35 Free Test Bank for Forensic Accounting and Fraud Examination 1st Edition by Kranacher

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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.

Some of the typical forensic and litigation advisory services are:

•  A. costs and lost profits resulting from business interruptions.
•  B. assets and business valuations.
•  C. anti-trust actions.
•  D. All of the above.

Which of the following is not one of the three-pronged processes of remediation?

•  A. The prevention and detection of a fraud that has already occurred.
•  B. The recovery of losses through insurance, the legal system, or other means.
•  C. Support for the legal process as it tries to resolve the matter in the legal environment.
•  D. The modification of operational processes, procedures, and internal controls to minimize the chances of a similar fraud recurring.

Evidence can best be defined as:

•  A. only tangible objects legally presented at a trial.
•  B. anything perceivable by the five senses and legally presented at trial.
•  C. only records, documents, facts, data, or tangible objects legally presented at trial.
•  D. only witness testimony accepted by both the plaintiff and defendant.

At a minimum, professional skepticism:

•  A. is supportive of client’s claim of fraud.
•  B. is a neutral but disciplined approach to detection and investigation.
•  C. assumes that the management is dishonest and therefore must “pull every loose thread” to find the evidence and fraud.
•  D. assumes unquestioned loyalty by newer and younger employees.

As compensation of the perpetrator increases the losses associated with the perpetrator rise most likely because:

•  A. the perpetrator has a greater appreciation of costly pleasures.
•  B. the perpetrator has greater access to company funds and assets.
•  C. the perpetrator has a higher cost of status and image.
•  D. the perpetrator can coerce others into the scheme.

The most common anti-fraud measure used by respondents to the ACFE’s National Fraud Survey was:

•  A. the external audit of financial statements.
•  B. a formal code of conduct.
•  C. surprise audits.
•  D. job rotation/mandatory vacation policies.

Which of the follow is not a reason why small businesses have high losses to fraud?

•  A. Smaller businesses have fewer personnel doing more jobs.
•  B. Small businesses frequently have external fraud detection units.
•  C. Small businesses frequently have higher degrees of trust between personnel.
•  D. All of the above are reasons why small businesses have higher fraud losses.

M/C Fraud deterrence begins:

•  A. with the employer’s internal controls.
•  B. in the employee’s mind.
•  C. with the fraud examination.
•  D. with regulatory and legal actions such as PCAOB Auditing Standard No. 5, AICPA Statement on Auditing Standards (SAS) No. 99, and the Sarbanes–Oxley Act.

Auditing is responsible for:

•  A. litigation support and redemption.
•  B. risk assessment and internal controls.
•  C. risk assessment and calculation of damages.
•  D. business valuation and risk assessment.

The tort, known as conversion is correctly stated as:

•  A. the taking of property of another with the intent to deprive the owner of its use or possession.
•  B. an assumption and exercise of the right of ownership over goods or personal chattels belonging to another.
•  C. the carrying away of the property of another without the consent of the owner.
•  D. an unauthorized assumption and exercise of the right of ownership over goods or personal chattels belonging to another, to the alteration of their condition or the exclusion of the owner’s rights.

Small businesses, such as those with less than one hundred employees, account for approximately what percentage of the cases in the 2006 and 2008 ACFE surveys?

•  A. 10%-14%
•  B. 35%-27%
•  C. 36%-38%
•  D. 50%-52%

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.

In fraud cases where no legal action was taken, the most significant reason for the lack of prosecution was cited as:

•  A. that internal discipline was sufficient.
•  B. the fear of bad publicity.
•  C. private settlement was attained.
•  D. the dollar value of the loss was insufficient.

A common complaint among those who investigate fraud is that:

•  A. the adversarial relationship between plaintiffs and fraud examiners resulted in weak cases.
•  B. job rotation policies often result in perpetrators being moved to new positions of responsibility before being exposed.
•  C. companies often conceal the cost of fraud as other business expenses.
•  D. organizations and law enforcement do not do enough to punish fraud and other white-collar offenses.

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.

According to the ACFE, owners and executives are involved in only about:

•  A. 23 percent of frauds and steal approximately $834,000.
•  B. 40 percent of frauds and steal approximately $834,000.
•  C. 64 percent of frauds and steal approximately $834,000.
•  D. 93 percent of frauds and steal approximately $834,000.

Which of the following acts would not be considered an abuse or abusive?

•  A. Surf the Internet while at work.
•  B. Remove small amounts of cash from the cash register till.
•  C. Taking a long lunch or break.
•  D. Using sick leave to see a child’s play at school.

Which of the following is not part of or one of the three elements of professional skepticism for a fraud investigation?

•  A. An attitude that includes a questioning mind and a critical assessment of the evidence.
•  B. A commitment to persuasive evidence.
•  C. That the plaintiff and/or the defendant may be masking the true underlying story.
•  D. The investigation must reveal a benefit to the plaintiff.

Which statement below correctly states the four elements required to prove larceny?

•  A. There must be a taking or carrying away of the money of another without the consent of the owner and with the intent to deprive the owner of its use.
•  B. There was a taking or carrying away, of the money or property of another without the consent of the owner, and with the intent to deprive the owner of its use or possession.
•  C. There was a carrying away, of the property of another without the consent, and with the intent to deprive the owner of its possession.
•  D. There was a taking or carrying away, of the property of another with the intent to deprive the owner of its use or possession.

From the statements below select the most correct.

•  A. Prevention and deterrence are typically more costly than attempting to remediate a fraud that has already occurred.
•  B. Fraud deterrence refers to creating environments in which people are prohibited from committing fraud.
•  C. Fraud detection refers to the process of preventing and discovering the presence of fraud.
•  D. Prevention and deterrence are typically more cost beneficial than attempting to remediate a fraud that has already occurred.

The acronym “M.I.C.E.” as typical motivations of fraud perpetrators stands for:

•  A. Money, Ideology, Coercion, and Environment.
•  B. Money, Ideology, Coercion, and Ego.
•  C. Motive, Ideology, Coercion, and Ego.
•  D. Money, Image, Capability, and Environment.

An employee enters the work place on a day off and utilizes the leased plotter/printer for four hours to produce graphics for his child’s school play. The lease payment is $80 per hour and his wages are $20 per hour. Select the correct statement from the choices below.

•  A. This is an abuse at the assumed value of $400.
•  B. This is an instance of fraud at the assumed value of $400.
•  C. This is an abuse at the assumed value of $320.
•  D. This is an instance of fraud at the assumed value of $320.

A person is said to act in a ‘fiduciary capacity’ when:

•  A. the business which he transacts, or the money or property which he handles, is not for his own benefit.
•  B. a relationship exists between the defendant and the plaintiff.
•  C. the action resulted in harm to the defendant.
•  D. he stands in a relation implying normal confidence, trust, and faith.

Select the most correct statement from those below.

•  A. Timing – Recurring for auditing and fraud examination, nonrecurring for financial forensics.
•  B. Objectives – Opinion for auditing and financial forensics, affix blame for fraud examination.
•  C. Relationship – Nonadversarial for auditing, adversarial for fraud examination, and independent for financial forensics.
•  D. Methodology – Audit techniques for auditing and financial forensics, fraud examination techniques for fraud examination.

Fraud professionals and forensic accountants use the term red flag to indicate:

•  A. that they are looking for symptoms and badges of fraud.
•  B. that all personnel will be investigated.
•  C. that evidence of fraud or abuse have been located and identified.
•  D. that a person or group of people have been identified as possible fraudsters or abuser.

Practically speaking, the law generally recognizes a fiduciary duty:

•  A. for cashiers and accountants.
•  B. for ordinary employees handling cash and valuables.
•  C. for officers and directors of a company.
•  D. All of the above are recognized as having a fiduciary duty.

The fraud theory approach involves the following steps, in the order of their occurrence is:

•  A. create hypotheses, analyze available data, test the hypotheses, refine and amend the hypothesis, and draw conclusions.
•  B. analyze available data, create hypotheses, test the hypotheses, refine and amend the hypothesis, and draw conclusions.
•  C. create hypotheses, test the hypotheses, analyze available data, refine and amend the hypothesis, and draw conclusions.
•  D. None of the above are in proper order.

The most frequently reported method of uncovering occupational fraud was:

•  A. by accident.
•  B. through internal audits.
•  C. tips.
•  D. through internal controls.

Which of the following is not a fraud risk factor?

•  A. Is there adequate reward for fraud?
•  B. Is there ample opportunity for fraud?
•  C. Is there a company culture for a high tolerance of risk?
•  D. Is management focused on short-term results or personal gain?

When the losses caused by fraud are correlated to the levels of compensation of the perpetrator, the line is somewhat linear, with slow rise from low compensation to approximately:

•  A. $100,000 annually where the rate of loss skyrockets.
•  B. $300,000 annually where the rate of loss skyrockets.
•  C. $500,000 annually where the rate of loss skyrockets.
•  D. $750,000 annually where the rate of loss skyrockets.

Financial statement fraud is often attributed to pressures, such as all of the following except:

•  A. investment losses.
•  B. meeting analysts’ expectations.
•  C. deadlines, and cutoffs.
•  D. qualifying for bonuses.

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.

The interrelationship among auditing, fraud examination, and financial forensics is:

•  A. established and maintained by legal structures and justice processes.
•  B. constant even while social and cultural pressures are exerted on it.
•  C. based on the SOX Act and SAS 99.
•  D. dynamic and changes over time.