Feaud Prevention

Question 1

Social control theory suggests that the less attached an individual is to social institutions and groups, the greater the chances that the individual violates the law
T / F

Answer 1

True

Question 2

To show appreciation for an employees hard work, a manager exempts the individual from several undesirable administrative tasks. This is an example of positive reinforcement.
T / F

Answer 2

False

Question 3

According to the theory of differential association that is used to explain white-collar criminality, learning criminal behavior involves mechanisms that are different from those used in other types of learning.
T / F

Answer 3

False

Question 4

Which of the following behavioral responses involves withdrawing a positive stimulus or applying a negative stimulus in response to an undesired behavior.
A Positive reinforcement
B Negative reinforcement
C Punishment
D None of the above

Answer 4

Punishment

Question 5

Edward Gross and other criminologists have asserted that organizations are inherently
A Criminogenic
B Adverse to misconduct
C Exploitative
D None of the above

Answer 5

Criminogenic

Question 6

The two primary strategies to control corporate criminal behavior are:
A Enforcement and compliance
B Deterrence and enforcement
C Compliance and deterrence
D None of the above

Answer 6

Compliance and deterrence

Question 7

According to Diane Vaughan, encouraging employee loyalty through social interactions, such as company parties and social functions, can contribute to the organization being more inherently inclined to commit crime.
T / F

Answer 7

True

Question 8

According to ACFE research what is the primary reason why organizations decline to prosecute white collar crime cases?
A They plan to pursue civil action to recover losses
B They believe their internal discipline is sufficient
C They feel that there is a lack of evidence
D They determine that prosecution would be too costly

Answer 8

They believe their internal discipline is sufficient

Question 9

According to ACFE research only a small percentage of occupational fraud perpetrators receive some form of internal punishment from their employer for their scheme.
T \ F

Answer 9

False

Question 10

An accounting clerk stealing incoming customer payments is an example of:
A Organizational crime
B Occupational crime
C Both org and occ crime
D Neither org or occ crime

Answer 10

Occupational crime

Question 11

Dr Steve Albrecht conducted research that focused on fraud-related red flags in two principal categories: perpetrator characteristics and organizational environment. Which of the following was the organizational-environment factor that was most present in the frauds studied?
A Lack of clear lines of authority
B Inadequate attention to details
C Too much trust in key employees
D None of the above

Answer 11

Too much trust in key employees

Question 12

According to ACFE research, which of the three major categories of occupational fraud has the highest median loss?
A Asset misappropriation
B Corruption
C Identity theft
D Financial statement fraud

Answer 12

Financial statement fraud

Question 13

Which of the following is not one of the factors that Diane Vaughn cotes as contributing to organizations being inherently prone to committing crime?
A Organizations tend to recruit and attract similar individuals
B Long-term loyalty is encouraged through company retirement and benefits
C Rewards are given to employees who challenge the company or how it works
D Employees are frequently transferred and expected to work long hours

Answer 13

Rewards are given to employees who challenge the company or how it works

Question 14

Most people who commit occupational fraud are repeat offenders with prior criminal records.
T / F

Answer 14

False

Question 15

According to ACFE research most white collar crime cases are referred to LE for prosecution.
T \ F

Answer 15

True

Question 16

According to ACFE research, which of the following is the most common internal response an organization will take when management discovers that one of its employees has committed fraud.
A Probation
B Suspension
C Permitted resignation
D Termination

Answer 16

Termination

Question 17

Which of the following represents one of the sides of the Fraud Triangle.
A Rationalization
B Perceived opportunity
C Perceived non-shareable financial need
D All of the above

Answer 17

All of the above

Question 18

According to ACFE research, which of the three major categories of occupational fraud is the most common?
A Corruption
B Asset misappropriation
C identity theft
D Financial statement fraud

Answer 18

Asset misappropriation

Question 19

The purpose of corporate governance is to:
A Encourage the efficient use of resources and require accountability for the stewardship of those resources
B Prevent and detect financial misstatements whether caused by errors or fraud
C Ensure the accuracy and reliability of the organizations financial reports
D Provide reasonable assurance regarding the organization’s compliance with applicable laws and regulations

Answer 19

Encourage the efficient use of resources and require accountability for the stewardship of those resources

Question 20

The G/20OECD Principles of Corporate Governance are binding and are required to be implemented by all corporations in jurisdictions that have officially adopted them.
T / F

Answer 20

False

Question 21

Who is responsible for holding the board of directors accountable for proper governance and oversight?
A The chairman of the board
B Executive management
C The shareholders
D The external auditors

Answer 21

The shareholders

Question 22

To reduce the probability of fraud in financial reports the National Commission on Fraudulent Financial Reporting (Treadway Commission) provided recommendations about which of the following parties involved in corporate governance?
A The compensation commission
B Shareholders
C The audit committee
D Management

Answer 22

The audit committee

Question 23

According to the G20/OECD Principles of Corporate Governance, companies should disclose all financial information to investors regardless of the cost of burden of the disclosure or the disclosure’s possible negative effects on the company’s competitive position.
T / F

Answer 23

False

Question 24

Effective ownership and reporting structures within an organization are necessary for ensuring which of the following principles of corporate governance?
A Accountability
B Transparency
C Responsibility
D Fairness

Answer 24

Accountability

Question 25

Which of the following parties is ultimately responsible for the prevention and detection of fraud within an organization? A Board of directors B Internal auditor C Management D External auditors

Answer 25

Management

Question 26

The risk of the auditor not detecting a material misstatement resulting from employee fraud is greater than the risk of the auditor not detecting a material misstatement resulting from management fraud. T / F

Answer 26

False

Question 27

The risk of an auditor not detecting a material misstatement resulting from fraud is higher than the risk of an auditor not detecting a material misstatement resulting from error. T / F

Answer 27

True

Question 28

The primary purpose of International Standard on Auditing (ISA) 240 is to: A Establish standards and provide guidance on the auditors responsibility to consider fraud in an audit of financial statements B Establish auditors as being primarily responsible for the prevention and detection of fraud so the in an organization C Establish requirements for auditors related to designing and implementing fraud-related internal controls D All of the above

Answer 28

Establish standards and provide guidance on the auditors responsibility to consider fraud in an audit of financial statements

Question 29

Government auditors have several considerations regarding fraud during a public sector financial statement audit that their counterparts in the private sector do not. Which of the following is NOT one of these considerations? A a need to consider the concept of abuse B An inability to withdraw from the audit engagement C Narrower overall audit objectives D Additional communications about fraud-related matters

Answer 29

Narrower overall audit objectives

Question 30

Under the ACFE Code of Professional Ethics, fraud examiners are strictly prohibited from accepting assignments to uncover fraud in a company in which they have a major interest. T / F

Answer 30

False

Question 31

Under the ACFE Code of Professional Ethics, fraud examiners are strictly prohibited from expressing opinions on technical matters. T / F

Answer 31

False

Question 32

In general, the lowest level of reference for making moral decisions is A Philosophical principles B The law C Individual standards D None of the above

Answer 32

The law

Question 33

An entity’s corporate culture is most effectively assessed by using a checklist of initiatives to make sure all the elements of a strong tone at the top are in place. T / F

Answer 33

False

Question 34

For analytical review procedures performed during a financial statement audit to be most effective in uncovering fraud, the scheme must materially impact the financial statements. T / F

Answer 34

True

Question 35

In response to a risk identified during a fraud risk assessment, management decides to purchase a bond to help protect the company against the associated risk of loss. This response is known as: A Avoiding the risk B Transferring the risk C Assuming the risk D Mitigating the risk

Answer 35

Transferring the risk

Question 36

Preventative anti-fraud controls include all the following except: A Fraud awareness training B Employee background checks C Separation of duties D Continuous audit techniques

Answer 36

Continuous audit techniques

Question 37

The size of the fraud risk assessment team will depend on the size of the organization and the methods used to conduct the assessment. T / F

Answer 37

True

Question 38

The risk that an organization might be victimized by an individual who is able to combine the three elements of the Fraud Triangle is called ___ A Audit risk B Fraud risk C Environmental risk D Insider risk

Answer 38

Fraud risk

Question 39

A fraud risk assessment report should contain a detailed, comprehensive list of every assessment finding and all suggested responses so that management can address each issue within the company, no matter how small. T / F

Answer 39

False

Question 40

The fraud risk assessment should include input from both management and auditors to ensure a holistic view of the organization’s risks, but it should exclude all others to maintain the independence and objectivity of the assessment process. T / F

Answer 40

False

Question 41

When performing a fraud risk assessment, the fraud examiner should only designate an area as high-risk if the assessment has conclusively revealed that fraud is occurring there. T / F

Answer 41

False

Question 42

Fraud risks that remain after the effect of internal controls are considered inherent risks. T / F

Answer 42

False

Question 43

The fraud risk assessment process should be conducted covertly so that the assessment team members can get an accurate picture of what occurs in the business. T / F

Answer 43

False

Question 44

According to the committee of Sponsoring Organizations of the Treadway Commission, ______ is the culture, capabilities, and practices, integrated with strategy-setting and it’s performance, that organizations rely on to manage risk in creating, preserving, and realizing value. A Internal control B Fraud prevention C Corporate governance D Enterprise risk management

Answer 44

Enterprise risk management

Question 45

Of the following parties, who is responsible for the oversight of the organizations financial, accounting, and audit matters? A The internal auditors B The audit committee C The chief financial officer D The external auditors

Answer 45

The audit committee

Question 46

Management must assign both a quantitative and qualitative measure to its risk appetite so that it can accurately measure the fraud risk management programs effectiveness. T / F

Answer 46

False

Question 47

Of the following parties, who is responsible for developing a strategy to assess and manage fraud risks that aligns with the organization’s risk appetite and strategic plans? A The legal department B The audit committee C The board of directors D The shareholders

Answer 47

The board of directors

Question 48

Which of the following is among the audit committees responsibility’s for fraud risks management? A Receiving regular reports on the status of reported or alleged fraud B Performing and regularly updating the fraud risk assessment C Monitoring and proactively improving the fraud risk management program D All of the above

Answer 48

Receiving regular reports on the status of reported or alleged fraud

Question 49

Which of the following is NOT one of the components of the Committee of Sponsoring Organizations of the Treadway Commissions Enterprise Risk Management— Integrating with strategy and performance? A Risk tolerance B Strategy and objective-setting C Review and revision D Information, communication, and reporting

Answer 49

Risk tolerance

Question 50

As part of its vendor due diligence procedures, an organization should avoid revealing that it is seeking information about potential vendors prior to starting a relationship with them. T / F

Answer 50

False

Question 51

According to the Fraud Risk Management Guide, a joint publication by the Committee of Sponsoring Organizations of the Treadway Commission and the ACFE, who has responsibility for fraud deterrence, prevention, and detection? A The board of directors B Executive management C Internal audit D Personnel at all levels of the organization

Answer 51

Personnel at all levels of the organization

Question 52

Which of the following is among the audit committees responsibilities for fraud risk management? A Receiving regular reports on the status of reported or alleged fraud B Performing and regularly updating the fraud risk assessment C Monitoring and proactively improving the fraud risk management program D All of the above

Answer 52

Receiving regular reports on the status of reported or alleged fraud