Fraud Examination
Question Bank
Course Introduction
Fraud Examination is a course designed to equip students with the knowledge and skills necessary to identify, investigate, and prevent various types of occupational and financial fraud. The course covers the principles of fraud detection, the methods used to commit and conceal fraud, and the legal and ethical considerations involved in fraud investigations. By analyzing real-world case studies, students will learn about the roles and responsibilities of fraud examiners, interview techniques, evidence collection, and reporting procedures. The curriculum is ideal for those seeking careers in accounting, auditing, law enforcement, or corporate compliance, and emphasizes the importance of internal controls and ethical behavior in combating fraud.
Recommended Textbook
Forensic Accounting and Fraud Examination 1st Edition by Mary Jo Kranacher
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16 Chapters
916 Verified Questions
916 Flashcards
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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) From the list below, create the typical fraud perpetrator profile.
A) Male, high school education, young, general labor, and with the company for years.
B) Female, high school education, young, general labor, and relatively new to the company.
C) Male, post secondary education, middle aged, professional, and with the company for years.
D) Female, post secondary education, middle aged, professional, and relatively new to the company.
Answer: C
Q2) Which of the following is not a symptom of one of the six common categories of fraud?
A) Unexplained accounting anomalies.
B) Exploited internal control weaknesses.
C) Where nonfinancial data correlates with financial data.
D) Anomalies communicated via tips and complaints.
Answer: C
Q3) Identify common fraud schemes.
Answer: Common fraud schemes include asset misappropriation, corruption, and False statements.
Page 3
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Chapter 2: Careers in Fraud Examination and Financial
Forensics
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68 Flashcards
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Sample Questions
Q1) Corporate governance means:
A) the integrity and quality of the corporation's trading value on the market.
B) the way a corporation is governed through proper accountability for managerial and financial performance.
C) the reliability, vigilance, and objectivity of the corporate.
D) All of the above are correct answers.
Answer: B
Q2) As part of legal and regulatory oversight to prevent misconduct, including fraud, professionals are checking for compliance and doing risk analysis for:
A) the Sarbanes-Oxley Act of 2002 SOX Act.
B) environmental.
C) health and safety OSHA issues.
D) All of the above are correct.
Answer: D
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) Organizational crimes occur when entities, companies, corporations, not-for-profits, nonprofits, and government bodies, otherwise legitimate and law-abiding organizations, are involved in a criminal offense.
A)True
B)False
Answer: True
Q2) Large frauds are typically associated with all of the following except:
A) Lack of segregation of duties and responsibilities.
B) Placing undeserved trust in key employees.
C) Operating on a crisis basis
D) Working with management to set realistic goals
Answer: D
Q3) For purposes of defining occupational fraud and abuse, employees include only top or middle managers.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Complex Frauds and Financial Crimes
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63 Flashcards
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Sample Questions
Q1) "Accidental" fraudsters are usually poor members of minority groups.
A)True
B)False
Q2) The transfer of funds obtained illegally from a US bank to another US bank is an example of:
A) Reiniating
B) Layering
C) Placement
D) None of the above
Q3) Explain the difference between mail and wire fraud. Which do you think might be easier to detect? Why?
Q4) Describe the stages of money laundering and for each stage, provide an example.
Q5) The conversion of illegal funds to assets is which step in the money laundering process:
A) Layering
B) Placement
C) Reinitiation
D) None of the above
Q6) Explain how the Patriot Act enhances RICO.
Page 6
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Chapter 5: Cybercrime: Computer and Internet Fraud
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6 Verified Questions
6 Flashcards
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Sample Questions
Q1) 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
Q2) Cyber-crime involves the use of cell phones.
A)True
B)False
Q3) Computers offer cyber criminals efficient ways to hide fraudulent activities.
A)True
B)False
Q4) The "computer as a symbol" involves using a computer to intercept data transmission.
A)True
B)False
Q5) Computer crime involves the attempt to access data illegally.
A)True
B)False
Q6) Computer crime and computer fraud are synonyms.
A)True
B)False
Page 7
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Chapter 6: Legal, Regulatory, and Professional Environment
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Sample Questions
Q1) What approaches are used by investigators to obtain documents?
Q2) Section 404 of SOX recommends, but does not require, the company's external auditors to attest to and issue a report on management's assessment of internal control.
A)True
B)False
Q3) In September 2004, the Committee of Sponsoring Organizations COSO of the Treadway Commission released their _______ framework, recognized by the SEC as the critical methodology for Sarbanes-Oxley.
A) ERM
B) IFRS
C) XBRL
D) XML
Q4) 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.
Q5) What constitutes "good cause" in the discharge of an employee?
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Chapter 7: Fraud Detection: Red Flags and Targeted Risk Assessment
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71 Verified Questions
71 Flashcards
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Sample Questions
Q1) Earnings management may:
A) increase current period net income.
B) decrease current period net income.
C) may involve "consuming" prior period reserves for current period performance.
D) All of the choices are correct.
Q2) Most audit committees have the authority to investigate any matters within the scope of their responsibility, including internal control deficiencies, concerns about the financial reporting process, suspected corruption, and alleged illegal acts.
A)True
B)False
Q3) Provide at least five examples of typical internal control weaknesses.
Q4) What is the "expectations gap"?
Q5) Electronic storage of entity financial and nonfinancial records is expensive and access to the information in data warehouses is limited to data mining activities.
A)True
B)False
Q6) Define the terms fraud prevention, fraud deterrence, and fraud detection and identify issues of timing.
Page 9
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Chapter 8: Detection and Investigations
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Sample Questions
Q1) Barney Fife keeps bank accounts in Switzerland. This is a method for hiding assets.
A)True
B)False
Q2) Chain of custody is achieved in which of the following scenarios:
A) A police officer tags each unit of evidence and places it in a separate envelope
B) A detective seals each unit of evidence in a manila envelope, signs and dates the envelope, and places it in protective custody
C) An evidence technician tags each unit of evidence in a sealed envelope, signs and dates the envelope, and places it with the evidence locker personnel for safekeeping
D) A police officer tags each unit of evidence, places it in a secure envelope, signs and dates the envelope, gives the envelope to evidence personnel for safekeeping and logging of access
Q3) Types of evidence
Q4) Net worth method
Q5) Data mining software
Q6) Bank analysis method:
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10
Chapter 9: Effective Interviewing and Interrogation
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Sample Questions
Q1) During the introduction stage, the interviewer also maintains a professional tone but importantly solicits the cooperation of the witness, subject, or target
A)True
B)False
Q2) A murderer is condemned to death. He has to choose between three rooms. The first is full of raging fires, the second is full of assassins with loaded guns, and the third is full of lions that haven't eaten in three years. Which room is safest for him?
Q3) What are some nonverbal clues to deception?
Q4) Provide three of Joe Well's ten commandments for effective interviewing.
Q5) Which of the following is NOT a step in the admission-seeking interview interrogation?
A) Accuse the subject of committing the offense
B) Observe-reaction
C) Assure confidentiality to the suspect
D) Interrupt denials
Q6) What are the five types of interview and interrogation questions?
Q7) Why are interviews in fraudulent financial statements and tax returns handled differently than interviews in other fraud examinations?
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Chapter 10: Using Information Technology for Fraud
Examination and Financial Forensics
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57 Flashcards
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Sample Questions
Q1) List and describe three graphical techniques used to support the forensics professional.
Q2) What computer functions can make recovering deleted files more difficult?
Q3) Once data sectors on computer files have been overwritten, generally a computer forensic specialist can still recover the files.
A)True
B)False
Q4) How is case management software used in an investigation?
Q5) 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
Q6) Which of the following is NOT a tool to collect digital evidence?
A) Road MASSter
B) Encase
C) HDD Regenerator
D) Microsoft Dynamics GP
Q7) What role do graphics play in an investigation? Page 12
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Chapter 11: Cash Receipt Schemes and Other Asset
Misappropriations
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55 Flashcards
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Sample Questions
Q1) Another method used by employees to conceal the misapplication of customer payments is the theft of alteration of account statements.
A)True
B)False
Q2) Trend analysis on aging of customer accounts can't be used to highlight a skimming scheme.
A)True
B)False
Q3) Service employees that are completing transactions during non-business hours could possibly use the non-business hours to sell company assets to their own benefit. This fraud could be caught by:
A) Comparing sales by employee on a year-to-year basis
B) Review company telephone logs for calls made during non-business hours
C) Comparing utility bills on a month-to-month basis
D) Comparing sales per location on a year-to-year basis
Q4) What is the difference between skimming and cash larceny?
Q5) In cash larceny schemes, what methods may be used to conceal these schemes at the point of sale?
Q6) Which is the most effective control to prevent receivables skimming?
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Chapter 12: Cash Disbursement Schemes
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Sample Questions
Q1) One common way to divert sales proceeds to yourself is by:
A) Opening a store for business before official starting time
B) Giving discounts for damaged merchandise without management approval
C) Diverting inventory to another store
D) All of the above
Q2) Fictitious revenue schemes are frequently designed around commission plans.
A)True
B)False
Q3) Falsifying time and attendance data are central to a ghost employee scheme.
A)True
B)False
Q4) "Kickback" schemes involve the vendor as an accomplice.
A)True
B)False
Q5) Which of the following would prevent a ghost employee scheme:
A) Separation of payroll and personnel functions
B) Separation of timekeeping and payroll functions
C) Separation of timekeeping and supervisor functions
D) None of the above
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Chapter 13: Corruption and the Human Factor
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Sample Questions
Q1) Illegal gratuities are similar to bribery schemes, except that something of value is given to an employee to reward a decision rather than influence it.
A)True
B)False
Q2) Employees who perceive that they will be caught engaging in occupational fraud and abuse are less likely to commit it.
A)True
B)False
Q3) In turnaround sales scheme, an employee knows his employer is seeking to purchase a certain asset and takes advantage of the situation by purchasing the asset himself.
A)True
B)False
Q4) How do bribery and illegal gratuities differ?
Q5) Why is it problematic for an organization to set standards that are too high?
Q6) What types of abuses may occur at the pre-solicitation stage of the bidding process?
Q7) What is the difference between fraud prevention and fraud deterrence?
Q8) How does the "perception of detection" impact fraud deterrence?
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Chapter 14: Financial Statement Fraud
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Sample Questions
Q1) Reporting practices within certain industries may not deviate from generally accepted accounting principles as a matter of fair and clear presentation..
A)True
B)False
Q2) Which of the following is NOT one of the more common reasons senior management understate business performance?
A) To defer "surplus" earnings to the next accounting period.
B) To take all possible write-offs in one "big bath" now so future earning will be consistently higher.
C) To preserve a trend of consistent growth and avoid volatile results.
D) To enhance the earnings per share.
Q3) What are some of the ways in which financial statement fraud is committed?
Q4) Improper asset valuations usually fall into one of the following EXCEPT:
A) Inventory valuation
B) Accounts receivable
C) Cash
D) Fixed assets
Q5) How can financial statement fraud be deterred?
Q6) What issues are generally involved in improper disclosures?
Page 17
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Chapter 15: Consulting, Litigation Support, and Expert
Witnesses: Damages, Valuations, and Other Engagements
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Sample Questions
Q1) The Accredited Senior Appraiser's ASA's Principles of Appraisal Practice suggests the following items be included from a valuation report with the exception of:
A) Description of the property that is the subject of the appraisal
B) The objectives of the appraisal work
C) The statement of contingent and limiting conditions to which the appraisal findings are subject
D) An opinion from FASB
Q2) Generally, in order to pursue a claim for legal damages successfully, the injured party must prove:
A) Liability
B) Damages
C) Both A and B
D) None of the above
Q3) Generally, in order to pursue a claim for legal damages successfully, the injured party must prove two points: liability and damages.
A)True
B)False
Q4) How may lost profits be calculated using typical benchmarks?
Page 18
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Chapter 16: Remediation and Litigation Advisory Services
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Sample Questions
Q1) The fraud examiner or forensic accountant should understand that the opposing lawyer will NOT:
A) Learn your field
B) Agree with your conclusions
C) Know your report
D) Know your resume
Q2) A deposition is a post-trial process by which the parties to a civil litigation are allowed to examine the other side's fact witnesses and expert witnesses.
A)True
B)False
Q3) Forensic accounting is the use of accounting for possible courtroom purposes.
A)True
B)False
Q4) What is the difference between fact witnesses and expert witnesses?
Q5) What steps should the forensic professional take, assuming that legal counsel initiated the fraud investigation?
Q6) What are the types of losses available for recovery?
Q7) In what types of cases may a forensic accountant serve as an expert witness?
Q8) When may an expert's opinion be subject to challenge?
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