White-Collar Crime Exam Bank
Course Introduction
White-Collar Crime examines non-violent crimes committed by individuals, businesses, and government professionals for financial gain. This course explores the historical development, key theories, and distinctive features of white-collar crime compared to traditional street crime. Topics include fraud, embezzlement, insider trading, bribery, corruption, regulatory violations, and corporate misconduct. Students will analyze case studies, legal frameworks, enforcement strategies, and the social and economic impacts of white-collar offenses, with particular attention to ethical considerations and contemporary issues in detection and prevention.
Recommended Textbook Fraud Examination 5th Edition by W. Steve Albrecht
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Page 2
Chapter 1: The Nature of Fraud
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Q1) Which individual listed is most likely to commit financial statement fraud in order to benefit an organization?
A)an executive
B)an internal auditor
C)a floor manager (line supervisor)
D)the company Treasurer
Answer: A
Q2) A company was the victim of several frauds that totaled approximately $10 million in one year.With a profit margin of 10 percent,and assuming that the company's product sold for $1,000 per unit,how many additional units must the company sell to compensate for the fraud losses?
A)1 million
B)100 million
C)100,000
D)10,000
Answer: C
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Chapter 2: Who Commits Fraud and Why
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Q1) Which racial group is most likely to commit fraud?
A)Caucasian
B)African American
C)Asian
D)Hispanic
E)People of every race commit fraud
Answer: E
Q2) According to the Sarbanes-Oxley legislation,current changes to,or waivers of codes of ethics should be disclosed in:
A)Form 10-K.
B)Form 1120.
C)Form 8-K.
D)Form 10-Q.
Answer: C
Q3) Studies show that in advanced countries,levels of honesty are:
A)Generally stable
B)Increasing
C)Decreasing
Answer: C
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Page 4
Chapter 3: Fighting Fraud: an Overview
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Q1) Which of the following is an example of a whistle-blowing system?
A)Bulletin board service
B)Supervisor intervention
C)Removing middle management layer
D)Fraud reporting hotline
Answer: D
Q2) Which of the following is a component of the evidence square?
A)Rationalization
B)Perceived pressure
C)Personal observation
D)Perceived opportunity
Answer: C
Q3) The most effective way to involve employees in the monitoring process is to provide a protocol for which of the following?
A)communication
B)office etiquette
C)administrative action
D)management oversight
Answer: A
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Page 5
Chapter 4: Preventing Fraud
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Q1) An employee recently bought three new cars and remodeled his/her home.These facts would be considered as a:
A)lifestyle symptom.
B)spending addiction symptom.
C)extravagant behavior symptom.
D)financial symptom.
Q2) An organization requires that employees in its accounting department take mandatory two-week long continuous vacations once a year.It allows no exceptions to this rule.Which control activity is the company using?
A)Segregation of duties
B)Proper authorizations
C)Physical safeguards
D)Independent checks
Q3) 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.
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Chapter 5: Recognizing the Symptoms of Fraud
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Q1) _____ are relationships in financial or nonfinancial data that do not make sense,such as an unreasonable change in a volume,mix,or price.
A)Analytical anomalies
B)Accounting anomalies
C)Auditing anomalies
D)Control weaknesses
Q2) There are three simple procedures that small business owners should do on a timely basis to prevent fraud when they can't afford sufficient employees to guarantee effective segregation of duties..Which of the following is NOT one among them?
A)Pay everything by check so that there is a record.
B)Always open the bank statement and reconcile it themselves.
C)Allow one key employee to operate the bank account personally.
D)Sign every check themselves and not delegate the signing to anyone else.
Q3) Which of the following is a control problem related to segregation of duties?
A)Julie writes expense checks and Mark collects cash from customers.
B)Bob order office supplies and deposits the company's checks.
C)Steve records receivables and writes off bad debts.
D)Rebecca records journal entries and orders lunch.
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7
Chapter 6: Data-Driven Fraud Detection
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Q1) The red-flag that is generally identified when vendors with invoices for the same amount on the same day are found is:
A)dummy vendors.
B)employees purchasing goods for personal use.
C)billing more than once for the same purchase.
D)providing poor-quality goods.
Q2) Which statistical approach is one of the most powerful and yet simple methods for identifying outliers?
A)N-grams
B)Z-score
C)Time-trend analysis
D)Soundex algorithm
Q3) Which of the following may result from a careful review of a Matosas Matrix?
A)This action identifies indicators that have been circumvented.
B)This action identifies indicator information that has been incorrectly input.
C)This helps investigators improve the set of indicators utilized.
D)This helps investigators identify fraud perpetrators.
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8
Chapter 7: Investigating Theft Acts
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Q1) Which step in the electronic evidence collection process is important to ensure that the original disk is kept in its seized state?
A)Evidence mapping
B)Search
C)Seizure
D)Cloning
Q2) Which of the following is an increasingly popular form of gathering physical evidence of fraud?
A)reviewing spending habits of the those possibly involved
B)confiscating and searching computers
C)tracking missing inventory through bar codes
D)creating and viewing surveillance tapes
Q3) Which of the following is a basic objective of surveillance,whether manual or electronic?
A)Identify victims of the fraud
B)Analyze how the money comes back in the form of assets
C)Understand the cover-up or concealment of fraud
D)Catch fraud at the theft act stage
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9
Chapter 8: Investigating Concealment
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Q1) Which statistical sampling allows an auditor to generalize and make inferences from the sample to the population?
A)Probability sampling
B)Random sampling
C)Discovery sampling
D)Quota sampling
Q2) Which of the following observations is true about subpoenas?
A)Subpoenas are generally used only in criminal cases.
B)Subpoenas are orders issued by the Company Law Board to produce documents.
C)Failure to honor a subpoena is punishable by law.
D)Every subpoena must be signed by the plaintiff and the accused.
Q3) An audit is part of which type of investigative method?
A)theft
B)conversion
C)concealment
D)inquiry
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Chapter 9: Conversion Investigation Methods
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Q1) Using the data below,calculate living expenses. Assets
$100,000 Liabilities
37,500 Prior years's net worth
32,500 Income
55,000
A)$57,500
B)$17,500
C)$20,000
D)$25,000
Q2) Which Act governs the information maintained by credit-reporting agencies?
A)the Sarbanes-Oxley Act of 2002
B)the Gramm-Leach-Bliley Act of 1999
C)the Fair and Accurate Credit Transactions Act of 2003
D)the Fair Credit Reporting Act of 1971
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Chapter 10: Inquiry Methods and Fraud Reports
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Q1) Identify the strongest response to a threatened ego.
A)Repression
B)Disapproval
C)Loss of Status
D)Anger
Q2) Which of the following is the correct sequence of reaction to a 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
Q3) During which stage of the reactionary process is the most useful time to interview individuals who are dealing with fraud?
A)acceptance
B)bargaining
C)depression
D)anger
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Chapter 11: Financial Statement Fraud
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Q1) Which types of questions should be asked about a company's relationship with financial institutions?
A)Is a significant part of the company's income or revenues derived from one or two large transactions?
B)Has management placed unreasonable demands on the auditor, including unreasonable time constraints?
C)Has significant "short selling" of the company's stock occurred? If so, for what reasons?
D)Is the organization highly leveraged through bank or other loans?
Q2) Should nonfinancial indicators be used for assessing fraud risk? Why or why not?
A)No.A company's financial statement data need not always be consistent with its nonfinancial measures.
B)Yes.Management can more easily manipulate financial numbers but finds it harder to keep all the nonfinancial information consistent with the financial information.
C)No.Nonfinancial measures are indicative of physical assets alone.
D)Yes.Management attempts to commit fraud first show up in these indicators.Financial statement fraud is an attempt to cover up those attempts.
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Chapter 12: Revenue- and Inventory-Related Financial
Statement Frauds
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Q1) Which of the following is a valid reason behind the prevalence of revenue-related financial statement fraud?
A)It is easy to manipulate net income using revenues and receivables accounts.
B)Revenue-related frauds are difficult to hide from detection.
C)A reversing effect of the fraud automatically occurs in the subsequent period.
D)Auditors generally focus more on balance sheet items than on revenue accounts.
Q2) Under SAS 99,financial statement auditors are required to make inquires of all but which of the following individuals or groups about possible fraudulent activity or red flags.
A)Management
B)Audit committee members
C)Internal audit personnel
D)Shareholders
Q3) Which of the following is a potential revenue-related fraud scheme?
A)Cutoff problems
B)Double counting
C)Holding items on consignment
D)Partial shipment
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Chapter 13: Liability, asset, and Inadequate Disclosure
Frauds
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Q1) Which ratio will increase when accounts payable is not recorded?
A)Accounts payable/Inventory
B)Quick assets/Current liabilities
C)Accounts payable/COGS
D)Accounts payable/Total liabilities
Q2) If marketable securities increase,then cash should usually decrease by a similar amount,since cash was probably used to purchase the securities.An exception to this is:
A)when the company paid through a check.
B)when the marketable securities are purchased through a broker.
C)when the company incurred debt or traded an asset for the securities.
D)when the transaction was not recorded in the books of accounts.
Q3) Analytical symptoms for unrecorded notes and mortgages payable include which of the following?
A)Significant increases in recorded debt
B)Unreasonable relationships between interest expense and recorded liabilities
C)Recorded amounts of notes payable, mortgages payable, and other debts that appear to be too high
D)Significant sales of assets with not much cash flow
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Chapter 14: Fraud Against Organizations
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Q1) Employees,vendors,and customers of organizations have three opportunities to steal assets.Which of the following is NOT one among them?
A)Steal receipts of cash and other assets as they are coming into an organization.
B)Steal cash, inventory, and other assets that are on hand.
C)Commit disbursement fraud by having the organization pay for something it shouldn't pay for or pay too much for something it purchases.
D)Paying off public officials or company insiders for preferential treatment.
Q2) Which of the following is an example of a register-disbursement scheme?
A)A perpetrator who processes transactions as if a customer were returning merchandise, even though there is no actual return.
B)A perpetrator uses the expense register to falsely record expenses that are then paid out by the A/P department.
C)A perpetrator physically prepares a check from the check register claiming it is a legitimate expense when it is not.
D)A perpetrator slowly takes money from the register drawer after making regular sales, showing that a discount was given to a customer on the receipt.
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Page 16
Chapter 15: Consumer Fraud
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Q1) Which of the following is a variation of fraudulent MLMs,in which an organization sells illusionary products and profits,instead of real products?
A)ponzi scheme
B)foreign advance scheme
C)identity theft scheme
D)shoulder surfing scheme
Q2) Which of the following is a true statement regarding The Gramm-Leach-Bliley Act?
A)The act gives financial institutions the right to share personal information for a profit.
B)The act expressly requires financial institutions to protect against identity theft.
C)The act allows financial institutions to share personal information, as long as it is not for a profit.
D)The act protects confidentiality of customer information.
Q3) What is one of the biggest marketing campaigns of illegal MLMs?
A)Promise of full-time work from home for huge weekly earnings.
B)Absence of headhunter fees.
C)A mysterious "benefactor" interested in contributing a large sum of money.
D)Promise that investors will always make money from future downline growth.
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Chapter 16: Bankruptcy, divorce, and Tax Fraud
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Q1) Which of the following is NOT an element of a fraudulent transfer that is made for less than a reasonably equivalent value?
A)The debtor knew the debts could not be repaid at maturity
B)The debtor becomes insolvent as a result of the transfer
C)The debtor misstates the value of the transfer on the books
D)The debtor's capital remaining after the transfer is unreasonably small
Q2) Which of the following is a possible indicator of concealment in a bankruptcy or divorce fraud?
A)Increases in operating losses that are not explained by economic factors
B)The size of orders placed on credit and the credit balances with suppliers suddenly and dramatically decrease
C)A sudden change in management is made without public notice
D)The company sells goods at large discounts
Q3) Bankruptcy and divorce can be which of the following categories?
A)Criminal matters
B)Civil matters
C)Either of the above
D)Neither of the above
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Chapter 17: E-Commerce Fraud
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Q1) Which of the following are self-contained programs that represent one of the biggest threats in e-commerce fraud?
A)P2P programs
B)Internet worms
C)Trojan Horses
D)Spyware
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) Which of the terms below best describe the act of employees using sophisticated denial-of-service attempts on local machines?
A)phishing
B)sniffing
C)vandalism
D)wartrapping
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Chapter 18: Legal Follow-Up
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Q1) All of the following observations are true about a criminal case EXCEPT:
A)guilt must be established "beyond a reasonable doubt."
B)the case is most often settled before it goes to trial.
C)defendants have the right to "plead the fifth."
D)a jury's decision must be unanimous.
Q2) Which of the following describes an insurance contract that guarantees payment to an employer looking for protection in the event of unforeseen financial loss through the dishonest actions of an employee?
A)Business insurance
B)Workmen's compensation
C)Group insurance
D)Fidelity bonding
Q3) The opposing attorneys try to achieve all of the following goals when deposing an expert witness,EXCEPT which of the following?
A)convincing the opposing party of the weakness of their case.
B)understanding the credentials and experience of the expert.
C)understanding what the expert's opinions are.
D)obtaining an assessment of how difficult the expert will be in the case.
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Page 20