Ethics in Accounting Exam Questions
Course Introduction
Ethics in Accounting explores the principles and standards that guide ethical decision-making in the accounting profession. The course examines frameworks for ethical reasoning, the regulatory environment, and the responsibilities of accounting professionals to act with integrity, objectivity, and transparency. Topics include professional codes of conduct, the role of ethical practices in maintaining public trust, recognizing and responding to ethical dilemmas, corporate governance, and the implications of fraud and misconduct. Through case studies and real-world examples, students will develop the skills to identify ethical issues and apply ethical reasoning in diverse accounting contexts.
Recommended Textbook Fraud Examination 3rd Edition by W. Steve Albrecht
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Page 2
Chapter 1: The Nature of Fraud
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Sample Questions
Q1) Which of the following does not include one of the six types of fraud classification schemes as described in chapter 1?
A) Employee embezzlement
B) Government fraud
C) Investment scams
D) Customer fraud
Answer: B
Q2) Which legal code makes the bribing of public officials illegal?
A) Title 18, US Code Section 201
B) Title 41, US Code Section 51 to 58
C) Title 18, U.S. Code Section 1341
D) 18, U.S. Code Section 1344
Answer: A
Q3) Fraud is deception that includes all of the following except:
A) False representation
B) Tricky and/or cunning tactics
C) Confidence in the perpetrator
D) Unintentional Errors
Answer: D
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Page 3
Chapter 2: Why People Commit Fraud
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Sample Questions
Q1) Most fraud perpetrators:
A) Have little education
B) Have a criminal record.
C) Are new to the company
D) None of the above
Answer: D
Q2) Greed, living beyond one's means and high bills all describe what type of fraud-related pressure?
A) Financial
B) Peer
C) Vice
D) Barometric
E) Work Related
Answer: A
Q3) What is the most important element in a control environment?
A) Management's communication
B) Management's role and example
C) The hiring process
D) The internal audit department
Answer: B
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Chapter 3: Fighting Fraud: An Overview
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Sample Questions
Q1) In order to create a culture of honesty and integrity, all of the following should prevail except
A) Hire the right employees
B) Have an indulgent manager
C) Communicate expectations
D) Create a positive environment
Answer: B
Q2) What type of evidence does invigilation fall into?
A) Testimonial evidence
B) Documentary evidence
C) Physical evidence
D) Personal observation
Answer: D
Q3) Which is not one of the three basic elements of fraud?
A) Concealment
B) Theft
C) Opportunity
D) Conversion
Answer: C
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Page 5
Chapter 4: Preventing Fraud
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Sample Questions
Q1) Each of the following personnel policies, operating conditions, and procedures appear to contribute to a high fraud environment EXCEPT:
A) Perceived inequalities in the organization and inadequate pay.
B) Inadequate expense accounts and unreasonable budget expectations
C) Proactive management
D) Managers with impulsive, insensitive, dominant, or emotional personalities
E) High employee turnover.
Q2) Which of the following is not a possible fraud prevention strategy/technique?
A) Including "right-to-audit" clauses on purchase invoices.
B) Instigate a zero tolerance policy with regards to fraud in the workplace.
C) Effectively screen potential employees.
D) All of the above are possible fraud prevention strategies/techniques.
Q3) Which factors are crucial in creating a culture of honesty, openness, and assistance?
A) Hiring honest people and training them in fraud awareness
B) Creating a positive work environment
C) Disseminating a well understood and respected code of conduct or ethics
D) All of the above
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Chapter 5: Recognizing the Symptoms of Fraud
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Sample Questions
Q1) Accounting anomalies include all of the following except
A) Irregularities in source documents
B) Lack of segregation of duties
C) Inaccuracies in ledgers
D) Faulty journal entries
Q2) Common examples of analytical anomalies include all of the following except:
A) Irregularities in source documents
B) Unexplained inventory shortages or adjustments
C) Excess purchases
D) Excessive late charges
Q3) Which of the following is an analytical anomaly?
A) Increases in past due Accounts Receivable
B) Significant increases or decreases in account balances
C) Alterations on documents
D) Excessive voids or credits
Q4) Who of the following would be most likely to provide a tip regarding the conversion of a fraud:
A) Company accountants.
B) Auditors.
C) Friends.
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Chapter 6: Data-Driven Fraud Detection
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Sample Questions
Q1) Using these to detect fraud is much easier than assessing changes in the financial statement numbers themselves:
A) Financial statement ratios
B) Vertical analyses
C) Horizontal analyses
D) Data mining
Q2) Which of the following is the most direct method of focusing on changes in a company's balance sheet and income statement?
A) Comparing key ratios from one period to the next
B) Comparing account balances from one period to the next
C) Vertical analysis
D) Horizontal analysis
Q3) A mathematical algorithm that predicts the percentage of the time each digit will appear in a sequence of numbers:
A) Inductive fraud detection
B) Deductive Fraud detection
C) Benford's law
D) Horizontal Analysis
E) Vertical Analysis
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Page 8
Chapter 7: Investigating Theft Acts
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Sample Questions
Q1) A vulnerability chart coordinates the various elements of a possible fraud including all the following except:
A) Pressures on the company
B) Concealment possibilities
C) Conversion possibilities
D) Symptoms observed
E) A, B, and D
F) None of the above
Q2) A ___________________ is a tool that coordinates the various elements of a fraud investigation to help identify possible suspects.
A) Vulnerability chart
B) Subpoena
C) Chain of custody
D) Invigilation
Q3) In most investigations of a fraud suspect, investigators should begin by:
A) Confronting the suspect.
B) Checking personal and company records
C) Interviewing co-workers.
D) Performing invigilation.
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Page 9
Chapter 8: Investigating Concealment
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Sample Questions
Q1) Which of the following terms describes the risk that the sample is not representative of the population?
A) Errors
B) Non-sampling risk
C) Sampling risk
D) Detection risk
Q2) All of the following information can be obtained from a cancelled check except:
A) Account number of the maker
B) Account number of the person who presented the check
C) A trail of all people who transferred the check (assignees and assignors)
D) Nature of transaction (cashed, deposited, presented for payment)
Q3) Moe owns a 24-hour convenience store. He has noticed that the amounts of liquor inventory purchases have gotten bigger and frequent lately. Nevertheless, sales provided by this particular item haven't increased. He is concerned that the two night-shift employees might be involved. The best method to use for this investigation is:
A) Theft investigation
B) Conversion investigation
C) Embezzlement investigation
D) Concealment investigation
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Page 10
Chapter 9: Conversion Investigation Methods
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Sample Questions
Q1) The CIA is responsible to investigate matters:
A) Inside the United States
B) Outside the United States
C) Dealing with the President of the United States
D) All of the above
Q2) The ____________ contains information on individuals who may be a threat to national security.
A) Department of justice
B) Bureau of prisons
C) Department of defense
D) Secret service
Q3) Which of the following is a true disadvantage of using the net worth method?
A) the amounts are not readily accepted as evidence by courts
B) it rarely facilitates the obtaining of a confession
C) it is widely used by the DEA, FBI, and IRS
D) embezzlers typically spend their money on luxuries that are difficult to track
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11
Chapter 10: Inquiry Methods and Fraud Reports
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Q1) Which of the following is an example of Stage 2 in the reaction to a crisis?
A) A person appears temporarily stunned or dazed.
B) A person feels that the perpetrator's motivation was almost justifiable.
C) A person insults, harms, or slanders the suspect.
D) A person is sad and withdraws or loses interest in the environment
Q2) Which is not a verbal clue that would place suspicion on an interviewee?
A) Frequent reference to good character
B) Eagerness to end the interview
C) Avoidance of emotionally charged terms
D) Answering with a question
E) All of the above are suspicious verbal clues
Q3) In which of the following stages would an individual usually become withdrawn, uncooperative, or embarrassed?
A) Denial.
B) Anger.
C) Rationalization.
D) Depression.
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12
Chapter 11: Financial Statement Fraud
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Sample Questions
Q1) Although GAAP does allow for some flexibility, which standards should be maintained in preparing financial statements?
A) Assertiveness
B) Integrity & Objectivity
C) Independence
D) None of the above
Q2) According to the COSO's study of financial statement frauds, what is the average period of a financial statement fraud?
A) 12 months
B) 18 months
C) 24 months
D) 30 months
Q3) Which of the following organizational characteristics is a possible fraud red flag:
A) A board of directors comprised mainly of outsiders.
B) An independent internal audit department.
C) An audit committee comprised mainly of insiders.
D) An overstaffed accounting department.
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13
Chapter 12: Revenue- and Inventory-Related Financial
Statement Frauds
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Q1) __________ involves examining percentage changes in account balances from period to period.
A) Horizontal analysis
B) Change statement analysis
C) Ratio analysis
D) None of the above
Q2) Horizontal analysis is not typically performed on the ___________.
A) Balance sheet
B) Income statement
C) Statement of cash flows
D) None of the above
Q3) The practice of ____________ involves selling unused assets while promising to buy them back at roughly the same price
A) Improper cutoff
B) Refreshing transactions
C) Channel stuffing
D) Round-tripping
E) None of the above
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Chapter 13: Liability, Asset, and Inadequate Disclosure
Frauds
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Q1) What type of disclosure fraud is perpetrated when a company fails to disclose significant events that occur after the balance sheet date (i.e. subsequent events)?
A) Misrepresentation of the company or its products
B) Misrepresentation in financial reports
C) Misleading footnotes
D) None of the above
Q2) Which of the following is NOT a symptom of Accounts Payable Fraud?
A) More inventory counted than identified through purchasing and inventory records
B) Discrepancy in cut off tests
C) Loans with no interest
D) Amounts listed on vendor statements not recorded as purchases
Q3) All of the following are examples of disclosure fraud except:
A) Failing to disclose contractual obligations
B) Failing to disclose information regarding loans to creditors
C) Inadequately disclosing significant accounting policies
D) Inadequately disclosing information about pensions
E) All of the above are examples of disclosure fraud
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Page 15
Chapter 14: Fraud Against Organizations
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Q1) Removal of cash from a victim organization prior to its entry in an accounting system would be considered:
A) Extortion
B) Disbursement Fraud
C) Skimming
D) Larceny
E) Check tampering
Q2) Which of the following is not an example of a billing scheme?
A) Submitting invoices to the victim organization for dummy companies
B) Altering a non-accomplice vendor's statements
C) Making a claim for reimbursement of a fictitious or inflated business expenses
D) Making personal purchases with company funds
E) All of the above are examples of billing schemes
Q3) Which of the following is the best example of theft of cash through skimming?
A) Preparing fraudulent checks
B) Understating sales by recording false or larger-than reality sales discounts
C) Setting up dummy companies
D) Stealing cash after it has already been recorded
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16
Chapter 15: Consumer Fraud
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Q1) All of the following are red flags for potential investment scams except:
A) Pressures to get in early on the investment
B) A business with a history of bankruptcy
C) Use of a special tax loophole
D) Assurance of low personal involvement
E) All of the above are red flags for potential investment scams
Q2) Cover up or concealment actions involve any actions:
A) That keep an investigator warm during a surveillance
B) That are used to keep a potential fraudster unaware of invigilation
C) That are used to cover the financial footprints of a perpetrator
D) That cover up the investigative steps of a fraud investigator
Q3) Multi-level Marketing schemes have often been dubbed:
A) Ponzi Schemes
B) Foreign Advance Schemes
C) Identity Theft Schemes
D) Shoulder Surfing Schemes
Q4) Fraudsters might complete a change of address form at the local post office:
A) To redirect their mail when investigations are discovered
B) To have a victim's mail sent to an alternative address as part of an identity theft scheme
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Chapter 16: Bankruptcy, Divorce, and Tax Fraud
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Q1) Bankruptcy judges perform all of the following functions except
A) Approve reorganization plans
B) Conduct hearings and trials to resolve disputes
C) Appoint fraud examination firms to conduct audits
D) Award professional fees
E) Bankruptcy judges perform all of the above functions
Q2) When fraud examiners investigate a bankruptcy or divorce resulting from fraud where do they focus?
A) Activity shortly before the bankruptcy filing or divorce
B) Activity after the bankruptcy filing or divorce
C) Activity several years prior to the bankruptcy filing or divorce
D) Activity throughout the individual's entire life
Q3) "Bust-out" refers to:
A) A planned bankruptcy
B) Jailbreak planned by fraud perpetrators
C) Skipping out on bail
D) Fraud prevention program for convicted fraudsters
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18
Chapter 17: Fraud in E-Commerce
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Q1) Which is not a method of preventing fraud through control activities
A) Separation of Duties
B) Sniffing
C) Authorization of transactions and activities
D) Physical control over assets and records
Q2) What is the most important aspect of internal control?
A) The personnel
B) The board and audit committee participation
C) A controlled system
D) All of the above are equally important aspects of internal control
Q3) All of the following are unique risks to e-commerce fraud except:
A) Removal of personal contact between customer and company
B) Pressures to "cook the books" and meet analysts expectations
C) Lack of "brick-and-mortar" facilities
D) Inability to distinguish larger, well-established companies from smaller, faux companies
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Chapter 18: Legal Follow-Up
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Sample Questions
Q1) Fraud cases that involve federal laws or statutes (such as mail fraud, Racketeer Influenced and Corrupt Organization, banking, and securities regulations) are tried in:
A) Criminal courts
B) U.S. claims courts
C) U.S. bankruptcy courts
D) U.S. district courts
Q2) The concept of probable cause comes from which amendment?
A) The Fourth Amendment
B) The Fifth Amendment
C) The Seventh Amendment
D) The Ninth Amendment
Q3) Which of the following protect the defendant from 'unreasonable searches and seizures by the government'?
A) 4th amendment
B) 5th amendment
C) 6th amendment
D) 7th amendment
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