CFE Exam - Fraud Deterrence Questions And Answers With Complete Updates

BOD committees required for companies listed on NYSE - (Think NCA - nominating, compensation, audit) 1. Nominating/corp gov committee. 2. Compensation committee 3. Audit Committee T/F: NASDAQ companies require the same corporate governance rules as NYSE - False. They require audit committee and compensation committee but not nominating/corp gov committee T/F: the G20/OECD principles are binding for all international companies adapting the principles - False. Nonbinding since many companies in different countries are involved. T/F: NYSE requires companies to have internal audit - True Four principles of corporate governance - (Think FART - fairness, accountability, responsibility, transparency) Fairness Accountability Responsibility Transparency Purpose of Treadway Commission - Defining the responsibility of the auditor in preventing and detecting fraud Sir Adrian Cadbury's purpose of corporate governance - To encourage efficient use of resources and equally to require accountability for stewardship of those resources.Private Securities Litigation Reform Act of 1995 (PSLRA) - If an auditor detects or otherwise becomes aware of an illegal act , they must determine its effect on the company's financials, inform appropriate level of management ASAP, and ensure to the AC that they are informed unless such acts are clearly inconsequential. PCAOB AS 2201 - Lays out requirements and provides guidance for auditors to perform an integrated audit (FS and IC) AU-C Section 240 - Consideration of Fraud in FSA. Auditor is primarily concerned with fraud that causes material misstatement in FS. Auditors shall perform a brainstorming session to discuss fraud risk assessment T/F: According to PCAOB AS 2201, auditors should implement a top-down approach in performing audit of ICOFR - True T/F: People with loyalty to others will most likely be criminals - False. Differential reinforcement theory - Behavior is reinforced with positive reinforcement (rewards gained) or punishment is avoided (negative reinforcement) Legitimacy of authority - Essential ingredient for leadership authority Enterprise Risk Management - The culture, capabilities, and practices integrated with strategysetting and performance, that organizations rely on to manage risk in creating, preserving, and realizing value. T/F: Personnel at all levels are responsible for managing fraud risk - True Five components of ERM framework - Think GS - PRIC: governance, strat, performance, review, info and communication.1. governance and culture 2. strategy and objective-setting 3. performance 4. review and revision 5. information, communication, and reporting T/F: BOD is responsible for developing and supporting an org's underlying fraud risk management strategy. - True. but the design and implementation of such strategy is senior management's responsibility T/F: It is common for employees who steal to use proceeds for lifestyle improvements - True Example of transferring risk - Purchasing fidelity insurance or a bond Lowest level of reference for moral decision making - The Law