Test Bank for Fraud Examination, 6th Edition

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Multiple Choice1. One way that criminal law differs from civil law is that it:a. provides remedies for violations of private rights.b. must yield a unanimous verdict.c. can have a jury of fewer than 12 persons.d. allows for various claims in one action.ANSWER:bRATIONALE:a. Incorrect. This is a characteristic of civil law; criminal law deals with crimes againstthe public.b. Correct. Criminal trials must result in a unanimous verdict.c. Incorrect. This is a characteristic of civil law; criminal trial juries must have 12persons.d. Incorrect. This is a characteristic of civil law; criminal law permits only one claim at atime.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.5DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM2. Which of the following is NOT an element of a Ponzi scheme?a. Gaining other's confidence.b. Promising abnormally high returns.c. Collected money is invested.d. Investment principle is partially used to make payments to previous investors.ANSWER:cRATIONALE:a. Incorrect. This is one of the most important elements of the “con.”b. Incorrect. This is how fraudsters lure in investors.c. Correct. This is very unlikely.d. Incorrect. The original principle is often used to make interest payments.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.3DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage1Chapter 01

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3. The following are all elements of Title 26, U.S. Code Section 7201 EXCEPT:a. not reporting bribe income may be grounds for being charged with tax evasion.b. filing income tax that excludes income from fraud may be considered an improper tax filing.c. bribes paid may be deducted as business expenses.d. failure to report income from fraud may be grounds for being charged with tax evasion.ANSWER:cRATIONALE:a. Incorrect. Not reporting bribe income may be grounds for being charged with taxevasion.b. Incorrect. Filing income tax that excludes income from fraud may be considered animproper tax filing.c. Correct. Bribes cannot be deducted as legitimate business expenses.d. Incorrect. Failure to report income from fraud or bribes may be prosecuted as taxevasion.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.3DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM4. Which one of the following is NOT a characteristic of a criminal proceeding?a. Deals with offenses against society.b. Consequences include restitution and damage payments.c. Jury of 12 individuals.d. Only one claim may be heard at a time.ANSWER:bRATIONALE:a. Incorrect. A crime is considered an offense against society.b. Correct. In a criminal proceeding, the consequences are jail and/or fines.c. Incorrect. A criminal jury consists of 12 jurors.d. Incorrect. Only one claim is heard at a time, whereas in a civil case many claims maybe joined into one action.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.5DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage2Chapter 01

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5. Management fraud is often referred to as:a. stockholder fraud.b. financial statement fraud.c. employee fraud.d. investment fraud.ANSWER:bRATIONALE:a. Incorrect. In its most common form, management fraud involves top management'sdeceptive manipulation of financial statements.b. Correct. In its most common form, management fraud involves top management'sdeceptive manipulation of financial statements.c. Incorrect. In its most common form, management fraud involves top management'sdeceptive manipulation of financial statements.d. Incorrect. In its most common form, management fraud involves top management'sdeceptive manipulation of financial statements.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.3DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM6. What is required to prove fraud, as opposed to negligence?a. Gross errorb. Intentc. Preponderance of the evidenced. Confession from the perpetratorANSWER:bRATIONALE:a. Incorrect. Gross error is not sufficient evidence to prove fraud.b. Correct. To succeed in a criminal or civil prosecution, it is usually necessary to showthat the perpetrator acted with intent to defraud the victim.c. Incorrect. This is what is proven in a civil case.d. Incorrect. Confession is not required to prove fraud. In fact, many perpetrators neveradmit their guilt.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.5DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage3Chapter 01

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7. Which of the following is the most common type of occupational fraud?a. Management fraudb. Mail fraudc. Investment fraudd. Employee embezzlementANSWER:dRATIONALE:a. Incorrect. Employee embezzlement is the most common type of occupational fraud.b. Incorrect. Employee embezzlement is the most common type of occupational fraud.c. Incorrect. Employee embezzlement is the most common type of occupational fraud.d. Correct. Employee embezzlement is the most common type of occupational fraud.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.3DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM8. Which of the following is NOT a characteristic of management fraud?a. Top management deceptionb. Manipulation of financial statementsc. Kickbacks or bribesd. Pressure to earn year-end bonusesANSWER:cRATIONALE:a. Incorrect. Management fraud often involves top management's deceptivemanipulation. Management fraud is when the top management deceives stockholders.b. Incorrect. Management often uses the manipulation of financial statements to commitfraud. This is one of the easiest ways to commit a large fraud.c. Correct. These are examples of employee embezzlement. Management fraud usuallydeals with financial statement manipulation.d. Incorrect. Many managers commit fraud to receive large bonuses that are dependentupon financial performance.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.3DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage4Chapter 01

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9. Customer fraud includes all of the following EXCEPT:a. getting something for nothing.b. not paying for goods purchased.c. receiving improper payments through collusion between buyers and vendors.d. deceiving the organization into giving the customer something that it should not.ANSWER:cRATIONALE:a. Incorrect. This is an example of customer fraud.b. Incorrect. This is an example of customer fraud.c. Correct. This is an example of vendor fraud.d. Incorrect. This is an example of customer fraud.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.3DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM10. Which of the following is a common example of vendor fraud?a. Fraud perpetrated through collusion between buyers and vendors.b. Fraud perpetrated by upper management.c. The perpetrator physically removes the inventory from the business premises.d. A fraud perpetrated through financial statement manipulation.ANSWER:aRATIONALE:a. Correct. Vendor fraud comes in two common forms: (1) fraud perpetrated by vendorsacting alone and (2) fraud perpetrated through collusion between buyers and vendors.b. Incorrect. Vendor fraud comes in two common forms: (1) fraud perpetrated byvendors acting alone and (2) fraud perpetrated through collusion between buyers andvendors.c. Incorrect. Vendor fraud comes in two common forms: (1) fraud perpetrated byvendors acting alone and (2) fraud perpetrated through collusion between buyers andvendors.d. Incorrect. Vendor fraud comes in two common forms: (1) fraud perpetrated byvendors acting alone and (2) fraud perpetrated through collusion between buyers andvendors.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.3DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage5Chapter 01

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11. Government agencies such as the FBI, FDIC, IRS, or various health agencies publish fraud statistics from time totime. Which of the following observations concerning such statistics is true?a. Generally, their statistics are complete.b. Such information is rarely used.c. They provide only those statistics related to their jurisdiction.d. They usually provide a total picture in the areas for which they have responsibility.ANSWER:cRATIONALE:a. Incorrect. Government agencies only publish those statistics that are directly relatedto their jurisdictions. As a result, their statistics are not complete and do not provide atotal picture of fraud—even in the areas for which they have responsibility.b. Incorrect. Government agencies only publish those statistics that are directly relatedto their jurisdictions. As a result, their statistics are not complete and do not provide atotal picture of fraud—even in the areas for which they have responsibility.c. Correct. Government agencies only publish those statistics that are directly related totheir jurisdictions. As a result, their statistics are not complete and do not provide a totalpicture of fraud—even in the areas for which they have responsibility.d. Incorrect. Government agencies only publish those statistics that are directly relatedto their jurisdictions. As a result, their statistics are not complete and do not provide atotal picture of fraud—even in the areas for which they have responsibility.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.3DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM12. Which legal code makes the bribing of public officials illegal?a. Title 18, U.S. Code Section 201b. Title 41, U.S. Code Section 51 to 58c. Title 18, U.S. Code Section 1341d. Title 18, U.S. Code Section 1344ANSWER:aRATIONALE:a. Correct. Title 18, U.S. Code Section 201 outlaws the bribing of public officials.b. Incorrect. Title 18, U.S. Code Section 201 outlaws the bribing of public officials.c. Incorrect. Title 18, U.S. Code Section 201 outlaws the bribing of public officials.d. Incorrect. Title 18, U.S. Code Section 201 outlaws the bribing of public officials.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.1DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage6Chapter 01

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13. Fraud has a direct dollar-for-dollar impact on a company's:a. revenues.b. net income.c. profit margin.d. stock price.ANSWER:bRATIONALE:a. Incorrect. Fraud does not have a dollar-for-dollar impact on revenues. It takessignificantly more revenues to cover the effect of the fraud on net income. Becauserevenues don't include the business costs, and the fraud directly hits the bottom line,ultimately, the fraud is much more expensive than it sounds.b. Correct. Losses incurred from fraud reduce a firm's income on a dollar-for-dollarbasis. This means that for every $1 of fraud, the net income of the firm is reduced by$1.c. Incorrect. The profit margin is a percentage. It really tells the company how muchrevenue the company must generate to recover the fraud losses. For example, if thecompany has a 10% profit margin, and the fraud cost $436 million, the company wouldhave to generate $4.36 billion or (436 million/.1) to recover the costs of the fraud.d. Incorrect. The stock price literally cannot drop by the amount of the fraud. If priceper share was $5 and the fraud was $100,000, then stock price could not drop below $0.However, if the fraud is $100,000, the price per share multiplied by the number of sharesoutstanding will probably drop considerably more than $100,000.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.1DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage7Chapter 01

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14. Which of the following is NOT a primary reason for increased size and number of frauds?a. The advent of computersb. Complex accounting systemsc. Increased centralization of businessesd. The InternetANSWER:cRATIONALE:a. Incorrect. This is a primary reason for the increased frequency of fraud.b. Incorrect. This is a primary reason for the increased frequency of fraud.c. Correct. With the advent of computers, the Internet, and complex accounting systems,the size and number of frauds have increased tremendously.d. Incorrect. This is a primary reason for the increased frequency of fraud.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.2DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM15. Which of the following statements regarding civil law is correct?a. When fraud is committed, criminal prosecution usually proceeds before civil prosecution.b. Civil law is the body of law that provides remedies for crimes against society.c. Civil cases must be heard by 12 jurors.d. In a civil case, the verdict of the jury must be unanimous.ANSWER:cRATIONALE:a. Correct. Fraud may result in both civil and criminal charges; criminal prosecutionusually proceeds first.b. Incorrect. Civil law is the body of law that provides remedies for violations of privaterights.c. Incorrect. Civil cases are often heard by a judge only or by as few as 6 jurors.d. Incorrect. The verdict of the jury need not be unanimous.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.5DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage8Chapter 01

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16. The elements of fraud include all of the following EXCEPT:a. a material point is misrepresented.b. the misrepresentation is intentional.c. the misrepresentation is known to the victim.d. the victim must sustain damages.ANSWER:cRATIONALE:a. Incorrect. An element of fraud is that a material point was misrepresented.b. Incorrect. In every fraud there must be intent.c. Correct. The victim must believe the misrepresentation.d. Incorrect. For fraud to take place, the victim must sustain damages.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.2DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM17. The burden of proof in a criminal case:a. is beyond a reasonable doubt.b. is determined by the majority of the jury members.c. is the preponderance of evidence.d. lies with the defendant.ANSWER:aRATIONALE:a. Correct. In a criminal case, perpetrators must be proven guilty “beyond a reasonabledoubt” with unanimous rule of jurors. Plaintiffs in civil cases must only prove their caseby the “preponderance of the evidence.”b. Incorrect. In a criminal case, perpetrators must be proven guilty “beyond a reasonabledoubt” with unanimous rule of jurors. Plaintiffs in civil cases must only prove their caseby the “preponderance of the evidence.”c. Incorrect. In a criminal case, perpetrators must be proven guilty “beyond a reasonabledoubt” with unanimous rule of jurors. Plaintiffs in civil cases must only prove their caseby the “preponderance of the evidence.”d. Incorrect. In a criminal case, perpetrators must be proven guilty “beyond a reasonabledoubt” with unanimous rule of jurors. Plaintiffs in civil cases must only prove their caseby the “preponderance of the evidence.”POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.5DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage9Chapter 01

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18. Which of the following statements about criminal and civil cases is correct?a. The purpose of a criminal case is "to right a wrong," the purpose of civil case is to obtain a remedy.b. A jury must have 12 people in civil cases, but in criminal cases may consist of fewer than 12 persons.c. Both criminal cases and civil cases require a fraud perpetrator to make payments for damages.d. Only one claim may be tried at a time in civil cases, but in criminal cases, various claims may be joined in oneaction.ANSWER:aRATIONALE:a. Correct.b. Incorrect.c. Incorrect.d. Incorrect.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.5DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM19. How is the confidence element established in a Ponzi scheme?a. By investing in prime bonds.b. By issuing notarized certificates.c. By paying returns to investors initially.d. By returning money to all investors.ANSWER:cRATIONALE:a. Incorrect. By paying early “returns,” Ponzi gained investors' confidence andconvinced them that he had a legitimate business.b. Incorrect. By paying early “returns,” Ponzi gained investors' confidence andconvinced them that he had a legitimate business.c. Correct. By paying early “returns,” Ponzi gained investors' confidence and convincedthem that he had a legitimate business.d. Incorrect. By paying early “returns,” Ponzi gained investors' confidence andconvinced them that he had a legitimate business.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.3DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage10Chapter 01

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20. The most common fraud committed on behalf of an organization is:a. vendor fraud.b. employee embezzlement.c. fraudulent financial reporting.d. customer fraud.ANSWER:cRATIONALE:a. Incorrect. Vendor fraud is not committed on behalf of the organization. Vendor fraudis committed against the organization.b. Incorrect. Employee embezzlement is an occupational fraud that focuses on deceivingthe organization.c. Correct. This is the only answer where the organization (the organization'smanagement) is actually responsible for the fraud.d. Incorrect. Customer fraud is not committed against the customer but by the customer.Customer fraud is also committed against the organization.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.4DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM21. A company is a victim of a $414 million fraud. At that time its profit margin is 10%. How much additional revenueshould the company generate in order to recover the effect on net income?a. $41.4 millionb. $414 millionc. $4.14 billiond. $41.4 billionANSWER:cRATIONALE:a. Incorrect. The company must generate 10 times the amount of the fraud.b. Incorrect. The company must generate 10 times the amount of the fraud.c. Correct. The company must generate 10 times the amount of the fraud.d. Incorrect. The company must generate 10 times the amount of the fraud.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.1DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage11Chapter 01

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22. The victim is a company or organization in all of the following EXCEPT:a. vendor fraud.b. investment scams.c. employee embezzlement.d. customer fraud.ANSWER:bRATIONALE:a. Incorrect. In investment scams and other consumer frauds, the victims are unwaryindividuals.b. Correct. In investment scams and other consumer frauds, the victims are unwaryindividuals.c. Incorrect. In investment scams and other consumer frauds, the victims are unwaryindividuals.d. Incorrect. In investment scams and other consumer frauds, the victims are unwaryindividuals.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.3DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM23. The Anti-Kickback Act of 1986 intends to prevent:a. bribery, by punishing perpetrators with up to 15 years in prison.b. any scheme by a contractor to gain the business of a global entity.c. the giving or receiving of anything of value by a subcontractor to a prime contractor in U.S. governmentcontracts.d. the custom of lobbyists to give gifts to influence laws regarding business transactions.ANSWER:cRATIONALE:a. Incorrect. This is not addressed in the Anti-Kickback Act of 1986.b. Incorrect. This is not addressed in the Anti-Kickback Act of 1986.c. Correct. This is addressed in the Anti-Kickback Act of 1986.d. Incorrect. This is not addressed in the Anti-Kickback Act of 1986.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.3DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage12Chapter 01

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24. Which of the following entails an insider who has material inside information purchasing or selling the company’ssecurities through insider deals directly or through an exchange?a. Bank fraudb. Ponzi schemesc. Management (financial statement) fraudsd. Securities fraudANSWER:dRATIONALE:a. Incorrect. Securities fraud involves an insider who purchases or sells the company'ssecurities based on material inside information.b. Incorrect. Securities fraud involves an insider who purchases or sells the company'ssecurities based on material inside information.c. Incorrect. Securities fraud involves an insider who purchases or sells the company'ssecurities based on material inside information.d. Correct. Securities fraud involves an insider who purchases or sells the company'ssecurities based on material inside information.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.3DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM25. Who are the primary victims of financial statement fraud?a. Middle managementb. Organizations that buy goods or servicesc. Analystsd. StockholdersANSWER:dRATIONALE:a. Incorrect. While they are negatively affected by fraud, they do not rely on financialstatements to the same degree as stockholders.b. Incorrect. Organizations that buy goods or services are victims of vendor fraud.c. Incorrect. They may be fooled by financial statement fraud, but they would not sufferas much as stockholders.d. Correct. Stockholders are the primary victims of management fraud because they arethe ones who depend most on the accuracy of the financial statements.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.4DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage13Chapter 01

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26. Generally, applicants for CFE certification should have a minimum of a bachelor’s degree or equivalent from aninstitution of higher learning. Alternatively, if applicants do not have a bachelor’s degree, they may substitute ______months of fraud-related professional experience for each year of academic study.a. 24b. 18c. 12d. 9ANSWER:aRATIONALE:a. Correct. Applicants may substitute two years of fraud-related professional experiencefor each year of academic study.b. Incorrect. Applicants may substitute two years of fraud-related professionalexperience for each year of academic study.c. Incorrect. Applicants may substitute two years of fraud-related professionalexperience for each year of academic study.d. Incorrect. Applicants may substitute two years of fraud-related professionalexperience for each year of academic study.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.6DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM27. The ACFE does NOT include which of the following major categories of occupational fraud?a. Asset misappropriationsb. Corruptionc. Fraudulent statementsd. Pension fraudANSWER:dRATIONALE:a. Incorrect. The ACFE includes three major categories of occupational fraud: (1) assetmisappropriations, (2) corruption, and (3) fraudulent financial statements.b. Incorrect. The ACFE includes three major categories of occupational fraud: (1) assetmisappropriations, (2) corruption, and (3) fraudulent financial statements.c. Incorrect. The ACFE includes three major categories of occupational fraud: (1) assetmisappropriations, (2) corruption, and (3) fraudulent financial statements.d. Correct. The ACFE includes three major categories of occupational fraud: (1) assetmisappropriations, (2) corruption, and (3) fraudulent financial statements.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.3DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage14Chapter 01

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28. What is the most cost-effective way to minimize the cost of fraud?a. Preventionb. Detectionc. Investigationd. ProsecutionANSWER:aRATIONALE:a. Correct. Preventing fraud is the most cost-effective way to minimize the overall costof fraud.b. Incorrect. Preventing fraud is the most cost-effective way to minimize the overallcost of fraud.c. Incorrect. Preventing fraud is the most cost-effective way to minimize the overallcost of fraud.d. Incorrect. Preventing fraud is the most cost-effective way to minimize the overallcost of fraud.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.1DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM29. Fraud in companies such as WorldCom, Enron, Waste Management, Sunbeam, Rite-Aid, Phar-Mor, and Parmalat areexamples of:a. customer fraud.b. investment scams.c. vendor fraud.d. management fraud.ANSWER:dRATIONALE:a. Incorrect. In its most common form, management fraud involves top management’sdeceptive manipulation of financial statements.b. Incorrect. In its most common form, management fraud involves top management’sdeceptive manipulation of financial statements.c. Incorrect. In its most common form, management fraud involves top management’sdeceptive manipulation of financial statements.d. Correct. In its most common form, management fraud involves top management’sdeceptive manipulation of financial statements.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.4DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage15Chapter 01

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30. Which of the following statements is true?a. Fraud usually results from unintentional errors.b. Fraud is more violent and traumatic than robbery.c. Fraud always involves deception, confidence, and trickery.d. Losses from fraud are less than losses from robbery.ANSWER:cRATIONALE:a. Incorrect. Fraud, by definition, is intentional.b. Incorrect. Robbery is generally more violent and more traumatic than fraud.c. Correct. Fraud involves deception, confidence, and trickery.d. Incorrect. Losses from fraud far exceed losses from robbery.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.2DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM31. To be successful, plaintiffs in civil cases must prove their case by which of the following?a. By the preponderance of the evidenceb. Beyond a reasonable doubtc. To a degree of reasonable mitigationd. To the standard of prima facieANSWER:aRATIONALE:a. Correct. To be successful, plaintiffs in civil cases must only prove their case by the“preponderance of the evidence.”b. Incorrect. To be successful, plaintiffs in civil cases must only prove their case by the“preponderance of the evidence.”c. Incorrect. To be successful, plaintiffs in civil cases must only prove their case by the“preponderance of the evidence.”d. Incorrect. To be successful, plaintiffs in civil cases must only prove their case by the“preponderance of the evidence.”POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.5DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage16Chapter 01

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32. Which of the following is NOT an example of a fraud-fighting career?a. Working for the criminal investigation division of the IRSb. Serving as an expert witnessc. Maintaining the security of public recordsd. Defending an organization being sued in a civil caseANSWER:cRATIONALE:a. Incorrect. This is a fraud-fighting career.b. Incorrect. This is a fraud-fighting career.c. Correct. Experience as a security guard or equivalent does not count as fraud-relatedexperience.d. Incorrect. This is a fraud-fighting career. Lawyers are needed to defend andprosecute cases.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.6DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM33. Which of the following observations concerning occupational fraud is NOT true?a. It is clandestine.b. It is committed for the purpose of direct or indirect financial benefit to the employee.c. It usually involves two or more employees.d. It costs the employing organization assets, revenues, or reserves.ANSWER:cRATIONALE:a. Incorrect. Occupational fraud could be committed by a person or a group of personsacting in concert.b. Incorrect. Occupational fraud could be committed by a person or a group of personsacting in concert.c. Correct. Occupational fraud could be committed by a person or a group of personsacting in concert.d. Incorrect. Occupational fraud could be committed by a person or a group of personsacting in concert.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.2DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage17Chapter 01

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34. Which of the following is NOT one of the major types of fraud classification schemes?a. Employee embezzlementb. Government fraudc. Investment scamsd. Customer fraudANSWER:bRATIONALE:a. Incorrect. The six types of fraud include employee embezzlement.b. Correct. The six types of fraud include employee embezzlement, management fraud,investment scams, vendor fraud, customer fraud, and other (miscellaneous) fraud.c. Incorrect. The six types of fraud include investment scams.d. Incorrect. The six types of fraud include customer fraud.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.2DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM35. Which of the following frauds is usually the most expensive?a. Vendor fraudb. Customer fraudc. Occupational fraudd. Management (financial statement) fraudANSWER:dRATIONALE:a. Incorrect. Management fraud involves top management’s deceptive manipulation offinancial statements and results in the most losses to victims.b. Incorrect. Management fraud involves top management’s deceptive manipulation offinancial statements and results in the most losses to victims.c. Incorrect. Management fraud involves top management’s deceptive manipulation offinancial statements and results in the most losses to victims.d. Correct. Management fraud involves top management’s deceptive manipulation offinancial statements and results in the most losses to victims.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.2DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage18Chapter 01

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36. Civil claims begin when one party files a complaint against another, usually for the purpose of:a. having a penalty imposed.b. sending the perpetrator to prison.c. proving the perpetrator guilty.d. being awarded financial restitution.ANSWER:dRATIONALE:a. Incorrect. The purpose of a civil lawsuit is to gain compensation for harm anindividual or organization believes has been done to him or her (it).b. Incorrect. The purpose of a civil lawsuit is to gain compensation for harm anindividual or organization believes has been done to him or her (it).c. Incorrect. The purpose of a civil lawsuit is to gain compensation for harm anindividual or organization believes has been done to him or her (it).d. Correct. The purpose of a civil lawsuit is to gain compensation for harm an individualor organization believes has been done to him or her (it).POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.5DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM37. Employee embezzlement can be direct or indirect. Indirect fraud occurs when:a. an employee uses company assets to run his/her private business.b. employees establish dummy companies and have their employers pay for goods that are not actually delivered.c. an employee receives a kickback from a vendor.d. an employee steals company cash, inventory, tools, or other assets.ANSWER:cRATIONALE:a. Incorrect. This is an example of direct fraud.b. Incorrect. This is an example of direct fraud.c. Correct. This is an example of indirect fraud.d. Incorrect. This is an example of direct fraud.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.3DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage19Chapter 01

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38. Telemarketing fraud usually falls into this category.a. Investment scamsb. Management fraudc. Vendor fraudd. EmbezzlementANSWER:aRATIONALE:a. Correct. Telemarketing fraud falls into the category of investment scams, in whichvictims are often first contacted by telephone and convinced to make worthlessinvestments.b. Incorrect. Telemarketing fraud falls into the category of investment scams, in whichvictims are often first contacted by telephone and convinced to make worthlessinvestments.c. Incorrect. Telemarketing fraud falls into the category of investment scams, in whichvictims are often first contacted by telephone and convinced to make worthlessinvestments.d. Incorrect. Telemarketing fraud falls into the category of investment scams, in whichvictims are often first contacted by telephone and convinced to make worthlessinvestments.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.3DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM39. The word "con," which means to deceive, comes from the word:a. Contract.b. Conserve.c. Confuse.d. Confidence.ANSWER:dRATIONALE:a. Incorrect. The word "con" comes from confidence.b. Incorrect. The word "con" comes from confidence.c. Incorrect. The word "con" comes from confidence.d. Correct. The word "con" comes from confidence.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.2DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage20Chapter 01

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40. In fraud prosecution cases, ______ matter consists of the underlying data and all corroborating information available.a. evidentialb. remedialc. supplementald. elementaryANSWER:aRATIONALE:a. Correct. Evidential matter consists of the underlying data and all corroboratinginformation available.b. Incorrect. Evidential matter consists of the underlying data and all corroboratinginformation available.c. Incorrect. Evidential matter consists of the underlying data and all corroboratinginformation available.d. Incorrect. Evidential matter consists of the underlying data and all corroboratinginformation available.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.5DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM41. The study conducted by the Association of Certified Fraud Examiners in 2016 estimated that organizations lose_____ percent of their annual revenues to fraud.a. 8b. 5c. 23d. 17ANSWER:bRATIONALE:a. Incorrect. The study estimated that organizations lose 5 percent of their annualrevenue to fraud.b. Correct. Applied to the estimated 2015 gross world product, this 5 percent figurewould translate to approximately $6.3 billion in fraud losses.c. Incorrect. The study estimated that organizations lose 5 percent of their annualrevenue to fraud.d. Incorrect. The study estimated that organizations lose 5 percent of their annualrevenue to fraud.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.1DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage21Chapter 01

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42. A company was the victim of several frauds that totaled approximately $10 million in one year. With a profit margin of10 percent, and assuming that the company’s product sold for $1,000 per unit, how many additional units must thecompany sell to compensate for the fraud losses?a. 1 millionb. 100 millionc. 100,000d. 10,000ANSWER:cRATIONALE:a. Incorrect. ($10 million loss/0.1 = $100 million in revenues. $100 million/$1,000 per unit= 100,000 units)b. Incorrect. ($10 million loss/0.1 = $100 million in revenues. $100 million/$1,000 per unit= 100,000 units)c. Correct. ($10 million loss/0.1 = $100 million in revenues. $100 million/$1,000 per unit =100,000 units)d. Incorrect. ($10 million loss/0.1 = $100 million in revenues. $100 million/$1,000 per unit= 100,000 units)POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.1DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage22Chapter 01

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43. Given below are the profit margins and fraud-related losses of four economies. Which economy will have to generatethe maximum dollar amount of additional revenues to recover the loss to aggregate income? Economy A: 10%, $225million Economy B: 10%, $150 million Economy C: 5%, $100 million Economy D: 2%, $50 milliona. Economy Ab. Economy Dc. Economy Cd. Economy BANSWER:bRATIONALE:a. Incorrect. The additional revenue requirements will be calculated as: additionalrevenue = loss/profit margin (Economy A - $2.25 billion; Economy B - $1.5 billion;Economy C - $2 billion; and Economy D - $2.5 billion)b. Correct. The additional revenue requirements will be calculated as: additional revenue= loss/profit margin (Economy A - $2.25 billion; Economy B - $1.5 billion; Economy C -$2 billion; and Economy D - $2.5 billion)c. Incorrect. The additional revenue requirements will be calculated as: additionalrevenue = loss/profit margin (Economy A - $2.25 billion; Economy B - $1.5 billion;Economy C - $2 billion; and Economy D - $2.5 billion)d. Incorrect. The additional revenue requirements will be calculated as: additionalrevenue = loss/profit margin (Economy A - $2.25 billion; Economy B - $1.5 billion;Economy C - $2 billion; and Economy D - $2.5 billion)POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.1DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage23Chapter 01

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44. The GDP in the economy of Ponziland was $5 billion in the year prior to the frauds (Year 1). The economy wasgrowing at 4 percent. Frauds during the year reduce aggregate income by $200 million. During the year, the economyhas:a. shrunk by 1 percent.b. grown by only 1 percent.c. remained flat.d. grown by 4 percent.ANSWER:cRATIONALE:a. Incorrect. Since the frauds reduce aggregate income by $200 million, the GDP in year2 is only $5 billion (as against what would have been $5.2 billion at 4 percent growth),and the economy has remained flat.b. Incorrect. Since the frauds reduce aggregate income by $200 million, the GDP in year2 is only $5 billion (as against what would have been $5.2 billion at 4 percent growth),and the economy has remained flat.c. Correct. Since the frauds reduce aggregate income by $200 million, the GDP in year2 is only $5 billion (as against what would have been $5.2 billion at 4 percent growth),and the economy has remained flat.d. Incorrect. Since the frauds reduce aggregate income by $200 million, the GDP in year2 is only $5 billion (as against what would have been $5.2 billion at 4 percent growth),and the economy has remained flat.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.1DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage24Chapter 01

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45. What is the single most critical element for a fraud to be successful?a. Criminal intentb. Confidencec. Greedd. CompulsionANSWER:bRATIONALE:a. Incorrect. It is difficult to con anyone out of anything unless the deceived hasconfidence in the deceiver.b. Correct. It is difficult to con anyone out of anything unless the deceived hasconfidence in the deceiver.c. Incorrect. It is difficult to con anyone out of anything unless the deceived hasconfidence in the deceiver.d. Incorrect. It is difficult to con anyone out of anything unless the deceived hasconfidence in the deceiver.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.2DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM46. Fraud statistics come from all of the following sources EXCEPT:a. government agencies.b. insurance companies.c. victims.d. fraud perpetrators.ANSWER:dRATIONALE:a. Incorrect. This is a source for statistics.b. Incorrect. This is a source for statistics.c. Incorrect. This is a source for statistics.d. Correct. Perpetrators do not generally provide statistics about their crimes.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.1DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage25Chapter 01

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Test Bank for Fraud Examination, 6th Edition - Page 27 preview image

47. Which of the following skills would be LEAST beneficial in a career as a fraud-fighting professional?a. Analytical skillsb. Mechanical skillsc. Communication skillsd. Technological skillsANSWER:bRATIONALE:a. Incorrect. Some of the most important skills for a fraud-fighting professional to haveare analytical, communication, and technological skills.b. Correct. Some of the most important skills for a fraud-fighting professional to haveare analytical, communication, and technological skills.c. Incorrect. Some of the most important skills for a fraud-fighting professional to haveare analytical, communication, and technological skills.d. Incorrect. Some of the most important skills for a fraud-fighting professional to haveare analytical, communication, and technological skills.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.6DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM48. Which of the following would NOT be acceptable as fraud-related experience to satisfy the education requirements toapply for CFE certification?a. Auditor (internal or external)b. Investigator for a law enforcement agency or in the private sectorc. Experience in the Human Resources department of an organizationd. Paralegal for a prosecuting attorneyANSWER:cRATIONALE:a. Incorrect. To be considered fraud-related experience, an individual’s responsibilitiesmust include the detection, investigation, or deterrence of fraud.b. Incorrect. To be considered fraud-related experience, an individual’s responsibilitiesmust include the detection, investigation, or deterrence of fraud.c. Correct. To be considered fraud-related experience, an individual’s responsibilitiesmust include the detection, investigation, or deterrence of fraud.d. Incorrect. To be considered fraud-related experience, an individual’s responsibilitiesmust include the detection, investigation, or deterrence of fraud.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.6DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage26Chapter 01

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49.Which of the following statements regarding fraud on behalf of an organization is true?a.Middle management is usually the perpetrator.b.This type of fraud benefits top executives as it generally increases stock price.c.This type of fraud includes deflating expenses in order to save on corporate income taxes.d.Financial statement fraud is common among publicly traded companies that are experiencing windfall profits.ANSWER:bRATIONALE:a. Incorrect. Top management is usually the perpetrator.b. Correct. Executives of the company benefit because a company’s stock priceincreases or remains artificially high.c. Incorrect. Corporate tax fraud to benefit the company would involve inflatingexpenses rather than deflating them.d. Incorrect. Financial statement fraud often occurs in companies that are experiencingnet losses or have profits much less than expected.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.4DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AM50.Which individual listed is most likely to commit financial statement fraud in order to benefit an organization?a.An executiveb.An internal auditorc.A floor manager (line supervisor)d.The company treasurerANSWER:aRATIONALE:a. Correct. It is executives that usually commit fraud “on behalf” of an organization.b. Incorrect. It is executives that usually commit fraud “on behalf” of an organization.c. Incorrect. It is executives that usually commit fraud “on behalf” of an organization.d. Incorrect. It is executives that usually commit fraud “on behalf” of an organization.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.1.4DATE CREATED:3/10/2018 9:22 PMDATE MODIFIED:3/20/2018 7:58 AMPage27Chapter 01

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Multiple Choice1. Which of the following is NOT a primary control procedure to minimize the occurrence of fraud?a. Dual custodyb. System of authorizationsc. Internal audit departmentd. Documents and recordsANSWER:cRATIONALE:a. Incorrect. Dual custody, or segregation of duties, is one of the five primary controlactivities.b. Incorrect. A system of authorizations is one of the five primary control activities.c. Correct. An internal audit department is an important element of the controlenvironment but not a control procedure.d. Incorrect. Documents and records make up one of the five primary control activities—they produce an audit trail.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.2.6DATE CREATED:3/15/2018 9:58 PMDATE MODIFIED:3/20/2018 8:09 AM2. Which of the following is NOT a common rationalization of fraud perpetrators?a. The organization owes me.b. I'm only borrowing the money.c. No one will get hurt.d. No one will care.ANSWER:dRATIONALE:a. Incorrect. This is a common rationalization for committing fraud.b. Incorrect. This is a common rationalization for committing fraud.c. Incorrect. This is a common rationalization for committing fraud.d. Correct. Fraud perpetrators usually rationalize their actions by thinking “I deservemore.”POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.2.7DATE CREATED:3/15/2018 9:58 PMDATE MODIFIED:3/20/2018 8:09 AMPage1Chapter 02

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3. Which of the following is NOT an example of a control weakness or violation?a. The HR department failed to check an applicant's background and hired someone who had committed fraud inthe past.b. A manager instructs employees not to share passwords, and then shares her passwords with her immediateassistant.c. A company has established codes of conduct and conducts training meetings to teach employees to distinguishbetween acceptable and unacceptable behavior. Attendance is voluntary.d. The employees know who has responsibility for each business activity. Procedures to follow are in place.ANSWER:dRATIONALE:a. Incorrect. This is an example of a control violation.b. Incorrect. This is an example of a control violation.c. Incorrect. This is an example of a control weakness.d. Correct. A clear organizational structure is an important fraud-deterring element. It iseasier to track missing assets and money when all employees know exactly who isresponsible for each business activity.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.2.6DATE CREATED:3/15/2018 9:58 PMDATE MODIFIED:3/20/2018 8:09 AM4. A fraud perpetrator used the float time between banks to give the impression that he had money in his accounts.Which crime is he committing?a. Floatingb. Stripc. Spinningd. KitingANSWER:dRATIONALE:a. Incorrect. Kiting is using the float time between banks to give the impression ofhaving money in one's bank accounts.b. Incorrect. Kiting is using the float time between banks to give the impression ofhaving money in one's bank accounts.c. Incorrect. Kiting is using the float time between banks to give the impression ofhaving money in one's bank accounts.d. Correct. Kiting is using the float time between banks to give the impression of havingmoney in one's bank accounts.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.2.5DATE CREATED:3/15/2018 9:58 PMDATE MODIFIED:3/20/2018 8:09 AMPage2Chapter 02

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5. Which of the following observations is true?a. Research shows that only people with a criminal mindset commit fraud.b. Fraud perpetrators usually can be distinguished from others based on psychological characteristics.c. Most fraud perpetrators have profiles that are similar to those of other people.d. When fraud does occur, the most common initial reaction by those involved in the fraud is confession.ANSWER:cRATIONALE:a. Incorrect. Research shows that anyone can commit fraud.b. Incorrect. Fraud perpetrators usually can’t be distinguished from other people on thebasis of demographic or psychological characteristics.c. Correct. Fraud perpetrators usually can’t be distinguished from other people on thebasis of demographic or psychological characteristics.d. Incorrect. When fraud does occur, the most common reaction by those around thefraud is denial.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.2.1DATE CREATED:3/15/2018 9:58 PMDATE MODIFIED:3/20/2018 8:09 AM6. When management fraud occurs, companies usually:a. overstate assets and net income.b. understate assets and net income.c. overstate assets and understate net income.d. understate assets and overstate net income.ANSWER:aRATIONALE:a. Correct. Usually, when management fraud occurs, companies overstate assets on thebalance sheet and net income on the income statement.b. Incorrect. Usually, when management fraud occurs, companies overstate assets onthe balance sheet and net income on the income statement.c. Incorrect. Usually, when management fraud occurs, companies overstate assets onthe balance sheet and net income on the income statement.d. Incorrect. Usually, when management fraud occurs, companies overstate assets onthe balance sheet and net income on the income statement.POINTS:1QUESTION TYPE:Multiple ChoiceHAS VARIABLES:FalseLEARNING OBJECTIVES:FRAU.ALBR.19.2.5DATE CREATED:3/15/2018 9:58 PMDATE MODIFIED:3/20/2018 8:09 AMPage3Chapter 02

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