Chapter 1 - The Nature of Fraud

Question 1

Characteristics of Fraud

Answer 1

• Intentional
• to trick or deceive someone out of assets
• theft
• criminal

Question 2

Fraud is NOT

Answer 2

• taking by physical force
• mistakes or errors
• victimless
• insignificant
• acceptable or justifiable

Question 3

3 types of fraud according to ACFE

Answer 3

1. asset misappropriation
2. Corruption
3. Financial Statement Fraud

Question 4

Examples of asset misappropriation

Answer 4

embezzlement, skimming, inventory fraud

Question 5

embezzlement, skimming and inventory fraud are examples of what category of fraud?

Answer 5

asset misappropriation

Question 6

examples of corruption fraud

Answer 6

bribery, conflict of interest

Question 7

bribery and conflicts of interest at types of what kind of fraud

Answer 7

corruption fraud

Question 8

fraudulent statements are perpetrated by …

Answer 8

management and employees

Question 9

ACFE types of fraud by percentage

Answer 9

1. asset misappropriation 83%
2. corruption 35%
3. fraudulent statements <10%

grand total is greater than 100 because frauds often involve more than 1

Question 10

7 elements of fraud…

Answer 10

1. a representation
2. about a material point
3. which is false
4. and intentionally or recklessly so
5. which is believed
6. and acted upon by the victim
7. to the victim’s damage

Question 11

Who’s the victim?

Employee embezzlement

Answer 11

the company or organization

Question 12

Who’s the victim?

Vendor fraud

Answer 12

the company or organization

Question 13

Who’s the victim?

Customer fraud

Answer 13

the company or organization

Question 14

Who’s the victim?

management fraud

Answer 14

the shareholders or debt-holders of the organization

Question 15

Who’s the victim?

investment scams or consumer frauds

Answer 15

the unwary individuals

Question 16

explain customer fraud

Answer 16

customers don’t pay, pay too little or get too much from the organization

Question 17

when someone doesn’t pay, pay too little or get too much from an organization is an example of ______ fraud

Answer 17

customer fraud

Question 18

another name for management fraud is…

Answer 18

financial statement fraud

Question 19

another name for financial statement fraud is…

Answer 19

management fraud

Question 20

the 2 ways vendor fraud can be committed

Answer 20

1. by a vendor acting alone

2. vendor and buyer colluding

Question 21

types of investment scams

Answer 21

1. Ponzi Scheme
2. telemarketing fraud
3. Nigerian letter or money
4. identity theft
5. advance fee scam
6. redemption/strawman/bond fraud
7. letter of credit fraud
8. internet fraud

Question 22

explain Ponzi scheme

Answer 22

early investors are paid high returns but with later investors money

Question 23

explain telemarketing fraud

Answer 23

callers pressure victims to provide financial info immediately or miss out on a deal

Question 24

explain Nigerian letter or money scam

Answer 24

a victim receives an email that they will be handsomely rewarded for helping to transfer money from one country to another

Question 25

explain advance fee scam

Answer 25

victim pays up front for a good, loan, gift, investment or service that’s never provided

Question 26

explain redemption/strawman/bond fraud

Answer 26

perpetrators claim the US government controls bank accounts that can be accessed by submitting paperwork. they sell the individuals expensive training kits that supposedly teach them how to access the funds

Question 27

explain letter of credit fraud

Answer 27

perpetrators create bogus bank guarantee letters and sell them as investments

Question 28

in criminal prosecution, when convicted, you must be proven_____

Answer 28

guilty beyond a reasonable doubt

Question 29

in civil prosecution, you must be proven______

Answer 29

only slightly more guilty than not guilty (by the preponderance of evidence)

Question 30

principal federal fraud statutes that can be prosecuted…

Answer 30

• bribing of public officials or witnesses
• anti kickback act of 1986
• bank fraud
• racketeer influenced and corrupt organizations (RICO statute)
• computer fraud
• securities fraud
• Foreign Corrupt Policies Act (FCPA)
• Tax evasion

Question 31

top 3 critical skills to fight fraud…

Answer 31

1. analytical skills
2. communication skills
3. technical skills