Fraud Exam Final Comprehensive
Exam Graded A+
_____ are relationships in financial or nonfinancial data that do not make sense, such
as an unreasonable change in a volume, mix, or price. - ANSWER-analytical
anaomalies
_____ focuses more on creating a culture of openness than eliminating opportunities. -
ANSWER-creating a positive work environment
_____ fraud symptoms are procedures or relationships that are unusual or that do not
make sense. - ANSWER-analytical
_____ has been adopted by most major accounting firms and is a powerful platform for
data analysis. - ANSWER-CaseWare's IDEA
_____ involves the actual taking of cash, inventory, information, or other assets,
whereas _____ involves selling stolen assets or transferring them into cash and then
spending the cash. - ANSWER-theft, conversion
_____ is the ability of the fraud perpetrator to make an individual perceive punishment if
he or she does not participate in the fraud. - ANSWER-coercive power
_____ is the ability of the perpetrator to relate to the potential co-conspirator. -
ANSWER-Referent power
_____ is the splitting of complex data sets into case-specific tables. - ANSWER-
stratification
_____ refers to the circumstances, taken as a whole, that would lead a ressonable,
prudent professional to believe a fraud has occurred, is occurring, or will incur. -
ANSWER-Predication
_____ require(s) every public company to have a code of ethics to help deter
wrongdoing. - ANSWER-The Sarbanes-Oxley legislation
10-K forms refer to which of the following? - ANSWER-the corporate reports filed with
the SEC
A _____ is a financial statement that reflects account balances at a specific point in time
like a snapshot. - ANSWER-position statement
,A "right-to-audit" clause: - ANSWER-alerts vendors that the company reserves the right
to audit the vendor's books at any time
A CEO believes that the company should try to keep the stock price high by
manipulating the financial statements to protect its shareholders. Which element of the
fraud triangle is discussed here? - ANSWER-rationalization
A clearinghouse scam involves a victim receiving: - ANSWER-A letter that falsely claims
the writer represents a foreign bank
A company is a victim of a $414 million fraud. At that time its profit margin is 10%. How
much additional revenue should the company generate in order to recover from the
effect on net income? - ANSWER-$4.14 billion
A company used computer auditing techniques to compare employees' telephone
numbers with vendors' telephone numbers. This is an example of which step in a
proactive fraud auditing? - ANSWER-building audit programs to proactively look for
symptoms and exposures
A company was the victim of several frauds that totaled approximately $10 million in
one year. With a profit margin of 10%, 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? - ANSWER-100,000
A conflict of interest occurs when: - ANSWER-An employee has an economic or
personal interest in a transaction that adversely affects the company
A form 1099 with no withholdings, where withholdings should exist, may be a fraud
symptom for which liability account? - ANSWER-accrued liabilities
A fraud perpetrator is able to convince a potential victim that he will receive a large
bonus if he supports him in a fraud scheme. Which type of power is the fraud
perpetrator using? - ANSWER-Reward power
A fraud perpetrator used the float time between banks to give the impression that he
had money in his accounts. Which crime is he committing? - ANSWER-Kiting
A fraudster changes the physical address or e-mail of the victim so that credit card
statements are sent by the financial institution to the perpetrator rather than the victim.
Which stage of the identity theft cycle is being discussed here? - ANSWER-Action stage
A good fraud auditing involves four steps. Which of the following is the correct
sequence? - ANSWER-identifying fraud risk exposures, identifying the fraud symptoms
of each exposure, building audit programs to proactively look for symptoms and
exposures, investigating fraud symptoms identified
,A good internal control system includes: - ANSWER-segregation of duties
A major difference between financial statement auditors and fraud examiners is that
most financial statement auditors: - ANSWER-match documents to verify whether
support exists for recorded information
A mathematical algorithm that predicts the percentage of the time each digit will appear
in a sequence of numbers is: - ANSWER-Benford's law
A Nigerian money offer e-mail is a form of which of the following scams? - ANSWER-
Foreign advance-fee scams
A red flag search to detect kickbacks would include: - ANSWER-price increases greater
than 20% for several consecutive years
A smart fraudster usually manipulates which financial record in order to better avoid an
audit trail? - ANSWER-Income statement
According to a study of financial statement frauds by the Committee of Sponsoring
Organizations (COSO), the average fraud lasts for how many months? - ANSWER-24
months
According to a study sponsored by the Committee of Sponsoring Organizations
(COSO), the most common way to manipulate revenue accounts is by: - ANSWER-
recording fictitious revenues
According to Benford's law, 5 will be the first digit of a random number set: - ANSWER-
less often than 4
According to Benford's law, the first digit of random sets will most often begin with which
number? - ANSWER-1
According to Max Weber, _____ is the probability that a person can carry out his or her
own will despite resistance. - ANSWER-Power
According to study of financial statement frauds by the Committee of Sponsoring
Organizations (COSO), who is the most common perpetrator of financial statement
fraud? - ANSWER-chief executive officer
According to the ACFE study, which of the following comprises the highest percentage
of asset misappropriation? - ANSWER-Fraudulent disbursement
According to the ACFE study, which of the following is the most common form of
occupational fraud? - ANSWER-Asset misappropriation
, According to the Federal Trade Commission, what is the most common type of
consumer fraud? - ANSWER-Identity theft
According to the Sarbanes-Oxley legislation, current changes to, or waivers of codes of
ethics should be disclosed on: - ANSWER-Form 8-K
According to the study done by the Securities and Exchanges Commission in what
areas were the greatest number of enforcement actions taken? - ANSWER-improper
revenue recognition
According to the study mentioned in the text, which of the following is true about fraud
perpetrators compared to property offenders? - ANSWER-fraud perpetrators are more
educated than property offenders
According to the text authors, educators have failed in three areas and contributed to
"the perfect fraud storm" that saw a rise in fraud activity in recent years. Which of the
following is NOT one of those areas? - ANSWER-they have not taught accounting
students how to detect fraud during audits
According to the text, which of the following is a consideration that influences the risk of
fraud when identifying a company's fraud risks? - ANSWER-industry characteristics
According to the text, which of the following is the best defense against becoming a
victim of consumer fraud? - ANSWER-Education
According to the text, why is the accounts receivable turnover ratio widely used in
analyzing revenue-related fraud? - ANSWER-significant amounts of fictitious revenues
and receivables will almost always affect this ratio except in rare cases
Accumulating documentation belongs to which stage of the identity theft cycle? -
ANSWER-Action stage
After committing fraud, an individual often exhibits unusual and recognizable behavior
patterns to cope with the stress. Perpetrators experience these behavioral signals in
which sequence? - ANSWER-guilt - fear - stress - behavior changes
All of the following adjustments can be used to understate accounts payable EXCEPT: -
ANSWER-understating purchase returns
All of the following are indicators of financial statement fraud EXCEPT: - ANSWER-
companies that report contingent liabilities that have the potential to create a loss
All of the following are part of the fraud element triangle EXCEPT: - ANSWER-
rationalization
Exam Graded A+
_____ are relationships in financial or nonfinancial data that do not make sense, such
as an unreasonable change in a volume, mix, or price. - ANSWER-analytical
anaomalies
_____ focuses more on creating a culture of openness than eliminating opportunities. -
ANSWER-creating a positive work environment
_____ fraud symptoms are procedures or relationships that are unusual or that do not
make sense. - ANSWER-analytical
_____ has been adopted by most major accounting firms and is a powerful platform for
data analysis. - ANSWER-CaseWare's IDEA
_____ involves the actual taking of cash, inventory, information, or other assets,
whereas _____ involves selling stolen assets or transferring them into cash and then
spending the cash. - ANSWER-theft, conversion
_____ is the ability of the fraud perpetrator to make an individual perceive punishment if
he or she does not participate in the fraud. - ANSWER-coercive power
_____ is the ability of the perpetrator to relate to the potential co-conspirator. -
ANSWER-Referent power
_____ is the splitting of complex data sets into case-specific tables. - ANSWER-
stratification
_____ refers to the circumstances, taken as a whole, that would lead a ressonable,
prudent professional to believe a fraud has occurred, is occurring, or will incur. -
ANSWER-Predication
_____ require(s) every public company to have a code of ethics to help deter
wrongdoing. - ANSWER-The Sarbanes-Oxley legislation
10-K forms refer to which of the following? - ANSWER-the corporate reports filed with
the SEC
A _____ is a financial statement that reflects account balances at a specific point in time
like a snapshot. - ANSWER-position statement
,A "right-to-audit" clause: - ANSWER-alerts vendors that the company reserves the right
to audit the vendor's books at any time
A CEO believes that the company should try to keep the stock price high by
manipulating the financial statements to protect its shareholders. Which element of the
fraud triangle is discussed here? - ANSWER-rationalization
A clearinghouse scam involves a victim receiving: - ANSWER-A letter that falsely claims
the writer represents a foreign bank
A company is a victim of a $414 million fraud. At that time its profit margin is 10%. How
much additional revenue should the company generate in order to recover from the
effect on net income? - ANSWER-$4.14 billion
A company used computer auditing techniques to compare employees' telephone
numbers with vendors' telephone numbers. This is an example of which step in a
proactive fraud auditing? - ANSWER-building audit programs to proactively look for
symptoms and exposures
A company was the victim of several frauds that totaled approximately $10 million in
one year. With a profit margin of 10%, 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? - ANSWER-100,000
A conflict of interest occurs when: - ANSWER-An employee has an economic or
personal interest in a transaction that adversely affects the company
A form 1099 with no withholdings, where withholdings should exist, may be a fraud
symptom for which liability account? - ANSWER-accrued liabilities
A fraud perpetrator is able to convince a potential victim that he will receive a large
bonus if he supports him in a fraud scheme. Which type of power is the fraud
perpetrator using? - ANSWER-Reward power
A fraud perpetrator used the float time between banks to give the impression that he
had money in his accounts. Which crime is he committing? - ANSWER-Kiting
A fraudster changes the physical address or e-mail of the victim so that credit card
statements are sent by the financial institution to the perpetrator rather than the victim.
Which stage of the identity theft cycle is being discussed here? - ANSWER-Action stage
A good fraud auditing involves four steps. Which of the following is the correct
sequence? - ANSWER-identifying fraud risk exposures, identifying the fraud symptoms
of each exposure, building audit programs to proactively look for symptoms and
exposures, investigating fraud symptoms identified
,A good internal control system includes: - ANSWER-segregation of duties
A major difference between financial statement auditors and fraud examiners is that
most financial statement auditors: - ANSWER-match documents to verify whether
support exists for recorded information
A mathematical algorithm that predicts the percentage of the time each digit will appear
in a sequence of numbers is: - ANSWER-Benford's law
A Nigerian money offer e-mail is a form of which of the following scams? - ANSWER-
Foreign advance-fee scams
A red flag search to detect kickbacks would include: - ANSWER-price increases greater
than 20% for several consecutive years
A smart fraudster usually manipulates which financial record in order to better avoid an
audit trail? - ANSWER-Income statement
According to a study of financial statement frauds by the Committee of Sponsoring
Organizations (COSO), the average fraud lasts for how many months? - ANSWER-24
months
According to a study sponsored by the Committee of Sponsoring Organizations
(COSO), the most common way to manipulate revenue accounts is by: - ANSWER-
recording fictitious revenues
According to Benford's law, 5 will be the first digit of a random number set: - ANSWER-
less often than 4
According to Benford's law, the first digit of random sets will most often begin with which
number? - ANSWER-1
According to Max Weber, _____ is the probability that a person can carry out his or her
own will despite resistance. - ANSWER-Power
According to study of financial statement frauds by the Committee of Sponsoring
Organizations (COSO), who is the most common perpetrator of financial statement
fraud? - ANSWER-chief executive officer
According to the ACFE study, which of the following comprises the highest percentage
of asset misappropriation? - ANSWER-Fraudulent disbursement
According to the ACFE study, which of the following is the most common form of
occupational fraud? - ANSWER-Asset misappropriation
, According to the Federal Trade Commission, what is the most common type of
consumer fraud? - ANSWER-Identity theft
According to the Sarbanes-Oxley legislation, current changes to, or waivers of codes of
ethics should be disclosed on: - ANSWER-Form 8-K
According to the study done by the Securities and Exchanges Commission in what
areas were the greatest number of enforcement actions taken? - ANSWER-improper
revenue recognition
According to the study mentioned in the text, which of the following is true about fraud
perpetrators compared to property offenders? - ANSWER-fraud perpetrators are more
educated than property offenders
According to the text authors, educators have failed in three areas and contributed to
"the perfect fraud storm" that saw a rise in fraud activity in recent years. Which of the
following is NOT one of those areas? - ANSWER-they have not taught accounting
students how to detect fraud during audits
According to the text, which of the following is a consideration that influences the risk of
fraud when identifying a company's fraud risks? - ANSWER-industry characteristics
According to the text, which of the following is the best defense against becoming a
victim of consumer fraud? - ANSWER-Education
According to the text, why is the accounts receivable turnover ratio widely used in
analyzing revenue-related fraud? - ANSWER-significant amounts of fictitious revenues
and receivables will almost always affect this ratio except in rare cases
Accumulating documentation belongs to which stage of the identity theft cycle? -
ANSWER-Action stage
After committing fraud, an individual often exhibits unusual and recognizable behavior
patterns to cope with the stress. Perpetrators experience these behavioral signals in
which sequence? - ANSWER-guilt - fear - stress - behavior changes
All of the following adjustments can be used to understate accounts payable EXCEPT: -
ANSWER-understating purchase returns
All of the following are indicators of financial statement fraud EXCEPT: - ANSWER-
companies that report contingent liabilities that have the potential to create a loss
All of the following are part of the fraud element triangle EXCEPT: - ANSWER-
rationalization
