Fraud Examination Exam 1 Solved
100% Correct
3 Federal Statues - ANSWER-1) Mail fraud
2) Wire Fraud
3) Bank Fraud
4 Phases of Fraud Examination - ANSWER-1. Prevention (best to spend the most time
and money here)
2. Detection: awareness that something is going wrong
-an audit & accidential findings
3. Investigation: building a case that could possibly go to court or calling an outside
party in to help
4. Resolution: the outcome, what is the company going to do about it?
5 primary control activities - ANSWER-1. Authorization 2. Segregation of duties 3.
Physical safeguards 4. Documents/Reports 5. Independent checks
A company's control environment includes: - ANSWER-a) the tone that management
establishes toward what is honest and acceptable
b) corporate hiring practices
c) having an internal audit department
D) ALL OF THE ABOVE ***
A method of classifying investigative approaches into testimonial evidence,
documentary evidence, physical evidence, and personal observations is referred to as
the: - ANSWER-Evidence square
All frauds that are detected by an organizations are made public - ANSWER-False
All of the following are ways to create a culture of honest and high ethics expect: -
ANSWER-eliminating opportunities for fraud
An important factor in creating a culture of honesty, openness, and assistance in the
workplace is maintaining an employee assistance program - ANSWER-True
An individual who owns his or her own business and is the sole employee probably
does not need many control activities - ANSWER-True
Auditing - ANSWER-collect and analyze evidence, but the objective is to attest to the
credibility of assertions that are under examination, such as material accuracy of
financial statements for which the audited company's management is responsible.
, -Examine evidence to determine whether people followed prescribed processes or
internal controls
-Routine
-General scope
-Purpose: 3rd parties
-Objective: opinion
-Standard: reasonable assurance
Average duration of a fraud? - ANSWER-18-24 months
Because of the ability to override internal controls, it is usually the most difficult to
prevent which type of fraud? - ANSWER-Fraud committed by a company president
Bernie Madoff - ANSWER-American financier who executed the largest Ponzi scheme
in history, defrauding thousands of investors of tens of billions of dollars over the course
of at least 17 years, and possibly longer. He was also a pioneer in electronic trading and
chair of the Nasdaq in the early 1990s.
*Auditors remember his article because he was able to trick and deceive
Best argument for taking legal action against fraud perpetrators is: - ANSWER-
Prosecution of perpetrators discourages future occurrences of fraud
Cheryl Eckard - ANSWER--Whistleblower
Exposed drug giant, Glazo Smith Kline. They were knowingly sellling contaminated and
ineffective drugs. She got $96 million pay out
Common rationalizations - ANSWER--The organization owes me
-Nobody will get hurt
-I am only borrowing the money and will pay it back
-I deserve more
Corporate employee fraud-fighters: - ANSWER-Prevent, detect, and investigate fraud
within a company
Creating an expectation of punishment causes firm morale to deteriorate and often
results in lower productivity - ANSWER-False
Customer Fraud - ANSWER-Customers don't pay, pay too little, or get too much from
the organization through deception
Detective Controls - ANSWER-1. Independent checks
2. Documents and records
Direct fraud - ANSWER-Company assets go directly into the perpetrators pockets
without the involvement of third parties
100% Correct
3 Federal Statues - ANSWER-1) Mail fraud
2) Wire Fraud
3) Bank Fraud
4 Phases of Fraud Examination - ANSWER-1. Prevention (best to spend the most time
and money here)
2. Detection: awareness that something is going wrong
-an audit & accidential findings
3. Investigation: building a case that could possibly go to court or calling an outside
party in to help
4. Resolution: the outcome, what is the company going to do about it?
5 primary control activities - ANSWER-1. Authorization 2. Segregation of duties 3.
Physical safeguards 4. Documents/Reports 5. Independent checks
A company's control environment includes: - ANSWER-a) the tone that management
establishes toward what is honest and acceptable
b) corporate hiring practices
c) having an internal audit department
D) ALL OF THE ABOVE ***
A method of classifying investigative approaches into testimonial evidence,
documentary evidence, physical evidence, and personal observations is referred to as
the: - ANSWER-Evidence square
All frauds that are detected by an organizations are made public - ANSWER-False
All of the following are ways to create a culture of honest and high ethics expect: -
ANSWER-eliminating opportunities for fraud
An important factor in creating a culture of honesty, openness, and assistance in the
workplace is maintaining an employee assistance program - ANSWER-True
An individual who owns his or her own business and is the sole employee probably
does not need many control activities - ANSWER-True
Auditing - ANSWER-collect and analyze evidence, but the objective is to attest to the
credibility of assertions that are under examination, such as material accuracy of
financial statements for which the audited company's management is responsible.
, -Examine evidence to determine whether people followed prescribed processes or
internal controls
-Routine
-General scope
-Purpose: 3rd parties
-Objective: opinion
-Standard: reasonable assurance
Average duration of a fraud? - ANSWER-18-24 months
Because of the ability to override internal controls, it is usually the most difficult to
prevent which type of fraud? - ANSWER-Fraud committed by a company president
Bernie Madoff - ANSWER-American financier who executed the largest Ponzi scheme
in history, defrauding thousands of investors of tens of billions of dollars over the course
of at least 17 years, and possibly longer. He was also a pioneer in electronic trading and
chair of the Nasdaq in the early 1990s.
*Auditors remember his article because he was able to trick and deceive
Best argument for taking legal action against fraud perpetrators is: - ANSWER-
Prosecution of perpetrators discourages future occurrences of fraud
Cheryl Eckard - ANSWER--Whistleblower
Exposed drug giant, Glazo Smith Kline. They were knowingly sellling contaminated and
ineffective drugs. She got $96 million pay out
Common rationalizations - ANSWER--The organization owes me
-Nobody will get hurt
-I am only borrowing the money and will pay it back
-I deserve more
Corporate employee fraud-fighters: - ANSWER-Prevent, detect, and investigate fraud
within a company
Creating an expectation of punishment causes firm morale to deteriorate and often
results in lower productivity - ANSWER-False
Customer Fraud - ANSWER-Customers don't pay, pay too little, or get too much from
the organization through deception
Detective Controls - ANSWER-1. Independent checks
2. Documents and records
Direct fraud - ANSWER-Company assets go directly into the perpetrators pockets
without the involvement of third parties
