Fraud Prevention ACTUAL KEY EXAM
Questions And CORRECT Answers
Forensic accounting - CORRECT ANSWERS The action of identifying, recording, settling,
extracting, sorting, reporting, and verifying past financial data or other accounting activities for
settling current or prospective legal disputes or using such past financial data for projecting
future financial data to settle legal disputes.
- Forensic accounting is much broader - divorce, bankruptcy, business valuations, disputes, etc..
Occupational Fraud and Abuse - CORRECT ANSWERS The use of one's occupation for
personal enrichment through the deliberate misuse or misapplication of the employing
organization's resources or assets.
What is Fraud? - CORRECT ANSWERS Fraud, sometimes referred to as the fraudulent act,
is an intentional deception, whether by omission or co-mission, that causes its victim to suffer
an economic loss and/or the perpetrator to realize a gain.
In the broadest sense, fraud can encompass any crime for gain that uses deception as its
principle technique.
Fraud Schemes - CORRECT ANSWERS Specific methodologies used to commit the fraud,
and conceal the fraudulent act.
Three ways to illegally relieve a victim of money: - CORRECT ANSWERS Force, trickery or
larceny.
(Those offenses that employ trickery are frauds)
Average cost of Fraud? - CORRECT ANSWERS According to the ACFE's studies - cost about
5-7% of revenues.
True cost will never be known.
,Four Characteristics of Most Frauds - CORRECT ANSWERS 1. Activity is clandestine
2. Violates the employee's fiduciary duties to organization
3. Committed for the purpose of direct or indirect financial benefit to the employee
4. Costs the employing organization assets, revenues, or reserves
Elements of Fraud - CORRECT ANSWERS Four Elements -
-A material false statement
-Knowledge that the statement was false when it was uttered
-Reliance on the false statement by the victim
-Damages resulting from the victim's reliance on the false statement
Edward Sutherland - CORRECT ANSWERS Occupational Fraud and Abuse Researcher.
-Coined term "white collar"
-Differential association
(Crime is a learned behavior)
Donald Cressey - CORRECT ANSWERS Occupational Fraud and Abuse Researcher.
-Cressey's Hypothesis
-Fraud Triangle
Cressey's Hypothesis - CORRECT ANSWERS Trusted persons become trust violators when
they conceive of themselves as having a financial problem which is non-sharable, are aware this
problem can be secretly resolved by violation of the position of financial trust, and are able to
apply to their own conduct in that situation verbalizations which enable them to adjust their
conceptions of themselves as trusted person with their conceptions of themselves as users of
the entrusted funds or property.
,Fraud Triangle - CORRECT ANSWERS -Opportunity
-Pressure
-Rationalization
Non-Shareable Financial Problems- Pressure - CORRECT ANSWERS Cressey Noted -
Needs money or something they can convert to money to solve problem
Problem itself needs to be kept secret
In their eyes
Different for different people
Therefore, the act of solving the problem also needs to be kept secret.
Violations of Ascribed Obligations - CORRECT ANSWERS Cannot keep up with one's status
- debts
Problems from Personal Failure - CORRECT ANSWERS Bad decisions
Business Reversals - CORRECT ANSWERS Business failure
Physical Isolation - CORRECT ANSWERS No one to turn to
Status Gaining - CORRECT ANSWERS Keeping up with the Jones'
Employer-Employee Relations - CORRECT ANSWERS Employee resentment
, Perceived Opportunity - CORRECT ANSWERS General Information-
Knowledge to commit the crime
Technical Skill-
Ability to commit the crime
Rationalization - CORRECT ANSWERS -Essentially non-criminal
-Justified
-Not completely accountable
*Out of their control
Offender Types - 3 categories - CORRECT ANSWERS Independent Businessmen
Long-Term Violators
Absconders
Independent Businessmen - CORRECT ANSWERS -Persons who were in business for
themselves and who converted deposits which had been entrusted to them
-Perpetrators in this category use 1 of 2 common excuses
*They were "borrowing" the money they converted
*The funds entrusted to them were really theirs
Long-Term Violators - CORRECT ANSWERS -Take small amounts of funds from employer or
employer's client over time
-More difficult to return funds than to steal them- but wanted to "clean the slate"
-Perpetrators often feared losing social position not possibility of punishment
Questions And CORRECT Answers
Forensic accounting - CORRECT ANSWERS The action of identifying, recording, settling,
extracting, sorting, reporting, and verifying past financial data or other accounting activities for
settling current or prospective legal disputes or using such past financial data for projecting
future financial data to settle legal disputes.
- Forensic accounting is much broader - divorce, bankruptcy, business valuations, disputes, etc..
Occupational Fraud and Abuse - CORRECT ANSWERS The use of one's occupation for
personal enrichment through the deliberate misuse or misapplication of the employing
organization's resources or assets.
What is Fraud? - CORRECT ANSWERS Fraud, sometimes referred to as the fraudulent act,
is an intentional deception, whether by omission or co-mission, that causes its victim to suffer
an economic loss and/or the perpetrator to realize a gain.
In the broadest sense, fraud can encompass any crime for gain that uses deception as its
principle technique.
Fraud Schemes - CORRECT ANSWERS Specific methodologies used to commit the fraud,
and conceal the fraudulent act.
Three ways to illegally relieve a victim of money: - CORRECT ANSWERS Force, trickery or
larceny.
(Those offenses that employ trickery are frauds)
Average cost of Fraud? - CORRECT ANSWERS According to the ACFE's studies - cost about
5-7% of revenues.
True cost will never be known.
,Four Characteristics of Most Frauds - CORRECT ANSWERS 1. Activity is clandestine
2. Violates the employee's fiduciary duties to organization
3. Committed for the purpose of direct or indirect financial benefit to the employee
4. Costs the employing organization assets, revenues, or reserves
Elements of Fraud - CORRECT ANSWERS Four Elements -
-A material false statement
-Knowledge that the statement was false when it was uttered
-Reliance on the false statement by the victim
-Damages resulting from the victim's reliance on the false statement
Edward Sutherland - CORRECT ANSWERS Occupational Fraud and Abuse Researcher.
-Coined term "white collar"
-Differential association
(Crime is a learned behavior)
Donald Cressey - CORRECT ANSWERS Occupational Fraud and Abuse Researcher.
-Cressey's Hypothesis
-Fraud Triangle
Cressey's Hypothesis - CORRECT ANSWERS Trusted persons become trust violators when
they conceive of themselves as having a financial problem which is non-sharable, are aware this
problem can be secretly resolved by violation of the position of financial trust, and are able to
apply to their own conduct in that situation verbalizations which enable them to adjust their
conceptions of themselves as trusted person with their conceptions of themselves as users of
the entrusted funds or property.
,Fraud Triangle - CORRECT ANSWERS -Opportunity
-Pressure
-Rationalization
Non-Shareable Financial Problems- Pressure - CORRECT ANSWERS Cressey Noted -
Needs money or something they can convert to money to solve problem
Problem itself needs to be kept secret
In their eyes
Different for different people
Therefore, the act of solving the problem also needs to be kept secret.
Violations of Ascribed Obligations - CORRECT ANSWERS Cannot keep up with one's status
- debts
Problems from Personal Failure - CORRECT ANSWERS Bad decisions
Business Reversals - CORRECT ANSWERS Business failure
Physical Isolation - CORRECT ANSWERS No one to turn to
Status Gaining - CORRECT ANSWERS Keeping up with the Jones'
Employer-Employee Relations - CORRECT ANSWERS Employee resentment
, Perceived Opportunity - CORRECT ANSWERS General Information-
Knowledge to commit the crime
Technical Skill-
Ability to commit the crime
Rationalization - CORRECT ANSWERS -Essentially non-criminal
-Justified
-Not completely accountable
*Out of their control
Offender Types - 3 categories - CORRECT ANSWERS Independent Businessmen
Long-Term Violators
Absconders
Independent Businessmen - CORRECT ANSWERS -Persons who were in business for
themselves and who converted deposits which had been entrusted to them
-Perpetrators in this category use 1 of 2 common excuses
*They were "borrowing" the money they converted
*The funds entrusted to them were really theirs
Long-Term Violators - CORRECT ANSWERS -Take small amounts of funds from employer or
employer's client over time
-More difficult to return funds than to steal them- but wanted to "clean the slate"
-Perpetrators often feared losing social position not possibility of punishment
