials illegal?
A) Title 18, US Code Section 201
B) Title 41, US Code Section 51 to 58
C) Title 18, U.S. Code Section 1341
D) 18, U.S. Code Section 1344
Answer: A
Q2) A company is a victim of a $414 million fraud. At that time its profit margin is 10%. How much additional revenue should the company generate in order to recover the effect on net income?
A) $41.4 million
B) $414 million
C) $4.14 billion
D) $41.4 billion
Answer: C
Q3) The most common fraud committed on behalf of an organization is:
A) Vendor fraud
B) Employee embezzlement
C) Fraudulent financial reporting
D) Customer fraud
Answer: C
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Chapter 2: Why People Commit Fraud
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56 Verified Questions
56 Flashcards
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Sample Questions
Q1) What is the most important element of the control environment?
A) Management's communication
B) Management's role and example
C) The hiring process
D) The internal audit department
Answer: B
Q2) The fraud triangle includes all of the following except for:
A) Validation
B) Perceived opportunity
C) Rationalization
D) Perceived pressure
Answer: A
Q3) Which of the following is not a component of the internal control structure?
A) Control Environment
B) Accounting System
C) Management Operations
D) Control Activities
Answer: C
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Chapter 3: Fighting Fraud: An Overview
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Sample Questions
Q1) Of the key activities related to fraud, which of the following is the most important and perhaps the most profitable?
A) Follow-up legal action/resolution
B) Early fraud detection
C) Fraud investigation
D) Fraud prevention
Answer: D
Q2) In order to create a culture of honesty and integrity, all of the following should prevail except
A) Hire the right employees
B) Have an indulgent manager
C) Communicate expectations
D) Create a positive environment
Answer: B
Q3) All of the following factors can be associated with high levels of fraud except:
A) Top management that does not pay attention to appropriate behavior
B) Lack of recognition of job performance
C) Unrealistically low pay
D) Lack of understanding of different department functions
Answer: D
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Chapter 4: Preventing Fraud
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Sample Questions
Q1) The following are (is a) good control(s) for preventing fraud
A) Physical control/proper authorization
B) Segregation of Duties
C) Independent checks
D) Documents and records
E) Both A and B
Q2) The key factors of a good internal control system includes
A) Accounting system including information that is valid, complete, and timely
B) Physical control of assets
C) Segregation of duties
D) All of the above
Q3) Collusion involves which of the following?
A) Employees working with other employees in the company
B) Employees working with others outside the company, such as vendors
C) All of the above
D) None 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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Sample Questions
Q1) 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
Q2) People who can delay gratification rarely embezzle.
A)True
B)False
Q3) Choose the answer that is NOT a common example of an analytical anomaly.
A) Increased volume with increased cost per unit
B) Increased revenues with increased inventory
C) Increased revenues with decreased receivables
D) Increased inventory with decreased payables
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7
Chapter 6: Data-Driven Fraud Detection
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55 Flashcards
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Sample Questions
Q1) Detecting fraud through financial statement ratios is much easier than assessing changes in the financial statement numbers themselves because:
A) They are sensitive to changes in key variables
B) Benchmarks are known
C) All of the above
D) None of the above
Q2) True or false: Spreadsheets are not very useful in analyzing large amounts of data.
A) True
B) False
Q3) Benford's Law states that the most likely first digit of any randomly selected number will be which of the following?
A) 1
B) 7
C) 3
D) 4
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8
Chapter 7: Investigating Theft Acts
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Sample Questions
Q1) 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
Q2) Legal undercover operations are __________ and ____________ and should be used with extreme care. (Choose the option that best describes legal undercover operations.)
A) Costly, time-consuming
B) Fun , exciting
C) Invasive, embarrassing
D) Quick, Dangerous
Q3) All of the following could be used in an investigation of suspected kickbacks except:
A) Interview unsuccessful buyers
B) Search public records to gather evidence about the person's lifestyle
C) Check the employee's personnel records of financial difficulties
D) Interview unsuccessful vendors
E) All of above could be used in the investigation
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9
Chapter 8: Investigating Concealment
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Sample Questions
Q1) Which of the following terms describes the risk that the sample is not representative of the population?
A) Errors
B) Non-sampling risk
C) Sampling risk
D) Detection risk
Q2) Which of the following does not appear on a check, which has been cashed?
A) Teller number
B) Date
C) Transaction number
D) Time of the transaction
Q3) All of the following information can be obtained from a cancelled check except:
A) Account number of the maker
B) Account number of the person who presented the check
C) A trail of all people who transferred the check (assignees and assignors)
D) Nature of transaction (cashed, deposited, presented for payment)
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10
Chapter 9: Conversion Investigation Methods
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Sample Questions
Q1) 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
Q2) Which of the following is false?
A) Rarely do perpetrators save what they steal.
B) Conversion searches are performed to find out more about a suspect's life
C) Conversion searches are performed to gather evidence to be used in interrogations.
D) Public records searches are preferred to uncover concealment attempts.
Q3) Why do most fraud perpetrators initiate fraudulent activity?
A) To increase their savings account
B) To meet a perceived critical need
C) To improve their lifestyle
D) All of the above
Q4) True or false: Federal records are usually more useful than state and local records when investigating fraud.
A)True
B)False
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Chapter 10: Inquiry Methods and Fraud Reports
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Sample Questions
Q1) Which of the following are TRUE concerning signed statements?
A) Allow the confessor to draft the statement,
B) The statement's wording should be general,
C) Declarants should read and sign the statement without undue delay,
D) Two people are legally required to witness the signing of the statement
Q2) A person will generally confess when
A) There is doubt in the mind of the accuser as to his or her guilt
B) They perceive the benefits of confession outweigh the penalties,
C) The accuser has reasonable suspicion or predication to believe the accused has committed an offense,
D) The accuser conveys the accused as a "bad person"
Q3) Which of the following is something that an interviewee might do or feel while in the denial phase?
A) Insult, harm, or slander the interviewer
B) Attempt to justify the act of the fraud
C) Become sad, withdraw, or lose interest in the fraud
D) The interviewee may lack comprehension of what the interviewer has said about the fraud.
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Chapter 11: Financial Statement Fraud
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39 Verified Questions
39 Flashcards
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Sample Questions
Q1) The termination of an auditor-auditee relationship can be caused by all but which of the following?
A) Failure of the client to pay
B) Auditor-auditee disagreement
C) Auditor's suspicion of fraud
D) State government mandate to break long term audit relationships
Q2) Which of the following reasons for an organization to change auditors would not be a concern to a successor auditor or an investor?
A) Failure of the client to pay the auditor
B) Auditee's view that the fees are too high
C) Auditor suspicious of fraud or other problems
D) Auditor-auditee disagreement
Q3) Lifestyle changes are usually not factors in detecting A) investment scams.
B) kickback schemes.
C) bankruptcy fraud.
D) financial statement fraud.
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Chapter 12: Revenue- and Inventory-Related Financial Statement
Frauds
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Sample Questions
Q1) According to a COSO-sponsored study, most companies committing financial statement fraud had all of the following characteristics except:
A) The companies were large
B) The companies had inactive audit committees
C) The companies had family members among directors or officers
D) all of the above
Q2) When analyzing ratios, what is typically the most important aspect to evaluate?
A) the size of the ratio
B) the direction of the ratio
C) the change in the ratio
D) the complexity of the ratio
Q3) Which accounts are most commonly manipulated in a financial statement fraud?
A) Revenues/ receivables
B) Inventory/ COGS
C) Long-term liabilities
D) Short-term liabilities
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14
Chapter 13: Liability, Asset, and Inadequate Disclosure
Frauds
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Sample Questions
Q1) An auditor's inquiries of management might include which of the following?
A) Related-party transactions
B) Contingent liabilities
C) Contractual obligations
D) All of the above are correct
Q2) Regarding deferred revenue liabilities, revenues can generally be recognized when a company:
A) Receives an order for a product
B) Produces a product that corresponds with a received order
C) Ships a product to a customer
D) Receives confirmation that a product has been received by a customer
Q3) Which of the following is usually the hardest fraud to detect?
A) Liability fraud.
B) Revenue fraud.
C) Asset fraud.
D) Disclosure fraud.
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Chapter 14: Fraud Against Organizations
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Sample Questions
Q1) All of the following are possible ways to commit fraud by using a payroll scheme except:
A) Overstating expenses that will be reimbursed
B) Falsify hours worked
C) Creating ghost employees
D) Commission scheme
Q2) A conflict of interest is corruption that can be defined as:
A) Offering, giving, receiving or soliciting anything of value in order to influence an official act
B) Corrupt employees demand payments from vendors for deciding in the vendors' favor
C) Corrupt employees are rewarded for making favorable decisions
D) The employee has an undisclosed economic or personal stake in a transaction that adversely affects the company
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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Chapter 15: Consumer Fraud
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Sample Questions
Q1) The process whereby representatives of Multi-level Marketing companies are required to buy large, expensive amounts of inventory is called:
A) Ground Floor Opportunity
B) Snake Oil
C) Front Loading
D) Headhunter Fees
Q2) Which organization should victims of identity theft contact first?
A) Social Security Office
B) A local police department
C) The victim's credit organization, such as Trans Union, Equifax, or Experian.
D) Federal Trade Commission
Q3) The Gramm-Leach-Bliley Act:
A) Gives financial institutions the right to share personal information for a profit
B) Prevents financial institutions from sharing personal information for a profit
C) Allows financial institutions to share personal information, as long as it is not for a profit
D) Prevents financial institutions from sharing personal information in any form
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Chapter 16: Bankruptcy, Divorce, and Tax Fraud
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Sample Questions
Q1) Which is the type of bankruptcy that allows large companies to reorganize themselves and pay off debt in the future?
A) Chapter 3
B) Chapter 5
C) Chapter 7
D) Chapter 11
E) Chapter 13
Q2) The duties of the court-appointed trustee in a chapter 11 case include all of the following except:
A) Investigate the acts, assets, liabilities, and financial condition of the debtor
B) Examine proofs of claims
C) Collect and liquidate the property of the debtor's estate
D) All of the above are duties of a court-appointed trustee
Q3) The concealment of assets during or in contemplation of a bankruptcy is:
A) Often used in divorce cases
B) Often used in a planned bankruptcy
C) How a bust-out is designed
D) All of the above
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18
Chapter 17: Fraud in E-Commerce
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Sample Questions
Q1) Which of the following examples illustrates sniffing?
A) A fraudster impersonating a customer and buying equipment on the customer's account.
B) A fraudster viewing design data of a special project that is being transferred over a network.
C) A fraudster using another employee's passwords to access sensitive information.
D) An internet site mimicking another site by using .com instead of .org.
Q2) Which of the following is not a type/category of control activities?
A) Adequate separation of duties (useful for making sure that individuals who authorize transactions are different from those who execute them)
B) Adequate documents and records (documents and records are the physical objects by which transactions are entered and summarized and can be the audit trail by which auditors can investigate wrongdoings)
C) Proper authorization of transactions and activities (most common controls in e-business include passwords, firewalls, digital signatures, and biometrics)
D) Use of internal auditors
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19
Chapter 18: Legal Follow-Up
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Sample Questions
Q1) During the deposition, good expert witnesses should do all of the following except:
A) Listen carefully to the questions to make sure they hear exactly what is being asked
B) Voluntarily talk about something that is important but the attorney didn't ask
C) Before answering, experts pause to give the attorneys for their side an opportunity to object to the question.
D) Not to answer specific questions if instructed by their attorneys.
Q2) Which of the stages of the civil litigation process tends to be the most difficult, time consuming, and expensive part of the litigation?
A) Investigation and Pleadings
B) Discovery
C) Trial and Appeal
D) Motion practice and Negotiation
Q3) Which type of trial uses pre-trial depositions?
A) Criminal
B) Civil
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