Chapter 1—The Nature of Fraud
MULTIPLE CHOICE
1. One way that criminal law differs from civil law is that it:
a. provides remedies for violations of private rights.
b. must yield a unanimous verdict.
c. can have a jury of fewer than 12 persons.
d. allows for various claims in one action.
ANS: B
Feedback
A Incorrect. This is a characteristic of civil law; criminal law deals with crimes against the
public.
B Correct. Criminal trials must result in an unanimous verdict.
C Incorrect. This is a characteristic of civil law; criminal trial juries must have 12 persons.
D Incorrect. This is a characteristic of civil law; criminal law permits only one claim at a
time.
PTS: 1
2. Which of the following is NOT an element of a Ponzi scheme?
a. Gaining other's confidence.
b. Promising abnormally high returns.
c. Collected money is invested in government bonds.
d. Investment principle is partially used to make payments to previous investors.
ANS: C
Feedback
A Incorrect. This is one of the most important elements of the 'con'.
B Incorrect. This is how fraudsters lure in investors.
C Correct. This is very unlikely.
D Incorrect. The original principle is often used to make interest payments.
PTS: 1
3. The following are all elements of Title 26, U.S. Code Section 7201 EXCEPT:
a. not reporting bribe income may be grounds for being charged with tax evasion.
b. filing income tax that excludes income from fraud may be considered an improper tax
filing.
c. bribes may be deducted as legitimate business expenses.
,d. failure to report income from fraud may be grounds for being charged with tax evasion.
, ANS: C
Feedback
A Incorrect. Not reporting bribe income may be grounds for being charged with tax
evasion.
B Incorrect. Filing income tax that excludes income from fraud may be considered an
improper tax filing.
C Correct. Bribes cannot be deducted as legitimate business expenses.
D Incorrect.
PTS: 1
4. Which one of the following is NOT a characteristic of a criminal proceeding?
a. Deals with offenses against society.
b. Consequences include restitution and damage payments.
c. Jury of 12 individuals.
d. Only one claim may be heard at a time.
ANS: B
Feedback
A Incorrect. A crime is considered as an offense against society as a whole.
B Correct. In a criminal proceeding, the consequences are jail and/or fines.
C Incorrect. A criminal jury consists of 12 jurors.
D Incorrect. Only one claim is heard at a time, whereas in a civil case many claims may be
joined into one action.
PTS: 1
5. Management fraud is often referred to as:
a. stockholder fraud.
b. financial statement fraud.
c. affinity fraud.
d. investment fraud.
ANS: B
Feedback
A Incorrect.
B Correct.
C Incorrect.
D Incorrect.
PTS: 1
,
MULTIPLE CHOICE
1. One way that criminal law differs from civil law is that it:
a. provides remedies for violations of private rights.
b. must yield a unanimous verdict.
c. can have a jury of fewer than 12 persons.
d. allows for various claims in one action.
ANS: B
Feedback
A Incorrect. This is a characteristic of civil law; criminal law deals with crimes against the
public.
B Correct. Criminal trials must result in an unanimous verdict.
C Incorrect. This is a characteristic of civil law; criminal trial juries must have 12 persons.
D Incorrect. This is a characteristic of civil law; criminal law permits only one claim at a
time.
PTS: 1
2. Which of the following is NOT an element of a Ponzi scheme?
a. Gaining other's confidence.
b. Promising abnormally high returns.
c. Collected money is invested in government bonds.
d. Investment principle is partially used to make payments to previous investors.
ANS: C
Feedback
A Incorrect. This is one of the most important elements of the 'con'.
B Incorrect. This is how fraudsters lure in investors.
C Correct. This is very unlikely.
D Incorrect. The original principle is often used to make interest payments.
PTS: 1
3. The following are all elements of Title 26, U.S. Code Section 7201 EXCEPT:
a. not reporting bribe income may be grounds for being charged with tax evasion.
b. filing income tax that excludes income from fraud may be considered an improper tax
filing.
c. bribes may be deducted as legitimate business expenses.
,d. failure to report income from fraud may be grounds for being charged with tax evasion.
, ANS: C
Feedback
A Incorrect. Not reporting bribe income may be grounds for being charged with tax
evasion.
B Incorrect. Filing income tax that excludes income from fraud may be considered an
improper tax filing.
C Correct. Bribes cannot be deducted as legitimate business expenses.
D Incorrect.
PTS: 1
4. Which one of the following is NOT a characteristic of a criminal proceeding?
a. Deals with offenses against society.
b. Consequences include restitution and damage payments.
c. Jury of 12 individuals.
d. Only one claim may be heard at a time.
ANS: B
Feedback
A Incorrect. A crime is considered as an offense against society as a whole.
B Correct. In a criminal proceeding, the consequences are jail and/or fines.
C Incorrect. A criminal jury consists of 12 jurors.
D Incorrect. Only one claim is heard at a time, whereas in a civil case many claims may be
joined into one action.
PTS: 1
5. Management fraud is often referred to as:
a. stockholder fraud.
b. financial statement fraud.
c. affinity fraud.
d. investment fraud.
ANS: B
Feedback
A Incorrect.
B Correct.
C Incorrect.
D Incorrect.
PTS: 1
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