Fraud Examination 4th Edition by Albrecht – Test Bank

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Fraud Examination 4th Edition by Albrecht – Test Bank

 

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Name Chapter 2–Why People Commit Fraud
Description
Instructions Modify
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Question Which of the following is NOT a common rationalization of fraud perpetrators?
Answer The organization owes me
I’m only borrowing the money
No one will get hurt
I don’t deserve more.
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Question Which of the following is NOT a primary control procedure to minimize the occurrence of fraud?
Answer Dual custody
Systems of authorization
Internal audit department
Documents and records
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Question Each of the following is an example of an inadequate control environment EXCEPT:
Answer The HR department failed to check an applicant’s background and hired someone who had committed fraud in the past.
A manager instructs employees not to share passwords, and then shares her passwords with others.
A company does not establish codes of conduct and does not have training meetings to teach employees to distinguish between
acceptable and unacceptable behavior.
The employees know who has responsibility for each business activity.
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Question A fraud perpetrator uses the float time between banks to give the impression that he had money in his accounts. Which crime is he
committing?
Answer Floating
Strip
Spinning
Kiting
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Question Which is following observations is TRUE?
Answer Research shows that only people with a criminal mind set can commit fraud.
Fraud perpetrators usually can be distinguished from others on the basis of demographic characteristics.
Most fraud perpetrators have profiles that look like those of other honest people.
When fraud does occur, the most common reaction by those around the fraud is confession.
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Question When management fraud occurs, companies usually:
Answer overstate assets and net income.
understate assets and net income.
overstate assets and understate net income.
understate assets and overstate net income.
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Question Which of the following is NOT one of the key elements common to all frauds?
Answer Perceived pressure
Perceived inequality
Perceived opportunity
Rationalization
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Question What is the most important element in a control environment?
Answer Management’s communication
Management’s role and example
The hiring process
The internal audit department
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Question Which of the following statements about accounting systems is incorrect?
Answer An effective accounting system provides an audit trail that allows frauds to be discovered.
An effective accounting system makes concealment difficult.
An effective accounting system can almost always effectively prevent “kickbacks.”
Without a good accounting system, it is often difficult to distinguish between actual fraud and unintentional error
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Question Greed, living beyond one’s means and high bills all describe what type of fraud-related pressure?
Answer Financial
Peer
Vice
Barometric
Work Related
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Question An effective accounting system is designed to provide which of the following to help discover fraud?
Answer An audit trail
Matching of expenses to revenues
Set of controls
Set of accounting procedures
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Question When fraud occurs, the most common reaction to those affected by the fraud is:
Answer Anger
Acceptance
Denial
Retribution
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Question Which of the following is NOT an element of a good control environment?
Answer Trust
Modeling
Appropriate hiring
Management’s communication
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Question Which of the following is NOT a possible control activity?
Answer Having separate authorization, bookkeeping, and custody functions.
Protecting access to important information with a password.
Requiring two individuals to work on the same task.
Supervisory review of each minute task completed by employees.
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Question The fraud triangle includes all of the following EXCEPT:
Answer Validation
Perceived opportunity
Rationalization
Perceived pressure
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Question Modeling and labeling are sub-components of which control structure component?
Answer Control environment
Accounting system
Control procedure
Review
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Question Poor credit could become a ____ that could lead to fraud.
Answer Financial pressure
Perceived opportunity
Rationalization
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Question ___________ requires every public company to have a code of ethics to help deter wrongdoing.
Answer The Glass Steagall legislation
The Sarbanes-Oxley legislation
The Securities Act
Generally Accepted Auditing Standards
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Question Financial statement fraud is typically committed by:
Answer Employees with access to company assets
Top management
Customers
Vendors
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Question An employee who has the responsibilities of both writing checks and making bank deposits would have ____.
Answer Financial pressure
Perceived opportunity
Rationalization
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Question Most fraud perpetrators have profiles that look like:
Answer Those of other honest people
Those with criminal records
Those who are uneducated
Those who use alcohol and drugs
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Question According to the Sarbanes-Oxley legislation, current changes to, or waivers of codes of ethics should be disclosed in:
Answer Form 10-K.
internal bulletin boards.
Form 8-K.
Form 10-Q.
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Question What is the strongest factor in deterring future fraud activity?
Answer Legal prosecution.
Sanctions.
Termination.
Counseling.
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Question Which of the following is NOT a true statement?
Answer Almost every fraud involves rationalization.
All frauds involve financial or vice-related pressures.
Perceived opportunity diminishes when fraud perpetrators are prosecuted.
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Question A smart fraudster usually manipulates which financial record in order to better avoid an audit trail?
Answer Income statement.
Balance sheet.
Statement of cash flows.
Statement of retained earnings.
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Question Which of the following factors creates an opportunity for fraud?
Answer Greed
Living beyond one’s means
Lack of an audit trail
The organization owes it to me
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Question Which of the following is NOT a common financial pressure associated with fraud?
Answer Living beyond one’s means
High bills or personal debt
Personal financial losses
Getting even with the employer
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Question Generally, internal controls are implemented in a corporation to help prevent which element of the fraud triangle?
Answer Perceived opportunity
Perceived pressure
Rationalization
Authorization
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Question Which racial group is most likely to commit fraud?
Answer Caucasian
African American
Asian
Hispanic
People of every race commit fraud
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Question According to the study mentioned in the text, which of the following is true about fraud perpetrators compared to property offenders?
Answer Fraud perpetrators are more likely to be caught than property offenders
Fraud perpetrators are more educated than property offenders
Fraud perpetrators are more likely to be men than property offenders
Fraud perpetrators are much younger than property offenders
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Question Which of the following creates opportunities for fraud?
Answer An audit trail
Inability to judge quality of performance
Controls that prevent or detect fraud
Disciplining fraud perpetrators
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Question Which of the following people is most likely to have opportunities to commit fraud?
Answer Rob is a convicted bank robber who has been out of jail for 7 years and is working for a small firm whose manager knows about Rob’s
criminal background.
Jane is a recent high school graduate who loves shopping. She is on the look out for a job.
Steve was just hired by his company but he is always acting suspicious
62 year old Dave has loyally worked up his company’s corporate ladder for the past 24 years
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Question According to the study mentioned in the text, people who commit fraud are most similar to which of the following groups?
Answer Property offenders
College students
Convicted murderers
Police officers
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Question 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.
Answer documentation
segregation of duties
system of authorizations
independent checks
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Question Which of the following is usually the most expensive of all control procedures?
Answer Documents and records
Segregation of duties
System of authorizations
Independent checks
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Question Segregation of duties, as a control procedure, is most often used
Answer when the task involved is quite simple.
when it is impossible for one person to complete a task.
when appraisals are conducted.
when cash is involved.
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Question Documents and records are an important control activity. Which of the following statements concerning this activity is true?
Answer They serve as excellent preventive controls.
Adequate accountability can exist even in their absence.
The entire accounting system serves as a documentary control.
They are poor detective controls.
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Question Which of the following is an example of an authorization control procedure?
Answer Password protection
Periodic job rotation
Cash counts
Supervisor review
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Question Who do criminologists compare fraudsters to in relation to repeat offenses and why?
Answer Rapists. They repeat their crimes because they are not severely punished.
Shoplifters. They steal goods frequently and in small quantities until they are confronted.
Bank Robbers. They steal a lot of money from wealthy sources.
Bank Tellers. They have access to a large amount of resources and they are perceived to be trustworthy people.
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Question Studies show that in advanced countries, levels of honesty are:
Answer Generally stable
Increasing
Decreasing
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Question Every fraud is comprised of all the following elements EXCEPT:
Answer The theft act
Concealment
Conversion
Assault
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Question According to Max Weber, ______ is the probability that a person can carry out his or her own will despite resistance.
Answer power
persuasion
prejudice
potency
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Question ____________ is the ability of the fraud perpetrator to make an individual perceive punishment if he or she does not participate in the
fraud.
Answer Expert power
Coercive power
Legitimate power
Reward power
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Question A fraud perpetrator is able to convince a potential victim that he will receive a large bonus if he supports him in a fraud scheme. Which
type of power is the fraud perpetrator using?
Answer Expert power
Coercive power
Legitimate power
Reward power
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Question Individuals often participate in fraud because they believe that by not participating in the fraud scheme, they may lose their job. Which
type of power is at play here?
Answer Expert power
Legitimate power
Coercive power
Reward power
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Question 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?
Answer Expert power
Referent power
Coercive power
Reward power
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Question _____ is the ability of the perpetrator to relate to the potential co-conspirator.
Answer Expert power
Legitimate power
Referent power
Reward power
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Question Many individuals, when persuaded by a trusted friend to participate in fraud, will rationalize the actions as being justifiable. Which type of
power is being employed in such situations?
Answer Referent power
Legitimate power
Coercive power
Reward power
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