Business Ethics
Test Questions
Course Introduction
Business Ethics explores the moral principles and standards that guide behavior in the world of business. The course examines key ethical theories and their applications to various business practices, including corporate governance, social responsibility, decision-making, and stakeholder relationships. Students analyze real-world case studies to identify ethical dilemmas and consider the implications of choices made by individuals and organizations. Through critical discussion and reflection, the course aims to develop students ability to recognize, evaluate, and resolve ethical challenges in business contexts, fostering responsible and ethical future business leaders.
Recommended Textbook
Forensic Accounting and Fraud Examination 1st Edition by Mary Jo Kranacher
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16 Chapters
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Page 2
Chapter 1: Core Foundation Related to Fraud Examination and Financial
Forensics
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71 Verified Questions
71 Flashcards
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Sample Questions
Q1) The three legs of the fraud triangle are:
A) Opportunity, Perceived Pressure, and Rationalization.
B) Opportunity, Value, and Rationalization.
C) Opportunity, Perceived Pressure, and Benefit.
D) Timing, Value, and Benefit.
Answer: A
Q2) The two primary functions of financial forensics are:
A) litigation advisory services and investigative services.
B) litigation advisory services and expert witness services.
C) post event auditing services and investigative services.
D) post event auditing services and expert witness services.
Answer: A
Q3) Rationalization must occur before the act of abuse or fraud.
A)True
B)False
Answer: True
Q4) Describe the fraud examiner/forensic accountant's approach to investigations.
Answer: Fraud examination and forensic accounting entail examining documents, reviewing records, and interviewing witnesses.
Page 3
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Chapter 2: Careers in Fraud Examination and Financial
Forensics
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68 Verified Questions
68 Flashcards
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Sample Questions
Q1) Corporate accounting is primarily responsible for the quality, integrity, and reliability of the financial reporting process, as well as the fair presentation of financial statements in conformity with generally accepted accounting principles GAAP.
A)True
B)False
Answer: False
Q2) Continued professional development will be required:
A) only by entry-level personnel concerning task-specific and organization-specific issues.
B) by entry-level and experienced staff concerning task-specific and organization-specific issues.
C) by experienced staff only concerning task-specific and organization-specific issues.
D) by entry-level and experienced staff concerning only task-specific issues.
Answer: B
Q3) Why are manhole covers round?
Answer: Manhole covers are round because other shaped covers can be maneuvered to fall through the hole e.g., try a square box.
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Page 4
Chapter 3: Who Commits Fraud and Why: Criminology and Ethics
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Sample Questions
Q1) Explain the relationship between an employee's position and the level of theft according to Hollinger and Clark's research.
Answer: Hollinger and Clark were able to confirm a direct relationship between an employee's position and the level of the theft, with thefts being highest in jobs with greater access to the things of value in the organization. Although they found obvious connections between opportunity and theft for example, retail cashiers with daily access to cash had the highest incidence, the researchers believed opportunity to be " . . . only a secondary factor that constrains the manner in which the deviance is manifested." Their research indicated that job satisfaction was the primary motivator of employee theft; the employee's position only affects the method and amount of the theft after the decision to steal has already been made.
Q2) In order to win an award for damages for negligence, the injured party must prove liability and damages.
A)True
B)False
Answer: True
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Chapter 4: Complex Frauds and Financial Crimes
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Sample Questions
Q1) "Parking" involves hiding ownership interest so as to avoid reporting requirements.
A)True
B)False
Q2) Financial statement fraudsters often:
A) Start as accidental fraudsters and progress to predator fraudsters
B) Rely on collusion to mask the fraud
C) Frequently go from company to company committing the same type of fraud
D) All of the above
Q3) Complex fraud often mixes legitimate business transactions with illegal transactions.
A)True
B)False
Q4) Under RICO, which of the following is an illegal activity:
A) Purchasing a bank to deposit gambling receipts generated from illegal betting parlors
B) Investing in a bank that provides services to foreign nationals
C) Purchasing a bank formerly used to reinitiate money into the financial system from a bankruptcy trustee
D) All of the above
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6
Chapter 5: Cybercrime: Computer and Internet Fraud
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Sample Questions
Q1) Computer crime and computer fraud are synonyms.
A)True
B)False
Q2) Computer crime involves the attempt to access data illegally.
A)True
B)False
Q3) An employee, having authorized access to a work computer, commits fraud while using the computer. This is an example of a computer crime.
A)True
B)False
Q4) The "computer as a symbol" involves using a computer to intercept data transmission.
A)True
B)False
Q5) Computers offer cyber criminals efficient ways to hide fraudulent activities.
A)True
B)False
Q6) Cyber-crime involves the use of cell phones.
A)True
B)False
Page 7
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Chapter 6: Legal, Regulatory, and Professional Environment
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Sample Questions
Q1) A scientist has two buckets, one holds four gallons and the other holds five gallons. In addition, the scientist also has an unlimited water supply. By using nothing but the buckets and water, how can the scientist accurately measure three gallons of water?
Q2) Anyone in a public park, parking lot, or mall may be videotaped without violating any laws as long as no audio of the target is recorded.
A)True
B)False
Q3) The Miranda warnings consist of everything but the following:
A) The interviewee has a right to remain silent.
B) The interviewee has a right to an attorney.
C) The interviewee's answers may NOT be used against him.
D) If the interviewee cannot afford an attorney, one will be provided at no cost.
Q4) In the criminal justice system, how is probation different from parole?
Q5) Fraud may only be prosecuted criminally.
A)True
B)False
Q6) Under what circumstances would a Miranda warning be required?
Q7) What is meant by demonstrative evidence? Give examples.
Page 8
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Chapter 7: Fraud Detection: Red Flags and Targeted Risk Assessment
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Sample Questions
Q1) Red flags, symptoms of fraud, often go unnoticed or are not vigorously pursued because:
A) there is not supporting evidence of fraud.
B) the red flags are not associated with financial statement preparation.
C) there are many red flags in day-to-day operations that are not fraud indicators.
D) the audit committee is involved in other investigations.
Q2) In a collusive environment:
A) management is responsible for all acts of fraud.
B) the fear of detection is usually more than adequate to stop fraud by senior management.
C) internal and external auditors must design procedures to detect such activity.
D) All of the choices are correct.
Q3) How is materiality determined?
Q4) What are some red flags that may indicate that fraud is occurring?
Q5) Define the terms fraud prevention, fraud deterrence, and fraud detection and identify issues of timing.
Q6) Is earnings management considered fraud?
Q7) What is the role of the external auditor in the financial reporting process?
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Chapter 8: Detection and Investigations
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Sample Questions
Q1) Circumstantial evidence usually has no impact on convictions.
A)True
B)False
Q2) Circumstantial evidence
Q3) In order to prove invigilation, an attorney must:
A) Show cause
B) Show intent
C) Show a pattern of loss during the defendant's tenure
D) Show concealment
Q4) Failure to obtain a promotion is a form of rationalization.
A)True
B)False
Q5) An oral statement in court as to what the witness heard from another coworker is called testimony evidence.
A)True
B)False
Q6) The SBA is a source of information regarding cash flow for a business.
A)True
B)False
Q7) Describe the process by which evidence should be handled.
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Chapter 9: Effective Interviewing and Interrogation
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Sample Questions
Q1) During the admission-seeking interview, you should not make a direct accusation of the subject.
A)True
B)False
Q2) Which of the following is NOT a typical closing question in an interview?
A) "You knew Ms. Jones had some financial problems, is that right?"
B) "If you were trying to resolve this issue, what would you do?"
C) "Ms. Collins, this is just a standard question. Do you feel that I have treated you fairly in this interview?"
D) "What is your position in the company?"
Q3) Only after suspected coconspirators have been interviewed is the person suspected of committing the fraud confronted.
A)True
B)False
Q4) Dishonest people typically have tolerant attitudes toward illegal or unethical conduct.
A)True
B)False
Q5) Provide three of Joe Well's ten commandments for effective interviewing.
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Chapter 10: Using Information Technology for Fraud
Examination and Financial Forensics
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Sample Questions
Q1) The software product Analyst's Notebook I2 would be classified as:
A) Data analysis and extraction software
B) Case management software
C) Electronic spreadsheet
D) Data presentation software
Q2) Record validation can include reasonableness checks, sequences checks, and other checks.
A)True
B)False
Q3) Compliance verification in data extraction and analysis software could be used to discover all EXCEPT:
A) Credit approvals for customer credit limits by credit manager
B) Excessive per diem amounts on employee expense accounts
C) Criminal background searches on prospective employees
D) Insuring that middle managers do not exceed company mandated budget limits
Q4) Once data sectors on computer files have been overwritten, generally a computer forensic specialist can still recover the files.
A)True
B)False
Q5) What is computer forensics?
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Chapter 11: Cash Receipt Schemes and Other Asset
Misappropriations
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Sample Questions
Q1) Which of the following is not typical receivables skimming scheme?
A) Lapping
B) Force balancing
C) Cashier theft
D) Fraudulent write offs
Q2) What types of company assets are typically misused?
Q3) How are noncash assets misappropriated?
Q4) The process of ______ occurs when an employee steals the deposit from day one then replaces it with day two's deposit. Day tow is replaced with day three, and so on.
A) Lapping
B) Kiting
C) Coring
D) Padding
Q5) List three proactive audit tests to detect noncash misappropriations.
Q6) Video cameras can be installed at cash entry points, but serve little use as a deterrent against theft.
A)True
B)False
Q7) What is meant by inventory "shrinkage"?
13
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Chapter 12: Cash Disbursement Schemes
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Sample Questions
Q1) "Kickback" schemes involve the vendor as an accomplice.
A)True
B)False
Q2) Who should be charged with adding a new vendor to the master file:
A) Purchasing
B) Accounts payable
C) The cashier
D) None of the above
Q3) In order for a "pay and return" scheme to work, vendors must be an accomplice.
A)True
B)False
Q4) Obtaining blank checks is unnecessary if the fraudster can produce counterfeit checks.
A)True
B)False
Q5) Pay and return schemes depend on which of the following controls being absent:
A) Separation of duties between the payment requestor and the mailroom
B) Separation of duties between the mailroom and cash receipts
C) Separation of duties between the vendor and the payment requestor
D) None of the above
14
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Chapter 13: Corruption and the Human Factor
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Sample Questions
Q1) How do bribery and illegal gratuities differ?
Q2) Which of the following would not normally be considered an illegal gratuity to the purchasing manager of Company A?
A) Accepting a trip to Hawaii donated by the vendor
B) Accepting of vendor office calendars
C) World Series baseball tickets donated by the vendor
D) Super Bowl tickets donated by the vendor
Q3) The Treadway Commission specifically commented on the importance of the "tone at the bottom" in respect to the ethics in an organization.
A)True
B)False
Q4) ________ are similar to bribery schemes, except that something of value is given to an employee to reward a decision rather than influence it.
A) Conflicts of interest
B) Economic extortion
C) Illegal gratuities
D) Expropriation
Q5) What is the defined as "something of value?"
Q6) What are the different types of corruption schemes?
Page 15
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Chapter 14: Financial Statement Fraud
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Sample Questions
Q1) The matching concept recommends but does not require that the books and records and the resultant financial statements match revenue and expense in the proper accounting period.
A)True
B)False
Q2) Improper capitalization of expenses was one of the key methods financial statement fraud allegedly used by:
A) Enron
B) Tyco
C) Raptor
D) WorldCom
Q3) Fictitious or fabricated revenue schemes involve the recording of sales of goods or services that did not occur
A)True
B)False
Q4) Accurate financial statements are the responsibility of company's external accountants.
A)True
B)False
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Chapter 15: Consulting, Litigation Support, and Expert
Witnesses: Damages, Valuations, and Other Engagements
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Sample Questions
Q1) In a forensic accounting investigation, documents are not only subjected to confirmation with external parties but also subjected to:
A) Fingerprint analysis
B) Destruction testing
C) Biometric analysis
D) Aural testing
Q2) The fraud examiner or forensic accountant often uses public records to verify the existence of the vendor business, the vendor's ownership, and the vendor's address and phone number.
A)True
B)False
Q3) Valuations can be developed to address a number of issues. For example, they may help facilitate asset transfers by helping to determine value for all the following EXCEPT:
A) Asset liquidations
B) Mergers and acquisitions
C) Bankruptcy
D) Expect longevity of the CEO
Q4) How may lost profits be calculated using typical benchmarks?
Page 17
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Chapter 16: Remediation and Litigation Advisory Services
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Sample Questions
Q1) How does the legal system differentiate between "following" versus "tracing' the money?
Q2) What is meant by remediation?
Q3) What is the difference between fact witnesses and expert witnesses?
Q4) With the ________ Rule, the basis of foundation for the opinion may not be based on "junk science." Just because a person qualifies as an expert, that person cannot offer any opinion unless that opinion is reasonably grounded in scientific fact.
A) Frye
B) Daubert
C) Campbell
D) Brislin
Q5) In what types of cases may a forensic accountant serve as an expert witness?
Q6) With the Daubert Rule, the basis of foundation for the opinion may not be based on "junk science." Just because a person qualifies as an expert, that person cannot offer any opinion unless that opinion is reasonably grounded in scientific fact.
A)True
B)False
Q7) What are the types of losses available for recovery?
Page 18
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