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Predication, although important, is not required in a fraud examination.
In a fraud examination, evidence is usually gathered in a manner that moves from general to specific.
In the 2011 Global Fraud Survey, the median loss in schemes committed by males was higher than the median loss in schemes committed by females.
Fraud examination differs from auditing in that fraud examination is:
General in scope
All of the above
Once sufficient predication has been established, what is the first step a fraud examiner following the fraud theory approach should take?
Interview the suspect.
Create a hypothesis.
Which of the following is not a part of the fraud theory approach?
Analyze available data.
Identify who committed the fraud.
Develop “what-if” scenarios.
Refine the hypothesis.
In order to prove that fraud occurred, four elements must be present. Which of the following is not one of those elements?
Reliance on the false statement by the victim
A material false statement
Intent to cause the victim damages
Knowledge that the statement was false
Which of the following is not one of the legs of the Fraud Triangle?
Perceived non-sharable financial need
Research in the Hollinger-Clark study suggests that the best way to deter employee theft is by:
Communicating the organization’s fraud policies to employees
Increasing sanctions imposed on occupational fraudsters
Strengthening internal controls
Increasing the perception of detection
Who developed the Fraud Scale?
Joseph T. Wells
Richard C. Hollinger
Donald R. Cressey
W. Steve Albrecht
Which of the following best describes the objective of a fraud examination?
To determine whether a crime has been committed, and if so, who is responsible
To determine whether financial statements are free of misstatements due to fraud
To express an opinion on the guilt or innocence of a suspect
To make recommendations to management about how to prevent fraud
According to the results of the Hollinger-Clark study, employees steal primarily because of:
Informal organizational structures
In the 2011 Global Fraud Survey, the category that committed the smallest percentage of occupational fraud was:
The basic tenet of Edwin Sutherland’s theory of differential association is that crime is passed on genetically; that is, the offspring of criminals commit crimes because their parents did.
Alice Durant works in the accounts payable department for the BC Group. She recently found out that Della Granger, another A/P clerk, received a bigger raise than she did, even though Durant has been with the company longer and frequently has to correct Granger’s errors. Which leg of the Fraud Triangle best applies to Durant’s situation?
Non-sharable financial need
Joel Baker, a customer of ABC Electronics, stole a box containing computer games while the sales associate waited on another customer. Which of the following could Joel be charged with?
All of the above
Skimming can be either an on-book scheme or an off-book scheme, depending on whether cash or a check is stolen.
To a fraudster, the principle advantage of skimming is the difficulty with which the scheme is detected.
None of the above
While conducting a routine internal audit, Sally Franks overheard one of the company’s purchasing agents bragging about receiving a substantial discount on a new SUV from the company’s supplier of fleet cars. Is there sufficient predication to initiate a fraud examination?
To cover up a skimming scheme in which the employee takes cash from the register, the employee must make a voided sale in order for the register to balance.
In the 2011 Global Fraud Survey, fraudulent financial statements schemes had a higher median loss than asset misappropriation and corruption schemes.
Methods of skimming sales include which of the following?
Posting a sale for less than the amount collected
Rigging the cash register so that the sale is not recorded
Conducting unauthorized sales after hours
All of the above
Skimming receivables is generally more difficult to conceal than skimming sales.
In the 2011 Global Fraud Survey, most perpetrators of fraud had been previously charged with or convicted of a fraud-related offense.
When Jill Michaels, an assistant to the director of procurement, moved into her new home, she used the company’s flat bed truck to move her furnishings on an afternoon when her boss was out of town. Which of the following best describes Michael’s act?
Which of the following techniques is not used to conceal sales skimming schemes?
Recording false voids
Destroying records of transaction
In one of the case studies in the textbook, Brian Lee, a top-notch plastic surgeon, collected payments from his patients without giving a cut to the clinic where he practiced. How was he punished?
He was terminated from the practice and was required to make full restitution in lieu of prosecution.
He was sued in civil court for the amount of the loss.
He was allowed to continue to practice at the clinic but was required to make full restitution.
He was convicted of grand larceny and sentenced to probation.
According to the 2011 Global Fraud Survey, skimming schemes are both the most common and the most costly type of cash misappropriation scheme.
In one of the case studies in the textbook, Brian Lee, a top-notch plastic surgeon, collected payments from his patients without giving a cut to the clinic where he practiced. What was his motivation for committing the fraud?
He was greedy.
He needed to repay his student loan.
He wanted to use the proceeds to fund his “doctors without borders” practice.
He felt that the clinic was taking too much of a cut from his income.
Mandating supervisory approval for write-offs or discounts can help prevent receivables skimming schemes.
Computing the percentage of assigned time to unassigned time for employees is one method to detect an employee skimming scheme.
Myra Manning, CFE, was hired to investigate some suspicious activity at Arizona Medical Supply after one of the company’s largest customers complained several times that its account statements do not reflect all the payments it has made. While examining the accounts receivable activity, Myra noticed a significant rise in the volume of overdue accounts during the last 6 months. What type of scheme might this situation indicate?
In one of the case studies in the textbook, Stefan Winkler was the controller for a beverage company in south Florida. Money was collected by either the delivery drivers who brought in the cash and checks from their route customers (route deposits), or by credit customers who mailed in their payments (office deposits). Winkler stole cash from the route deposits and made up for it by using checks from the office deposits. How did Winkler conceal his crime?
He altered electronic files
He stole cash receipt journals, copies of customer checks, and deposit slips
He removed his personnel file
All of the above
Jason Herman works part-time as a retail clerk at a local bookstore. One night while his manager was out of town, Jason decided to keep the store open for a few extra hours. He reset the cash registers at the normal closing time, but continued making sales. Two hours later, when he closed for the night, he reset the registers again, removing all evidence that any extra transactions had been made, and pocketed the money from the after-hours sales. What kind of scheme did Jason commit?
A method of concealing receivables skimming by crediting one account while abstracting money from a different account is known as:
Asset misappropriations are broken down into two categories: cash schemes and non-cash schemes. According to the 2010 Report to the Nations on Occupational Fraud and Abuse, cash schemes are much more common than non-cash schemes.
Sue Meyers was an accounts receivable clerk for an insurance broker. When premium payments were received, she would steal the check of every tenth customer and cash it at a liquor store. To conceal her scheme, she would credit the account of the customer that she stole from with a payment that was received from another customer’s account. This is an example of:
A forged endorsement scheme
Anne Mullens is the bookkeeper for DWG Refrigeration Repair. One afternoon while she was preparing the bank deposit, a customer came in to the office and paid his account in full with a $57 check. Rather than adding the check to the deposit, Anne pocketed $57 cash from the previously recorded amount and included the customer’s check in the money to be taken to the bank. What type of scheme did Anne commit?
Question 40 The concealment of receivables skimming can be difficult because:
Inventory must be padded to conceal shrinkage.
The audit trail must be destroyed.
The incoming payments are expected.
All of the above