Occupational Fraud and Abuse Final Exam
Course Introduction
This course explores the principles, typologies, and real-world implications of occupational fraud and abuse within organizations. Students will examine common fraud schemes, including asset misappropriation, corruption, and financial statement fraud, as well as the behavioral red flags and motivations behind such misconduct. The curriculum covers methods for prevention, detection, and investigation, highlighting the role of internal controls and ethical frameworks. Through case studies and regulatory analysis, learners gain practical skills to assess vulnerability, implement anti-fraud measures, and contribute to ethical organizational cultures.
Recommended Textbook
Forensic Accounting and Fraud Examination 1st Edition by Mary Jo Kranacher
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16 Chapters
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Page 2
Chapter 1: Core Foundation Related to Fraud Examination and
Financial Forensics
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71 Verified Questions
71 Flashcards
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Sample Questions
Q1) One of the best ways to ruin an investigation, fail to gain a conviction, or lose a civil case is to base investigative conclusions on logic and conjecture.
A)True
B)False
Answer: True
Q2) Practically speaking, the law generally recognizes a fiduciary duty:
A) for cashiers and accountants.
B) for ordinary employees handling cash and valuables.
C) for officers and directors of a company.
D) All of the above are recognized as having a fiduciary duty.
Answer: C
Q3) M/C Fraud deterrence begins:
A) with the employer's internal controls.
B) in the employee's mind.
C) with the fraud examination.
D) with regulatory and legal actions such as PCAOB Auditing Standard No. 5, AICPA
Statement on Auditing Standards SAS No. 99, and the Sarbanes-Oxley Act.
Answer: B
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Chapter 2: Careers in Fraud Examination and Financial
Forensics
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68 Verified Questions
68 Flashcards
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Sample Questions
Q1) This accreditation has been approved by the U.S. Department of Defense DoD for information management.
A) Information Systems Audit and Control Association ISACA
B) Certified Information Security Manager CISM.
C) Certified Information Systems Analyst CISA
D) Each of the above is accredited by the U.S. Department of Defense.
Answer: B
Q2) Other than accounting, which disciplines do fraud examination and financial forensics encompass?
Answer: In addition to accounting, fraud examination and financial forensics include finance, economics, law, psychology, sociology, criminology, information technology, business management, and communications.
Q3) Due to a greater degree of oversight and audits, frauds in not-for-profit organizations generally do not last as long as those in the private sector and usually result in less lost values.
A)True
B)False
Answer: False
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Chapter 3: Who Commits Fraud and Why: Criminology and Ethics
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Sample Questions
Q1) Large frauds are typically associated with all of the following except:
A) Lack of segregation of duties and responsibilities.
B) Placing undeserved trust in key employees.
C) Operating on a crisis basis
D) Working with management to set realistic goals
Answer: D
Q2) Compare and contrast Cressey's and Albrecht's theories of crime causation.
Answer: Although Cressey focused on embezzlement and Albrecht focused on occupational frauds, their elements were very similar. According to Albrecht, three elements must be present for a fraud to be committed: a situational pressure, a perceived opportunity to commit and conceal the dishonest act, and some way to rationalize verbalize the act as either being inconsistent with one's personal level of integrity or justifiable. According to Cressey, the three elements are perceived pressure or a nonshareable financial pressure, a way to secretly resolve the dishonest act or the lack of deterrence by management via a perceived opportunity, and finally some way to rationalize the act, because the perpetrator does not see him or herself as a criminal.
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Chapter 4: Complex Frauds and Financial Crimes
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63 Flashcards
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Sample Questions
Q1) Collusion involves:
A) Two or more individuals working together to override internal control
B) Negating the effect of separation of duties
C) At least one high level employee
D) Both "a" and "b"
Q2) Tax avoidance involves hiding receipts from the IRS.
A)True
B)False
Q3) The primary reason predator fraudsters continue to commit fraud is:
A) They are never caught
B) They resign before being caught
C) They are not prosecuted to avoid unfavorable publicity for their employer
D) All of the above
Q4) The characteristics of a predator fraudster are:
A) Poorly educated
B) Divorced
C) Member of a minority group
D) None of the above
Q5) Explain how the Patriot Act enhances RICO.
Q6) Describe the stages of money laundering and for each stage, provide an example.
Page 6
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Chapter 5: Cybercrime: Computer and Internet Fraud
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Sample Questions
Q1) Computer crime involves the attempt to access data illegally.
A)True
B)False
Q2) An employee, having authorized access to a work computer, commits fraud while using the computer. This is an example of a computer crime.
A)True
B)False
Q3) Computer crime and computer fraud are synonyms.
A)True
B)False
Q4) Cyber-crime involves the use of cell phones.
A)True
B)False
Q5) The "computer as a symbol" involves using a computer to intercept data transmission.
A)True
B)False
Q6) Computers offer cyber criminals efficient ways to hide fraudulent activities.
A)True
B)False
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Chapter 6: Legal, Regulatory, and Professional Environment
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Sample Questions
Q1) The AICPA has the authority to set standards and make rules in all the following areas EXCEPT:
A) Auditing standards for nonpublic companies.
B) Auditing standards for public companies.
C) Code of professional conduct.
D) Compilation and review standards.
Q2) The Sarbanes-Oxley Act of 2002 was signed into law on July 30, 2002 to address corporate governance and accountability as well as public accounting responsibilities in improving the quality, reliability, integrity, and transparency of financial reports.
A)True
B)False
Q3) The Miranda warnings consist of everything but the following:
A) The interviewee has a right to remain silent.
B) The interviewee has a right to an attorney.
C) The interviewee's answers may NOT be used against him.
D) If the interviewee cannot afford an attorney, one will be provided at no cost.
Q4) Under what circumstances would a Miranda warning be required?
Q5) What is the discovery process and how does it work?
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Chapter 7: Fraud Detection: Red Flags and Targeted Risk Assessment
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Sample Questions
Q1) What is the "expectations gap"?
Q2) Red flags, symptoms of fraud, often go unnoticed or are not vigorously pursued because:
A) there is not supporting evidence of fraud.
B) the red flags are not associated with financial statement preparation.
C) there are many red flags in day-to-day operations that are not fraud indicators. D) the audit committee is involved in other investigations.
Q3) Red flags are considered trouble signs in almost any environment and yet there seem to be many red flags in normal business operations which can reduce their value in finding fraudulent activities. Explain how this may happen.
Q4) CAATTS computer-aided auditing tools and techniques are used primarily to select samples and detect collusion . A)True B)False
Q5) Earnings management below a threshold value may be judged immaterial. A)True B)False
Page 9
Q6) What is the role of the external auditor in the financial reporting process?
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Chapter 8: Detection and Investigations
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84 Flashcards
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Sample Questions
Q1) Investigators and accountants can find data on the internet regarding:
A) Time a person spent in prison
B) Whether or not a person is eligible for social security disability income
C) The type of property owned by an individual
D) All of the above
Q2) Evidence must be authentic in order to be admitted.
A)True
B)False
Q3) One way of demonstrating that the act was fraud and not a mistake is by:
A) Demonstrating that the employee concealed the act
B) Showing that there were multiple incidents of the same act
C) The destruction of evidentiary documents that describe the act
D) All of the above
Q4) Which of the following is an example of confirmed validity:
A) A witness offers direct evidence
B) A co-worker offers corroborating evidence of another witness
C) A pattern of theft consistently points to the defendant as the culprit
D) None of the above
Q5) Describe the process by which evidence should be handled.
Q6) Data mining software
Page 10
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Chapter 9: Effective Interviewing and Interrogation
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Sample Questions
Q1) In a fraud examination, evidence is usually gathered in a manner that moves from the specific to the general.
A)True
B)False
Q2) ________ questions contain the answer as a part of the question.
A) Open
B) Closed
C) Affirmative
D) Leading
Q3) With fraudulent representations such as materially misstated financial statements and improper tax returns, the investigator starts with the suspected perpetrator.
A)True
B)False
Q4) Which of the following is NOT a typical closing question in an interview?
A) "You knew Ms. Jones had some financial problems, is that right?"
B) "If you were trying to resolve this issue, what would you do?"
C) "Ms. Collins, this is just a standard question. Do you feel that I have treated you fairly in this interview?"
D) "What is your position in the company?"
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Chapter 10: Using Information Technology for Fraud
Examination and Financial Forensics
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57 Verified Questions
57 Flashcards
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Sample Questions
Q1) IDEA can read, display, analyze, manipulate, sample, and extract data from files obtained from many sources in only one format.
A)True
B)False
Q2) An information technology IT audit consists of all EXCEPT
A) planning,
B) tests of controls,
C) substantive tests, D) qualitative tests.
Q3) This type of graphic allows the investigator to analyze the movement of goods services, people and money:
A) Gantt chart
B) Link chart
C) Association matrix
D) Flow diagram
Q4) Generally, a warrant or subpoena is not required to obtain digital evidence.
A)True
B)False
Q5) What is computer forensics?
Q6) What is the purpose of timelines in an investigation? Page 12
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Chapter 11: Cash Receipt Schemes and Other Asset
Misappropriations
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Sample Questions
Q1) What steps should an organization take to prevent fraudulent shipments of merchandise?
Q2) "Death by a thousand cuts" involves stealing cash one thousand dollars at a time.
A)True
B)False
Q3) To prevent fraudulent shipments of merchandise, organizations should make sure that every packing slip sales order is matched to an approved purchase order and that every outgoing shipment is matched to the sales order before the merchandise goes out.
A)True
B)False
Q4) Which of the following is not typical receivables skimming scheme?
A) Lapping
B) Force balancing
C) Cashier theft
D) Fraudulent write offs
Q5) What is the difference between skimming and cash larceny?
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Q6) List three proactive audit tests to detect noncash misappropriations.
Q7) What techniques are generally used to conceal a receivables skimming scheme?
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Chapter 12: Cash Disbursement Schemes
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Sample Questions
Q1) One way to detect altered expense schemes is to:
A) Compare the expenses claimed to the credit card statement
B) Require a company issued credit card for all expense purchases
C) Require a full printed receipt, as opposed to a "summary receipt"
D) All of the above
Q2) Detecting a shell company scheme requires:
A) A review of bank statements
B) A review of cash disbursements
C) An analysis of price variances
D) Both "b" and "c"
Q3) A pass through scheme requires:
A) The availability of an accomplice at a legitimate vendor
B) The ability to add vendors to the vendor master file
C) The ability to change purchase order prices after approval
D) All of the above
Q4) Which of the following controls should assist in preventing fraudulent makers:
A) Strict control of the check signing machine
B) Prohibition on the use of facsimile signatures
C) Control of the blank check stock
D) Both "a" and "c"
Page 15
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Chapter 13: Corruption and the Human Factor
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Sample Questions
Q1) Corruption schemes are broken down into four classifications: bribery, illegal gratuities, economic extortion and larceny.
A)True
B)False
Q2) In this type of scheme, an employee knows his or her employer is seeking to purchase a certain asset and takes advantage of the situation by purchasing the asset himself or herself usually in the name of an accomplice or shell company.
A) Turnaround sale
B) Illegal gratuity
C) Economic extortion
D) Conflict of interest
Q3) How does the "perception of detection" impact fraud deterrence?
Q4) Most company ethics policies forbid employees from accepting unreported gifts from vendors.
A)True
B)False
Q5) What types of abuses may occur at the pre-solicitation stage of the bidding process?
Q6) Describe the features of an effective fraud reporting program within a company.
Page 16
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Chapter 14: Financial Statement Fraud
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Sample Questions
Q1) Management has an obligation to disclose to the shareholders any acts of fraud committed by officers, executives, and others in positions of trust.
A)True
B)False
Q2) Which of the following is NOT one of the more common reasons senior management overstate business performance?
A) To meet or exceed the earning or revenue growth expectations of stock market analysts
B) To impress union officials prior to labor negotiations
C) To increase the amount of financing available from asset-based loans
D) To trigger performance-related compensation or earn-out payments
Q3) Which is NOT a step to reduce grounds for rationalizing fraud?
A) Promote strong values, based on integrity, throughout the organization
B) Provide regular training to all employees, communication prohibited behavior
C) Provide job opportunities to friends and relatives
D) Clearly define the consequences of violating the rules.
Q4) Why might senior management overstate or understate business performance?
Q5) List four steps to reduce the opportunity to commit financial statement fraud.
Q6) How may improper asset valuation inflate the current ratio?
Page 17
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Chapter 15: Consulting, Litigation Support, and Expert
Witnesses: Damages, Valuations, and Other Engagements
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Sample Questions
Q1) Valuations can be developed to address a number of issues. For example, they may help facilitate asset transfers by helping to determine value for all the following EXCEPT:
A) Asset liquidations
B) Mergers and acquisitions
C) Bankruptcy
D) Expect longevity of the CEO
Q2) How many outs are there in an inning?
Q3) Compare two methods that can be used to develop estimates of lost sales and incremental expenses.
Q4) What is included as an expert's work product?
Q5) What must an injured party prove to be successful in a claim for damages?
Q6) What are the various categories and calculations used in ratio analysis?
Q7) The SEC has created the "Forensic and Valuation Services Section" to provide support to forensic accounting professionals.
A)True
B)False
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Q8) What are some of the decisions that need to be made with regard to quantifying lost revenues and increased expenses?
Chapter 16: Remediation and Litigation Advisory Services
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Sample Questions
Q1) Once illegal money has been combined with money from legitimate sources, one can no longer follow the money; the money can't be traced.
A)True
B)False
Q2) What are the types of losses available for recovery?
Q3) What is meant by corporate governance and why is it important?
Q4) Remediation is characterized as the steps necessary to "clean up the mess" after a fraud or financial crime has been discovered and investigated, and the results of the investigation have been reported.
A)True
B)False
Q5) At a minimum, corporate governance should address this issue:
A) Creating and maintaining a culture of honesty and high ethics
B) Evaluating fraud risks and implementing programs and controls to mitigate them
C) Developing an appropriate anti-fraud oversight process
D) All of the above
Q6) In what types of cases may a forensic accountant serve as an expert witness?
Q7) What three attributes must the plaintiff demonstrate in a civil framework?
Page 19
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