Solutions for Fraud Examination, 6th Edition by W. Steve Albrecht.pdf

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Solutions for Fraud Examination 7th Edition by W. Ste
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Solution and Answer Guide k k k


ALBRECHT, FRAUD EXAMINATION, 7E, ©2025, 9780357721759; CHAPTER 1: THE NATUR
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EKOF

FRAUD
DISCUSSIONkQUESTIONS
1. Whatkiskfraud?
Answer:kFraudkalwayskinvolveskdeception,kconfidence,kandktrickery.kThekfollowingkiskonekofkthek
mostkcommonkdefinitionskofkfraud:
a. “Fraudkiskakgenerickterm,kandkembraceskallkthekmultifariouskmeanskthatkhumankingenuitykc
ankdevise,kwhichkarekresortedktokbykonekindividual,ktokgetkankadvantagekoverkanotherkbykfalsekre
presentations.kNokdefinitekandkinvariablekrulekcankbeklaidkdownkaskakgeneralkpropositionkinkdefi
ningkfraud,kaskitkincludesksurprise,ktrickery,kcunningkandkunfairkwayskbykwhichkanotherkiskcheat
ed.kThekonlykboundarieskdefiningkitkarekthosekwhichklimitkhumankknavery.”
Fraudkiskdeceptionkthatkincludeskthekfollowingkelements:
1. Akrepresentation
2. Aboutkakmaterialkpoint
3. Thatkiskfalse
4. Intentionallykorkrecklesslykso
5. Thatkiskbelieved
6. Andkactedkuponkbykthekvictim
7. Tokthekvictim’skdamage
2. Howkdoeskfraudkaffectkindividuals,kconsumers,kandkorganizations?
Answer:kFraudkaffectskindividuals,kconsumers,kandkorganizationskinkvariouskways.kFraud
usuallyklowerskorganizations’knetkincomekdollarkforkdollar.kTokrecoverkthesekcosts,kconsumerskand
kindividualskmustkpaykmorekforkgoodskandkservices.kForkexample,khealthkcarekfraudkandkinsurancek
fraudkincreasekpremiumskthatkindividualskmustkpay.kThekcostkofkfraudkeventuallykreacheskeverykpa
rtkofkthekeconomy,kincludingkindividuals,kconsumers,kandkorganizations.
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Thek2008kstudykbykThekAssociationkofkCertifiedkFraudkExaminerskestimateskthatkU.S.korganizatio
nsklosekroughlyk7kpercentkofktheirkannualkrevenuesktokfraud.kAppliedktokthe
U.S.kgrosskdomestickproductk(GDP),kthisk7kpercentkfigurektranslatesktokapproximately
$994kbillionkinkfraudklosses.
3. Listkandkdescribekthekfivekdifferentktypeskofkfrauds.k
Answer:
a. Employeekembezzlement:kInkthisktypekofkfraud,kemployeeskdeceivektheirkemployerskbykt
akingkcompanykassets.kEmbezzlementkcankbekeitherkdirectkorkindirect.
b. Managementkfraud:kDistinguishedkfromkotherktypeskofkfraudkbothkbyktheknaturekofkthekper
petratorskandkbykthekmethodkofkdeception.kInkitskmostkcommonkform,kmanagementkfraudkiskdece
ptionkperpetratedkbyktopkmanagement’skmanipulationkofkfinancialkstatements.kThekvictimskofkm
anagementkfraudkarektypicallykstockholders,klenders,kandkotherskwhokrelykonkfinancialkstatemen
tkinformation.
c. Investmentkscamskorkconsumerkscams:kAktypekofkfraudkthatkiskperpetratedkwhenkfraudulentka
ndkusuallykworthlesskinvestmentskareksoldktokunsuspectingkinvestors.
d. Vendorkfraud:kPerpetratedkbykvendors;kcomeskinktwokmainkvarieties:kfraudkperpetratedkbyk
vendorskactingkalone,kandkfraudkperpetratedkthroughkcollusionkbetweenkbuyerskandkvendors.kVen
dorkfraudkusuallykresultskinkankoverchargekforkpurchasedkgoods,kthekshipmentkofkinferiorkgoods,k
orktheknonshipmentkofkgoodskevenkthoughkpaymentkwaskmade.


e. Customerkfraud:kUsuallykinvolveskcustomersknotkpayingkforkgoodskpurchased,kgettingkso
methingkforknothing,korkdeceivingkorganizationskintokgivingkthemksomethingktheykshouldknotkha
ve.
4. Whatkiskthekdifferencekbetweenkcivilkandkcriminalklaw?k
Answer:
a. Criminalklawkiskthekbranchkofklawkthatkdealskwithkoffenseskofkakpublicknature.kCriminalkl
awskgenerallykdealkwithkoffenseskagainstksocietykaskakwhole.kViolatorskofkcriminalklawskarekpr
osecutedkeitherkfederallykorkbykakstatekforkviolatingkakstatutekthatkprohibitsksomektypekofkactivit
y.




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b. Civilklawkiskthekbodykofklawkthatkprovideskremedieskforkviolationskofkprivatekrights.kCivilkla
wkdealskwithkrightskandkdutieskbetweenkindividuals.kThekpurposekofkakcivilklawsuitkisktokprovidekc
ompensationkforkharmkdonektokankindividual.kUnlikekcriminalkcases,kwherekjurieskconsistkofk12kju
rors,kjurieskinkcivilkcaseskmaykhavekaskfewkasksixkjurors,kandkthekverdictkofkthekjurykneedknotkbekun
animous.kAdditionally,kjudgeskoftenkhearkcivilkcaseskinsteadkofkjuries.kInkcivilklawsuits,kplaintiffs
kmustkonlykprovektheirkcasekbykthek“preponderancekofkthekevidence.”kInkotherkwords,ktherekneedkb
ekonlykslightlykmorekevidenceksupportingkthekplaintiffkthanksupportingkthekdefendant.
5. Forkeachkofkthekfollowing,kindicatekwhetherkitkiskakcharacteristickofkakcivilkorkakcriminalkc
ase:
a. Jurykmaykconsistkofkfewerkthank12kjurors.
b. Verdictkmustkbekunanimous.
c. Multiplekclaimskmaykbekjoinedkinkonekaction.
d. Provenk“beyondkakreasonablekdoubt.”
e. Purposekisktokrightkakpublickwrong.
f. Purposekisktokobtainkremedy.
g. Consequenceskofkjailkand/orkfines.
h. Jurieskmaykhavekaklesskthankunanimouskverdict.k
Answer:
a. Civil
b. Criminal
c. Civil
d. Criminal
e. Criminal
f. Civil
g. Criminal
h. Civil
6. WhykwaskCharleskPonziksoksuccessfulkwithkhiskfraudkscheme?
Answer:kCharleskPonzikwasksuccessfulkforkseveralkreasons.kFirst,kCharleskPonzikbuiltkconfidenceki
nkhiskschemekbykgivingkearlykinvestorskakreturnkonktheirkinitialkinvestments.kSecond,kCharles



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Ponzikpresentedkhiskcouponkschemekinkakwaykthatkwaskeasykforkinvestorsktokunderstand.kAlthoug
hkthekcouponkschemekneverkmadekanykrealkprofits,kinvestorskbelievedkthatkitkhad.kThird,kPonzikwa
skextremelyktalentedkatkmanipulatingkvictims’kemotions.kPonzikwaskablektokcapitalizekonkindividu
als’kgreed.kWhenkpeoplekbeganktokseektheirkfriendskandkfamilykmemberskreceivekdividendskfromki
nvestments,ktheyktookwantedkinkonkthekinvestmentkscam.
7. Whatkareksomekofkthekdifferentktypeskofkfraud-fightingkcareers?


Answer:kAsktheknumberkofkfraudskandkthekamountskofkfraudklosseskincrease,ksokdokthekopportunitie
skforksuccessfulkcareerskinkfraudkpreventionkandkdetection.kInkChapterk1,kwekhaveklistedkfivekareaski
nkfraudkfightingkthatkwillkbekrewardingkandkhavekhighkdemandkinkthekfuture.kTheykincludekthekfollo
wing:
a. Government:kThiskincludeskFBI,kpostalkinspectors,kCriminalkInvestigationkDivisionkofkthekI
RS,kU.S.kmarshals,kinspectorskgeneralkofkvariouskgovernmentalkagencies,kstatekinvestigators,kand
klawkenforcementkofficials.
b. CPAkfirms,kforensickaccountingkfirms,klitigationksupportkfirms,kandklawkfirms:kThesekindivi
dualskwillkconductkinvestigations,ksupportkfirmskinklitigation,kdokbankruptcy-
relatedkfraudkwork,kservekaskexpertkwitnesses,kconsultkinkfraudkpreventionkandkdetection,kandkpro
k



videkotherkfee-basedkwork.
c. Corporations:kIndividualskwhokworkkforkcorporationskwillkprevent,kdetect,kandkinvestigatekf
raudkwithinkakcompany.kThiskcategorykincludeskinternalkauditors,kcorporateksecuritykofficers,kand
kin-houseklegalkcounsels.
d. Lawyers:kLawyerskwillkdefendkorkprosecutekorganizationskinkcivilkandkcriminalkcases.
e. Consulting:kUniversitykprofessors,khospitalkmanagement,ktechnologykcorporations,kandk
theklike.kPeoplekwhokworkkinkthesekareaskwillkconsult,kservekaskexpertkwitnesses,kextractkevide
ncekfromkcomputerskandkservers,kinvestigatekpublickrecords,kandkservekonkgrandkorktrialkjuries.
8. Howkdokemployeekfraudkandkmanagementkfraudkdiffer?
Answer:kWhenkemployeekfraudktakeskplace,kemployeeskdeceivektheirkemployerskbyktakingkcomp
anykassets.kManagementkfraudkiskdistinguishedkfromkemployeekfraudkandkotherktypeskofkfraudkinkt
hatktopkmanagementktypicallykcommitskitktokdeceivekfinancialkstatementkusers.




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