Reference no: EM132482169

Questions -

Q1. An effective accounting system is designed to provide which of the following to help uncover fraud?

A. Matching of revenues and expenses

B. A set of internal controls

C. An audit trail

D. A set of accounting procedures

E. A description of journal entries

F. B and C

Q2. Employee embezzlement can be direct or indirect. Indirect fraud occurs when:

A. an employee uses company assets to run his/her private business.

B. Employees establish dummy companies and have their employers pay for goods that are not actually delivered.

C. An employee receives a kickback from a vendor.

D. An employee steals company cash, inventory, tools, or other assets.

Q3. Which of the following is NOT an element of Ponzi scheme?

A. Gaining other's confidence.

B. Promising abnormally high returns.

C. Collected money is invested.

D. Investment principle is partially used to make payments to previous investors.

Q4. Each of the following is an example of an abuse of a control environment EXCEPT:

A. The HR department failed to check an applicant's background and hired someone who had committed fraud in the past.

B. A manager instructs employees not to share passwords, and then shares her passwords with her immediate assistant.

C. A company has established codes of conducts training meetings to teach employees to distinguish between acceptable and unacceptable behavior. Attendance is voluntary.

D. The employees know who has responsibility for each business activity. Procedures to follow are in place.

Q5. Which of the following is NOT an example of a control weakness or violation?

A. The HR department failed to check an applicant's background and hired someone who had committed fraud in the past.

B. A manager instructs employees not to share passwords, and then shares her passwords with her immediate assistant.

C. A company has established codes of conducts training meetings to teach employees to distinguish between acceptable and unacceptable behavior. Attendance is voluntary.

D. The employees know who has responsibility for each business activity. Procedures to follow are in place.

E. None of the above

Q6. Which of the following statements about accounting systems is incorrect?

A. An effective accounting system provides an audit trail that allows frauds to be discovered.

B. An effective accounting system makes concealment difficult.

C. An effective accounting system can effectively prevent "Kickbacks".

D. Without a good accounting system, it is often difficult to distinguish between actual fraud and unintentional error.

Q7. Which of the following is NOT a possible control activity?

A. Having separate authorization, bookkeeping, and custody functions.

B. Protecting access to important information with a password.

C. Requiring two individuals to work on the same task.

D. Supervisory review of each task completed by employees.

Q8. Most fraud perpetrators have profiles that appear like:

A. Those who possess the characteristics of the dark triad-psychopathy, narcissism, and Machiavellianism

B. Individuals with criminal records

C. Those who are uneducated

D. Those who use alcohol and drugs

E. Those of honest people

F. A and E

Q9. A smart fraudster usually manipulates which financial record in order to better avoid an audit trail?

A. Income statement.

B. Balance sheet.

C. Statement of cash flows.

D. Statement of retained earnings.

E. Interim financial statements

Q10. The theory behind_______is that if people know their work or activities will be monitored by others, the opportunity to commit and conceal a fraud will be reduced.

A. Documentation.

B. Segregation of duties.

C. System of authorizations.

D. Independents checks.

E. None of the above

Q11. Documents and records are an important control activity. Which of the following statements concerning this activity is true?

A. They serve as excellent preventive controls.

B. Adequate accountability can exist even in their absence.

C. The entire accounting system serve as a documentary control.

D. They are poor detective controls.

E. None of the above

Q12. Which of the following is usually the most expensive of all control procedures?

A. Documents and records.

B. Segregation of duties.

C. System of authorizations.

D. Independent checks.

Q13. Wilma participates in a fraud scheme by executing some derivative trades because she believed that a senior analyst knew more about complex derivative transactions than she did. These transactions were fraudulent in nature. Which type of power was employed to deceive Wilma?

A. Expert power.

B. Referent power.

C. Coercive power.

D. Reward power.

Q14. Segregation of duties, as a control procedure, is most often used:

A. When the task involved is complex

B. When it is impossible for one person to complete task

C. When appraisals are conducted

D. When cash is involved

Q15. A major difference between financial statement auditors and fraud examiners is that most financial statement auditors:

A. Match documents to verify whether support exists for recorded information

B. Determine whether the documents are originals

C. Determine whether the expenditures make sense

D. Check whether all aspects of the documentation are in order

E. None of the above

Q16. Which of the following is NOT an indicator that a person with a salary of $50,000 per year is living above his or her means?

A. A person owns several expensive cars.

B. A person closely monitors his/her investments.

C. A person hosts extravagant parties in his or her home.

D. A person owns a valuable art collection.

E. None of the above

Q17. A good fraud auditing involves four steps. Which of the following is the correct sequence?

A. Identifying fraud risk exposures; building audit programs to proactively look for symptoms and exposures; investigating fraud symptoms identified; and identifying fraud symptoms of each exposure.

B. Identifying fraud risk exposures; identifying fraud symptoms of each exposure; building audit programs to proactively look for symptoms and exposures; and; investigating fraud symptoms identified.

C. Building audit programs that proactively check for symptoms and exposures; identifying fraud risk exposures; identifying the fraud symptoms of each exposure; and investigating fraud symptoms identified.

D. Identifying the fraud symptoms of each exposure; identifying fraud risk exposures, investigating fraud symptoms identified, and building audit programs to proactively look for symptoms and exposures.

Q18. Jim was a crook. He embezzled $450,000 from his employer. When his employer found out about his misdeeds, before even conducting a thorough investigation, he went and gave all the details to a local newspaper agency. The next day Jim read the story, with his own name in the newspaper. Which of the following is correct?

A. The company did the right thing by publishing Jim's identity in the newspaper because it punished him for stealing as well as serving as a warning to his neighbors who might also be at the risk of being defrauded.

B. The company should not have put Jim's name and story in the paper because when other employees come to know about it, they might leave the organization.

C. Jim may have been misrepresented in the story by the newspaper agency and the company might face legal consequences.

D. Publishing the story in the newspaper was the wrong thing to do because Jim's family will be embarrassed.

Q19. In order to detect fraud at the earliest stage, a manager should pay attention to:

A. Present lifestyle.

B. Past conduct.

C. Attitude toward work.

D. Absenteeism.

E. None of the above