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2 Fraud Examination - Second Exam
Terms in this set (160)
5-1 After committing fraud, an individual often exhibits unusual and recognizable behavior patterns to cope with the stress. Perpetrators experience this behavioral signals in a particular sequence. Identify it.
D. Guilt - Fear - Stress - Behavior changes
5-2 All transactions related to specific accounts, such as cash or inventory, are summarized in a:
5-3 An auditor noticed that company B had an exorbitant increase in sales and drastic decreases in its inventory and accounts receivables. The above statement symbolizes which fraud symptom?
C. Analytical anomaly
5-4 Blank involves the actual taking of cash, inventory, information, or other assets whereas blank involves selling stolen assets or transferring them into cash and then spending the cash
B. Theft, conversion
5-5 Common accounting anomaly fraud symptom involve problems with various data and books of accounts. Which of the following is not one among them?
C. Rounding adjustments
5-6 Document symptoms to some extent can signal out that embezzlement is taking place. Which among the following usually do not point to some problem with the source documents?
B. Different names or addresses of payees or customers
5-7 An employee decides to steal cash from his/her employer. What would be the best way to conceal such a fraud?
A. Record the stolen cash as an expense.
5-8 Fraud examiners must be able to recognize signals that a journal entry may have been manufactured to conceal a fraud. Which of the following is a common journal entry fraud symptom?
D. Journal entries made near the end of an accounting period
5-9 Fraud occurs when perceived pressure, perceived opportunity and rationalization combine. Which of the following is related to the problem of segregation of duties?
C. Steve records receivables and writes off bad debts.
5-10 fraud symptoms are procedures or relationships that are unusual or too unrealistic to be believable.
5-11 Generally, at the conversion stage, what are definitely not in the best position to detect fraud.
5-12 How does a smart embezzler manipulate accounting records to conceal fraud?
D. By increasing expenses.
5-13 Implementing a system of independent checks is one of the most effective ways to deter fraud. Which one of the following is not a way of providing independent checks on employees?
D. Single endorsement on checks
5-14 Inaccuracies in ledgers represent which type of fraud symptom?
C. Accounting anomalies
5-15 Increased scrap, excessive purchases, physical abnormalities, etc. are all examples of:
C. analytical anomalies.
5-16 In most organizations, coworkers and others have knowledge or suspicions that fraud is occurring but do not come forward with their information. There are several major reasons for this hesitancy. Which of the following is not one among them?
B. They are least bothered if whatever is happening is not affecting their work.
5-17 In which stage do auditors have a good chance of detecting fraud, if the audit samples include altered documents and miscounts?
5-18 Lifestyle changes of fraud perpetrators are related to which of the following fraud elements?
5-19 A major difference between financial statement auditors and fraud examiners is that most financial statement auditors:
A. merely match documents to see whether support exists and is adequate.
5-20 Recording an expense to conceal fraud involves making a fictitious journal entry. A faulty journal entry is an example of which fraud symptom?
A. Accounting anomaly
5-21 Research in psychology indicates that when people commit a crime, especially for the first time, they are initially overwhelmed by what
A. guilt, fear
5-22 There are three simple procedures that small business owners should do on a timely basis to prevent fraud when they can't afford sufficient employees to guarantee effective segregation of duties. Which of the following is not one among them?
C. Allow one key employee to operate the bank account personally.
5-23 Transactions happening at odd times or places; being performed by people who would not normally participate; or including odd procedures are typically associated with which type of fraud symptom?
C. Analytical anomaly
5-24 What are relationships in financial or nonfinancial data that do not make sense, such as an unreasonable change in a volume, mix, or price.
A. Analytical anomalies
"5-25 What does the following journal entry indicate? Legal Expense $2,900 Cash $2,900"
D. An attorney was paid $2,900 in cash.
5-26 Which name refers to people who commit a fraud or another crime once in a while and does not feel stress?
5-27 Which of the following appears to be common to most embezzlers who are caught?
D. Spending on lifestyle improvements
5-28 Which of the following fraud symptoms are often the easiest to detect?
D. Lifestyle changes
5-29 Which of the following is a highly suspicious financial statement relationship?
"A. Increased revenues with decreased inventory. or C. Increased inventory with decreased payables"
5-30 Which of the following is an analytical fraud symptom
B. Significant increase or decrease in account balances
5-31 Which of the following is an example of accounting anomaly fraud symptom?
A. Missing documents
5-32 Which of the following is not a fraud symptom related to internal control weaknesses?
E. Excessive turnover of executives
5-33 Which of the following is not an analytical fraud symptom?
B. Overriding of existing controls
5-34 Which of the following is not a "strange" financial statement relationship?
C. Decreased inventory with decreased payables
5-35 Which of the following motivates embezzlers to indulge in a fraudulent activity
A. Pursuit of immediate gratification.
5-36 Which of the following scenarios is least conducive to fraud?
B. Mandatory vacation time
5-37 Who in an organization is not in a good position to recognize fraud during the theft act?
10-1 All of the following are true concerning polygraphs except:
E. Failure to pass the test implies certain guilt.
10-2 Assessment questions seek to:
C. establish credibility of the respondent.
10-3 During which stage of the reactionary process is the most useful time to interview individuals who are dealing with fraud?
10-4 Each of the following is a clue that an interviewee is dishonest EXCEPT:
"A. Upon repeated accusations, a interviewee's denials become more vehement."
10-5 The feeling of a General Manager that he can "save" an employee who has committed a fraudulent act is an indication that the manager is in the stage of crisis reaction.
10-6 Guilty people almost never confess when it is conveyed that they are what type of person?
10-7 Identify an appropriate accusation in an effective admission-seeking interview.
B. Our investigation has clearly established that you made a false entry.
10-8 Identify the strongest response to a threatened ego.
10-9 . Inferential errors fall into two categories:
B. induction and deduction.
10-10 Interviewers can control the length of time after respondents finish a sentence before they pose another question. What is this called?
D. Silent probe
10-11 Interviewers should demonstrate all but which characteristic during interviews?
D. Admiration of the perpetrator
10-12 Interviewers who use pacing are employing a form of .
C. Chronemic communication.
10-13 In , the respondent is asked to convert concrete experiences into a higher level of generalization.
10-14 In the sequence of reactions to a crisis, which is the most dangerous time in which to attempt to solve a fraud?
10-15 _____ is the process by which we obtain release from unpleasant emotional tensions by talking about the source of these tensions.
10-16 Many times the information sought in an interview is closely related to the respondent's inner conflicts and tensions. Which element of conversation will he helpful in releasing this?
10-17 The most common of all techniques used to investigate and resolve fraud is:
10-18 The most effective theme of interviewing is:
A. That help is being sought.
10-19 Most nonverbal clues fall into one of four categories. Which is NOT one of those categories?
10-20 A person will generally confess when
B. They perceive the benefits of confession outweigh the penalties,
10-21 Probably the most common rationalization for criminal activity in general (and fraud in particular) is in fraudsters' attempts to ______.
D. achieve equity
10-22 . Use of all of the following methods will help an interviewer deal with difficult people, EXCEPT
E. Try to reason
10-23 The use of body movement to convey meaning is
B. Kinetic communication.
10-24 What is Graphology?
A. The study of handwriting for the purpose of character analysis.
10-25 What is meant by calibrating?
B. Process of observing behavior before critical questions are asked.
10-26 What is one of the most important personality traits of being an effective interviewer?
10-27 Which element of conversation is used mostly to convince respondents of the legitimacy of the interview?
10-28 Which is not a verbal clue that would place suspicion on an interviewee?
B. Eagerness to end the interview
10-29 Which of the following elements is not true regarding a confession?
D. A written confession should be drafted by the confessor.
10-30 Which of the following involves the use of volume, pitch, and voice quality to convey meaning?
B. Paralinguistic communication
10-31 Which of the following is a basic strategy of admission-seeking interviews?
C. Maximize sympathy and minimize the perception of moral wrongdoing.
10-32 Which of the following is a characteristic of a good interviewer?
B. One who is able to get others to open up and share information
10-33 Which of the following is a facilitator of communication
10-34 Which of the following is an element of a leading question?
B. It contains the answer in it.
10-35 Which of the following is an example of an informational question that you should avoid?
C. "Didn't you suspect that something wasn't right?"
10-36 Which of the following is not a characteristic of a good interview?
C. The interview is conducted as far away from the event as possible
10-37 Which of the following is not a good thing to do during an interview?
C. Interview more than one person at once
10-38 Which of the following is NOT an important Closing Question?
A. In conclusion, what do you think should be done?
10-39 Which of the following is NOT a technique for refuting an alibi?
B. Discuss specific witnesses to the crime by name
10-40 Which of the following is NOT a verbal clue that someone may be lying?
B. Showing intolerance for shady conduct
10-41 Which of the following is NOT considered a normal response to an ego threat?
10-42 Which of the following is something that an interviewee might do or feel while in the denial phase?
D. Failure to comprehend what has been said
10-43 Which of the following is the correct sequence of reaction to a crisis?
A. Denial, anger, rationalization, depression, acceptance
10-44 Which of the following is the last attempt of the affected group to return to the previous psychological equilibrium while reacting to a crisis?
10-45 Which of the following is the last stage in the model for understanding an individual's reaction to crisis?
10-46 Which of the following is the most common inquiry method?
10-47 Which of the following is the most efficient method to reduce the negative effects of the etiquette barrier of communication?
C. Selecting an appropriate interviewer and a proper setting for the interview.
10-48 Which of the following is true concerning signed statements?
C. Declarants should read and sign the statement without undue delay.
10-49 Which of the following observations concerning pencil-and-paper honesty tests is true?
D. They are ideal for applicant screening.
10-50 Which of the following practices should interviewers avoid?
A. Taking detailed notes.
10-51 Which of the following refers to the use of interpersonal space to convey meaning?
D. Proxemic communication
10-52 Which of the following refers to the use of time in interpersonal relationships to convey meaning, attitudes, and desires?
A. Chronemic communication
10-53 Which of the following statements is true of an admission-seeking interview?
D. The interviewer should attempt to interrupt any denial.
10-54 Which of the following words should be avoided during the introductory phase of an interview?
10-55 Which of the following would be considered a form of denial while reacting to a crisis?
D. A person insists that there is some mistake.
"10-56 Which response to ego threats is characterized by respondents not only refusing to admit information, but also refusing to admit the information inwardly?"
10-57 While reacting to crisis, an individual usually becomes withdrawn, uncooperative, or embarrassed in the ____ stage.
7-1 A(n)_________ is a calculation (using encryption technologies) based on the contents of a disk or file. They are engineered so that even small changes in the source data will produce significantly different checksum results.
B. cyclic redundancy check number
7-2 A(n) is a tool for explicitly considering all aspects of the fraud and for establishing fraud theories.
A. Vulnerability chart
7-3 __________ are theft act investigative methods that usually involve observing or listening to potential perpetrators.
D. Surveillance and covert operations
7-4 Characteristics of invigilation include which of the following?
C. It is most commonly used in such high-risk areas as expensive inventory.
"7-5 Concealment investigative techniques do not work well in kickback situations. Why?"
C. There is usually no direct documentary evidence.
7-6 A divisional manager is suspected of adding ghost employees to the payroll. Which investigative method can most easily uncover this type of fraud?
7-7 Electronic surveillance may have only limited value in the investigation of employee frauds and many other white-collar crimes. Why?
B. Concerns regarding employees' privacy
7-8 Experts recommend that invigilation must continue:
B. for at least 14 days.
7-9 For fraud to occur, usually three elements are necessary: pressure, opportunity, and .
7-10 Identify the best pattern/order to go about a theft investigation.
B. Check personnel records, interview former employers, search public records, ,interview other buyers, and interview suspect.
7-11 Identify the first step in any electronic evidence collection process.
A. Seizure of the device
7-12 In most investigations of a fraud suspect, investigators should begin by:
B. Checking personal and company records.
7-13 _________ investigative methods are usually helpful in investigating all types of frauds, but they are most useful after you have gathered other types of evidence and know who to interview and what questions to ask.
7-14 An investigator locates the scene that should be observed, anticipates the action that is most likely to occur at the scene, and keeps detailed notes on all activities involving the suspect. Which type of surveillance is being used here?
C. Stationary surveillance
7-15 _______ means that there are symptoms or red flags that a fraud may be occurring.
7-16 Several factors are considered in deciding whether or not to investigate fraud. Which of the following is NOT one of them?
E. Preparation of a surveillance log.
7-17 Subjects of covert operations are protected against unreasonable breaches of privacy under the ______ of the constitution.
A. Fourth Amendment
7-18 Surveillance is usually used to investigate:
A. Theft acts.
7-19 Undercover operations are costly and time-consuming and should be used with extreme care. In which of the following situations would it be ineffective to conduct an undercover operation?
C. When other investigation methods are available
7-20 Undercover operations should be used only when
A. large scale fraud is likely and other investigation methods fail.
7-21 What is invigilation?
"B. A theft investigation technique which involves close supervision of the suspects during the examination period."
7-22 What is used in court cases to prove that data has not been adversely affected during analysis?
7-23 When investigating fraud, investigators should usually interview suspects:
"C. at the end of the investigation process so that they can gather sufficient evidence against them."
7-24 Which general term refers to the gathering of electronic evidence?
D. Computer forensics
7-25 Which investigation technique relies on a person's senses, especially hearing and seeing?
B. Surveillance and covert operations
7-26 Which investigation technique usually does not work well in kickback situations?
7-27 Which of the following is a basic objective of surveillance, whether manual or electronic?
D. Catch fraud at the theft act stage
7-28 Which of the following is a form of surveillance that is usually only available to law enforcement officers?
7-29 Which of the following is NOT a method for theft investigation?
B. Electronic searches
7-30 Which of the following is NOT a type of surveillance?
7-31 Which of the following is the last step in an investigation?
A. Interview suspect
7-32 Which of the following is true about invigilation?
A. The strict controls imposed are temporary in nature
7-33 Which of the following observations concerning physical evidence is TRUE
B. It is more associated with nonfraud types of crimes.
7-34 Which of the following statements is FALSE?
C. The investigation process usually starts by approaching the suspect.
7-35 Which step in the electronic evidence collection process is important to ensure that the original disk is kept in its seized state?
8-1 are executed only by law enforcement officials and are generally used only in criminal cases.
C. Search warrants
8-2 are used by attorneys involved in litigation to track all documents.
B. Bates numbers
8-3 Audit is a _________ investigative method.
8-4 The best way to obtain documentary evidence is:
"B. through computer-based queries of full-population accounting and other databases."
8-5 Computer searches and physical asset counts usually focus on the _________ element of the fraud triangle.
8-6 Discovery sampling is sometimes referred to as _____ sampling.
8-7 During a concealment investigation, an investigator fails to recognize that an invoice had been forged. This represents a:
B. non-sampling risk.
8-8 The four most common examples of documentary evidence which are valuable but difficult to obtain are
"A. Web-based e-mail accounts, private bank records, tax returns, and brokerage records."
"8-9 In large cases that involve investigators, legal counsel, accountants, expert witnesses, and management representatives, coordination can be very difficult. ____ can be useful in such cases."
B. Analyst's Notebook
8-10 _______ is a popular program used to index and store evidence
8-11____ is a simple, statistically based method of analyzing a subset of transactions from a larger pool
D. Discovery sampling
8-12 _____ is the risk that the sample was not representative of the population.
C. Sampling risk
8-13 The least reliable method of obtaining documentary evidence is:
D. by accident.
8-14 Mark owns a 24-hour convenience store. Lately he has noticed that the liquor inventory purchases have gone up by huge amounts, although sales proceeds from this category haven't increased. He is doubting his two night-shift employees. Which is the best investigative method to uncover such a fraud?
D. Concealment investigation
8-15 ________ means that a record must be kept of when a document is received and what has happened to it since its receipt
D. Chain of custody
8-16 Methods for concealment investigation include all but which of the following?
B. Honesty testing
8-17 The most common way to obtain private documents is by , which can be either oral or written.
C. voluntary consent
8-18 Once investigators enter their indicators into the centralized database, the software performs _______ to find connections between people, places, and events
C. link analysis
8-19 Orders issued by a court or a grand jury to produce documents are called:
8-20 The risk that an auditor will examine a fraudulent check and not recognize it as being fraudulent is called .
B. non-sampling risk
8-21 The three most common ways to obtain documentary evidence which are valuable but difficult to obtain are:
B. subpoena, search warrant, and voluntary consent
8-22 When the document is in the custody of a public office:
A. it is permissible to obtain photocopies, which are considered secondary evidence, in a court of law.
8-23 Which aspect of documentary evidence should be kept in mind to ensure that the documents can be identified later and accessible for trial?
C. Marking of evidence
8-24 Which of the following does not appear on a check that has been cashed?
D. Time of the transaction
8-25 Which of the following is an alternative when original documents are too voluminous to permit careful examination?
C. A summary of its contents is acceptable.
8-26 Which of the following is generally considered a best practice while handling documentary evidence?
A. Copies of the document should be used during the investigation and trial and should be kept in the same file where the original is kept.
8-27 Which of the following is not a characteristic of sampling risk?
"B. Sampling risk cannot be quantified, and can only be slightly reduced by careful planning of the sampling procedure."
8-28 Which of the following observations is true about discovery sampling?
D. It deals with the probability of discovering at least one error in a given sample size if the population error rate is a certain percentage.
8-29 Which of the following observations is true about subpoenas?
C. Failure to honor a subpoena is punishable by law.
8-30 Which of the following statements is true?
"A. Concealment investigation includes document investigation, physical asset counts, and computer searches."
8-31 Which statistical sampling allows an auditor to generalize and make inferences from the sample to the population?
C. Discovery sampling