Investigation of Financial Crime Pre-Test
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Course Introduction
This course explores the principles and practices involved in the detection, investigation, and prevention of financial crime. Students will examine the various forms of financial crime, including fraud, money laundering, insider trading, tax evasion, and corruption, and learn about the legal frameworks and regulatory bodies that address such offenses. The course covers investigative techniques, evidence gathering, forensic accounting, and the use of technology in financial crime investigations. Real-world case studies and current trends are analyzed to illustrate the complexities of financial crime and the challenges faced by professionals in both public and private sectors.
Recommended Textbook Fraud Examination 5th Edition by W. Steve Albrecht
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Chapter 1: The Nature of Fraud
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Q1) Which of the following statements is true?
A)Fraud usually results from unintentional errors.
B)Fraud is more violent and traumatic than robbery.
C)Fraud always involves deception, confidence and trickery.
D)Losses from fraud are less than losses from robbery.
Answer: C
Q2) What is required to prove fraud,as opposed to negligence?
A)Gross error
B)Intent
C)Preponderance of the evidence
D)Confession from the perpetrator
Answer: B
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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Chapter 2: Who Commits Fraud and Why
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Q1) The theory behind _____ is that if people know their work or activities will be monitored by others,the opportunity to commit and conceal a fraud will be reduced.
A)documentation
B)segregation of duties
C)system of authorizations
D)independent checks
Answer: D
Q2) Studies show that in advanced countries,levels of honesty are:
A)Generally stable
B)Increasing
C)Decreasing
Answer: C
Q3) According to the study mentioned in the text,people who commit fraud are most similar to which of the following groups?
A)Property offenders
B)College students
C)Convicted felons
D)Animal lovers
Answer: B
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Chapter 3: Fighting Fraud: an Overview
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Q1) What is the overall term for the investigative technique that includes gathering evidence through data mining,audits,computer searches,net worth calculations,and financial statement analysis?
A)Documentary evidence
B)Testimonial evidence
C)Physical evidence
D)Personal observation
Answer: A
Q2) Which of the following is a possible indication that fraud may be present?
A)An employee's spouse is diagnosed with Alzheimer's disease.
B)An employee's lifestyle changes suddenly.
C)An employee's spouse has a serious vehicle accident.
D)An employee reports that another employee is a gambling addict.
Answer: B
Q3) Which is the highest level in the ethical maturity model?
A)Ethical leadership
B)Ethical courage
C)Personal ethical understanding
D)Application of ethics to business situations
Answer: A
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Chapter 4: Preventing Fraud
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Q1) When only a very small amount of money has been embezzled:
A)taking no action is the best course of action.
B)the perpetrator should be punished by publishing the details of the fraud in the local newspapers.
C)the perpetrator should be prosecuted.
D)the company should transfer the perpetrator to a position with more supervision.
Q2) Which of the following explains the Pygmalion effect?
A)Employees who commit fraud are likely to do so more than once.
B)The probability of fraud detection increases with the number of people involved.
C)People generally perform according to a leader's expectations.
D)Absence of controls leads to increased incidents of dishonesty.
Q3) In order to detect fraud at the earliest,a manager should pay attention to:
A)present lifestyle.
B)past conduct.
C)attitude toward work.
D)absenteeism.
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Chapter 5: Recognizing the Symptoms of Fraud
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Q1) Which of the following appears to be common to most embezzlers who are caught?
A)Long-term focus
B)Investments made in low-risk instruments
C)Saving what they steal
D)Spending on lifestyle improvements
Q2) Which of the following is usually NOT a reason people hesitate to anonymously report their suspicions about an act of fraud?
A)The perpetrator has bullied them in the past.
B)The perpetrator is a friend who has helped them in the past.
C)The perpetrator is a relative.
D)The perpetrator is a neighbor.
Q3) Allowing the clerk who checked out customer A handle a return by that same individual without presenting the receipt would NOT be an example of which of the following internal controls?
A)lack of segregation of duties
B)lack of requiring proper documents and records
C)lack of independent checks
D)lack of an adequate accounting system
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Chapter 6: Data-Driven Fraud Detection
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Q1) Which of the following is a true statement regarding the United States Social Security Administration (U.S.SSA)?
A)The U.S.SSA publishes a monthly list of newly issued Social Security numbers.
B)The U.S.SSA publishes a monthly list of Social Security numbers that are no longer in use.
C)The U.S.SSA database of valid numbers can be accessed by interested parties.
D)The U.S.SSA database can be used to create mailing lists.
Q2) Benford's law:
A)applies to numbers that have built-in limits.
B)is most effectively used with assigned numbers.
C)applies best to numbers that occur naturally.
D)uses ratios to detect fraud.
Q3) Which of the following ratios can be used to assess a company's solvency?
A)Current Ratio
B)Return on assets
C)Times-interest-earned
D)Inventory turnover
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Chapter 7: Investigating Theft Acts
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Q1) Identify the first step in any electronic evidence collection process.
A)Seizure of the device
B)Automated search of the device
C)Clone the device
D)Do a manual reconnaissance
Q2) Undercover operations should be used only when:
A)large scale fraud is likely and other investigation methods fail.
B)controls are made so strict that opportunities to commit fraud are virtually impossible.
C)the investigation cannot be kept a secret.
D)there is a need to develop theories about what kind of fraud has occurred.
Q3) Subjects of covert operations are protected against unreasonable breaches of privacy under the ______ of the constitution.
A)Fourth Amendment
B)Fifth Amendment
C)Second Amendment
D)Seventh Amendment
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Chapter 8: Investigating Concealment
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Q1) An audit is part of which type of investigative method?
A)theft
B)conversion
C)concealment
D)inquiry
Q2) What is the most common way to obtain private documents (either oral or written)?
A)subpoena
B)search warrant
C)voluntary consent
D)audit
Q3) Which of the following statements about subpoenas is correct?
A)A subpoena can only be issued by agents of a grand jury or of the court.
B)A subpoena is one of the two ways to gain access to difficult to obtain information.
C)A subpoena must be signed by the chair of the grand jury.
D)A subpoena's only purpose is to access difficult to obtain documents.
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Chapter 9: Conversion Investigation Methods
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Q1) The Gramm-Leach Bliley Act prohibits:
A)telemarketers from selling information to corporations.
B)the use of false pretenses to access the personal information of others.
C)public from accessing the criminal database of FBI.
D)customers to opt out of information sharing.
Q2) Refer Data Set 9-1.Calculate the net worth of the individual at the end of year 1.
A)$3,000
B)$8,000
C)$0
D)$288,000
Q3) Which of the following is NOT public information on record with the Secretary of State through the Uniform Commercial Code?
A)the company articles of incorporation
B)the current board of directors
C)the corporation registered agent
D)the initial incorporators
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Chapter 10: Inquiry Methods and Fraud Reports
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Q1) Which is NOT a verbal clue that would place suspicion on an interviewee?
A)Frequent reference to good character
B)Eagerness to end the interview
C)Avoidance of emotionally charged terms
D)Answering with a question
Q2) The use of body movement to convey meaning is
A)Proxemic communication.
B)Kinetic communication.
C)Chronemic communication.
D)Paralinguistic communication.
Q3) Which response to ego threats is characterized by respondents not only refusing to?admit information,but also refusing to admit the information inwardly?
A)Denial
B)Disapproval
C)Loss of Status
D)Repression
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Chapter 11: Financial Statement Fraud
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Q1) Your audit team working with a newly acquired client,discovers that there has been fraudulent financial reporting for the past 5 years.Who is most likely to have been involved in the fraud?
A)Middle management in positions of trust
B)Disgruntled employees
C)Top management
D)The accountants in charge of preparing the financial statements
Q2) Which of the following is an example of a perceived opportunity that can lead to financial statement fraud?
A)Inability to compete with other companies
B)Independent audit and a strong board of directors
C)Thinking that fraud is good for the company
D)Inadequate internal controls
Q3) Frauds are more likely to occur in:
A)large, historically profitable companies.
B)companies with an active board of directors.
C)smaller companies where one or two individuals have almost all control in decision making.
D)any company, as the probability of a fraud does not change with the size of a company.
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Chapter 12: Revenue- and Inventory-Related Financial
Statement Frauds
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Q1) According to the text,why is the accounts receivable turnover ratio widely used in analyzing revenue-related fraud?
A)Significant amounts of fictitious revenues and receivables will almost always affect this ratio except in rare cases.
B)Adding fictitious receivables will generally decrease the number of days it takes to collect receivables.
C)If the ratio generally exceeds 1, recording fictitious sales will significantly increase the ratio, making it easy to spot fraud.
D)Since the ratio should ideally equal to 1, any deviation from this number is easy to detect.
Q2) Sales return percentage ratio is calculated by:
A)dividing sales returns by total sales.
B)dividing total sales by sales returns.
C)dividing sales returns by net sales.
D)dividing net sales by sales returns.
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Chapter 13: Liability, asset, and Inadequate Disclosure
Frauds
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Q1) Disclosure frauds occur through misrepresentations about the company or through what other intentional act?
A)omissions in the footnotes to the financial statements
B)falsely increasing sales
C)creating off-balance sheet accounts
D)conducting related-party transactions
Q2) Inadequate disclosure occurs when:
A)a company attempts to overstate assets to make their financial position look better.
B)management makes statements that are wrong in its annual report or any other media.
C)assets are not written down to their appropriate values because insufficient depreciation is recorded.
D)a company understates its liabilities and overstates its revenues and net income.
Q3) With liability fraud,which of the following is most likely to occur?
A)Liabilities will be overstated
B)Balances in general that relate to this fraud will tend to be low
C)Items will be expensed rather than capitalized
D)Net income will be understated
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Chapter 14: Fraud Against Organizations
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Q1) Which is the least common expense disbursement scheme?
A)Mischaracterizing expenses
B)Submitting the same expenses multiple times
C)Submitting fictitious expenses
D)Overstating expenses
Q2) Which of the following groups listed is most likely to perpetrate frauds against the organization?
A)customers
B)vendors
C)competitors
D)employees
Q3) A conflict of interest occurs when:
A)an employer knows of an employee's interest in a business deal or negotiation.
B)an employee has an economic or personal interest in a transaction that adversely affects the company.
C)employees offer, give, receive or solicit anything of value in order to influence an official act.
D)employees demand payments from vendors for deciding in the vendors' favor.
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Chapter 15: Consumer Fraud
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Q1) Which of the following is the limit set on consumers' credit card fraud liability by Federal law?
A)$50
B)$100
C)$150
D)$200
Q2) Which of the following statements defines shoulder surfing?
A)Criminals physically confront consumers forcing them to reveal their valuable information.
B)Criminals follow consumers to discover their buying habits.
C)Criminals sneak into victims' homes and steal their information.
D)Criminals watch consumers from a nearby location as they give credit card information over the phone
Q3) Which of the following is NOT an action to minimize your risk of identity theft?
A)opting out of pre-approved credit cards.
B)shredding mail that contains detailed information.
C)using strong passwords and changing them often.
D)using Social Security number on visiting cards.
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Chapter 16: Bankruptcy, divorce, and Tax Fraud
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Q1) Which of the following may indicate concealment of assets during a bankruptcy?
A)Large transfers of assets to related parties or individuals
B)Rapid reduction in assets
C)Missing, inaccurate, or damaged documents
D)All of the above
Q2) Which of the following has a lower fine dollar amount limit than the others?
A)willful failure to file return, supply information, or pay taxes
B)willful failure to collect or pay tax
C)attempt to evade or defeat tax
D)attempt to interfere in the administration of Internal Revenue laws
Q3) The Bankruptcy Fraud section of the Bankruptcy Code,as it relates to criminal fraud,makes it a crime to do which of the following in executing or concealing a fraud scheme?
A)File a bankruptcy petition
B)File a document in a bankruptcy proceeding
C)Make a false or fraudulent representation, claim, or promise with respect to a bankruptcy proceeding
D)All of the above
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Chapter 17: E-Commerce Fraud
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Q1) In an electronic environment,no other control can better prevent fraud than the wise use of _________.
A)digital certificates
B)biometrics
C)anti-virus software
D)passwords
Q2) What is the term for a method of injecting Javascript and other browser commands into the Web site data.
A)Database query injection
B)HTML
C)Cross-site scripting
D)Java
Q3) What is normally the primary concern in an electronic environment?
A)Financial statement fraud
B)Data theft
C)Theft of money
D)Asset misappropriation
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Chapter 18: Legal Follow-Up
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Q1) Carolyn Laney has just been convicted of mail fraud in a U.S.District Court.She is not satisfied with the judgment rendered by the court.What can she do next?
A)Appeal to the Supreme Court
B)Appeal the findings in one of 12 circuit courts of appeals
C)Appeal to a Probate Court
D)Nothing, as verdicts from the district courts cannot be appealed.
Q2) Collection under which type of fidelity bond hinges on absolute proof that an employee stole from the company?
A)Name schedule fidelity bond.
B)Blanket position bond.
C)Primary commercial blanket bond.
D)Wall Street bond.
Q3) During cross-examination,an expert witnesses should:
A)respond in general terms to questions that are difficult.
B)resist responding with simple yes or no answers that may be misleading without some qualification or explanation.
C)take your client's side by effectively playing an advocacy role.
D)not raise his/her voice to emphasize an important point.
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