Fraud Prvention Programs

Question 1

A detailed anti-fraud policy should outline the types of actions that are considered to be fraud. Which of the following should be included on that list?

A. Disclosing proprietary information to competitors
B. Using company equipment for personal reasons
C. Forging or altering documents
D. All of the above

Answer 1

D. All of the above

Question 2

Which of the following is FALSE regarding employee anti-fraud education?

A. Fraud awareness training efforts should be restricted to formal educational mechanisms.
B. Fraud awareness training should be required for employees both at time of hire and periodically thereafter.
C. Mid-level managers should be tasked with assisting in training their teams about fraud.
D. All anti-fraud training should be based on the organization’s specific operations and fraud risks.

Answer 2

A. Fraud awareness training efforts should be restricted to formal educational mechanisms.

Question 3

Requiring employees in certain functions (e.g., accounting clerks) to periodically rotate job duties can be an effective anti-fraud measure.

A. True
B. False

Answer 3

True

Question 4

Surprise audits can be effective in both preventing and detecting fraudulent conduct.

A. True
B. False

Answer 4

True

Question 5

Which of the following components would NOT be present in a well-designed organizational structure?

A. Written summaries that outline departmental roles and responsibilities
B. Reporting lines that are informally established and communicated
C. Documentation of organizational hierarchies, such as flowcharts
D. Organization-wide visibility into the proper flow of information

Answer 5

B. Reporting lines that are informally established and communicated

Question 6

In developing an anti-fraud policy, it is good practice for an organization’s management to consult legal counsel to ensure that every fraud allegation is managed uniformly.

A. True
B. False

Answer 6

True

Question 7

Unless specific unacceptable conduct is detailed in an anti-fraud policy, there can be legal problems in terminating a dishonest employee.

A. True
B. False
Submit

Answer 7

True

Question 8

Which of the following is an effective way to help prevent fraud through an organization’s performance measurement and management programs?

A. Giving employees sole responsibility for identifying their own training needs and performance deficiencies
B. Including ethics-based metrics as a component of performance evaluations
C. Tying employee compensation to aggressive organizational performance goals
D. Establishing loosely defined job descriptions that allow employees to have flexibility in their roles

Answer 8

B. Including ethics-based metrics as a component of performance evaluations

Question 9

An organization’s whistleblower procedures should be made public so that individuals both inside and outside of the organization are aware of the appropriate channels for reporting misconduct.

A. True
B. False

Answer 9

True

Question 10

Which of the following controls can help minimize the pressures that might lead an employee to commit fraud?

A. Fair personnel policies and procedures
B. Open-door management policies
C. Employee support programs
D. All of the above

Answer 10

D. All of the above

Question 11

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.

A. True
B. False

Answer 11

True

Question 12

Managers should be instructed to observe employees’ lifestyles for warning signs of fraud, and employees should know that supervisors are watching for unexplained or suspicious anomalies of this nature.

A. True
B. False

Answer 12

True

Question 13

Proactive audit procedures, such as fraud assessment questioning and surprise audits, can help demonstrate management’s intention to aggressively look for fraud.

A. True
B. False

Answer 13

True

Question 14

According to best practices, which of the following should be included in a formal whistleblower policy?

A. Procedures for reporting suspicions or concerns
B. Types of misconduct that should be reported
C. Any rewards available for providing credible tips
D. All of the above

Answer 14

D. All of the above

Question 15

To reinforce an anti-fraud culture, management should:

A. Create an environment in which employees feel safe challenging management’s decisions
B. Show employees that unethical behavior will not be tolerated
C. Visibly adhere to the same set of ethics policies that is required of all employees
D. All of the above

Answer 15

D. All of the above

Question 16

Communications regarding the organization’s anti-fraud policy should be presented in a positive, non-accusatory manner.

A. True
B. False

Answer 16

True

Question 17

Which of the following is NOT a recommended way for management to respond to incidents of fraud within an organization?

A. Maintaining a policy of zero tolerance for fraud
B. Allowing all employees one warning before termination
C. Reporting known incidents of fraud to law enforcement
D. Consistently punishing all fraud perpetrators

Answer 17

B. Allowing all employees one warning before termination

Question 18

Of the following, which is the MOST EFFECTIVE method of preventing fraud?

A. Screening employees
B. Conducting covert audits
C. Having an open-door policy
D. Increasing perception of detection

Answer 18

D. Increasing perception of detection

Question 19

Most experts agree that it is much easier to detect fraud than it is to prevent it.

A. True
B. False

Answer 19

False

Question 20

Which of the following is TRUE regarding an organization’s ethics policy?

A. The policy should only be accessible to company employees.
B. In developing the policy, management should consider how various members of the organization define success.
C. The policy should be limited to external parties only.
D. In developing the policy, management should not consider the existing ethical tone set by leadership.

Answer 20

B. In developing the policy, management should consider how various members of the organization define success.

Question 21

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.

A. True
B. False

Answer 21

False

Question 22

In countries with limited legal protections for whistleblowers, employment laws might be used as a framework to protect employees when they encounter retaliation for reporting workplace misconduct.

A. True
B. False

Answer 22

True

Question 23

Which of the following is NOT a topic that should be covered in employee anti-fraud training?

A. Common characteristics that lead individuals to commit fraud
B. What constitutes fraud, including examples of acceptable and unacceptable behavior
C. How fraud hurts the organization and its employees
D. Specific controls and procedures that the organization uses to detect fraud

Answer 23

D. Specific controls and procedures that the organization uses to detect fraud

Question 24

There are specific anti-retaliation laws in every country that protect whistleblowers against adverse action for reporting misconduct in the workplace.

A. True
B. False

Answer 24

False

Question 25

The anti-retaliation component in a whistleblower policy should do all of the following EXCEPT:

A. Detail the protections that the organization affords to whistleblowers.
B. Describe the penalties that people may encounter for refusing to provide tips.
C. Specify how people will be punished if they violate the policy.
D. List any consequences for retaliating against whistleblowers.

Answer 25

B. Describe the penalties that people may encounter for refusing to provide tips.

Question 26

Which of the following should be emphasized in an employee reporting program?

I. Fraud, waste, and abuse occur in only a few companies.
II. The company actively encourages employees with information to disclose it.
III. The employee’s name must be disclosed.
IV. The report need not be made to one’s immediate supervisor.

A. II and IV
B. II and III
C. I, II, III, and IV
D. I, II, and IV

Answer 26

A. II and IV

Question 27

Having an auditor ask employees questions such as, “Has anyone ever asked you to do anything that you felt was illegal or unethical?” can be an effective method of uncovering fraud within an organization.

A. True
B. False

Answer 27

True

Question 28

Which of the following is an effective method of increasing the perception of detection?

A. Forcing employees to take vacation time
B. Conducting surprise audits
C. Requiring strong management oversight
D. All of the above

Answer 28

D. All of the above

Question 29

Which of the following mechanisms can be used to help increase the perception of detection in an organization?

A. Rewards for whistleblowers
B. Employee anti-fraud education
C. Hotlines and reporting programs
D. All of the above

Answer 29

D. All of the above

Question 30

A detailed anti-fraud policy that includes specific examples of fraud can give management legal grounds to investigate and punish violators.

A. True
B. False

Answer 30

True

Question 31

Management of Blue Top Inc. is implementing a formal background check policy for its employees. Which of the following is NOT a best practice that should be implemented as part of this initiative?

A. Checking the background of any employee who will have access to cash, checks, and credit card numbers
B. Conducting a background check on existing employees who are being promoted or moved to positions that include access to easily stolen assets
C. Placing a low priority on checking professional references, since most people do not provide bad references
D. Asking a candidate’s previous employers whether the individual is eligible for rehire

Answer 31

C. Placing a low priority on checking professional references, since most people do not provide bad references

Question 32

Components necessary to develop, implement, and manage a comprehensive ethics program include:

A. Sanctions for unethical behavior
B. An ethics task force or committee
C. A designated ethics official
D. All of the above

Answer 32

D. All of the above

Question 33

When establishing a whistleblower policy, organizations should emphasize that it applies to all employees, regardless of their positions or seniority.

A. True
B. False

Answer 33

True

Question 34

Establishing and communicating the proper flow of information to everyone in the organization is an essential component of a fraud prevention program.

A. True
B. False

Answer 34

True