Chapter 4: Preventing Fraud Flashcards
TF 1
Even with the right opportunity or significant pressure, most people would probably not steal or embezzle.
F
TF 2
Studies show that a positive and honest work culture in a company does little to prevent fraud
F
TF 3
An important factor in creating a culture of honest, openness, and assistance in the workplace is maintaining an employee assistance program
T
TF 4
A good internal control system within a company can ensure the absence of fraud
F
TF 5
When fraud is committed, the problem is often not a lack of controls, but the overriding of existing controls by management and others.
T
TF 6
The two elements in creating a positive work environment are (1) having an open-door policy and (2) having positive personnel and operating procedures.
T
TF 7
Not prosecuting fraud perpetrators is cost-effective both in the short run and the long run
F
TF 8
Even a good system of internal controls will often not be completely effective because of fallibility of the people applying an enforcing the controls.
T
TF 9
The increasingly complex nature of business helps to decrease the number of collusive frauds
F
TF 10
Tips and complaints are the most common way fraud is detected
T
TF 11
The major role of employee assistance programs is to help employees recover from the damaging psychological effects of fraud
F
TF 12
Not all possible controls should be implemented; rather, one must assess a control’s cost and benefits before implementation
T
TF 13
Creating an expectation of punishment causes firm morale to deteriorate and often results in lower productivity
F
MC 1
People will often be dishonest if they are placed in an environment of:
a. Poor controls
b. High pressure
c. Low integrity
d. Loose accountability
e. All of the above
e. All of the above
MC 2
Which of the following factos contribute to creating a corporate culture of honesty and openness?
a. Hiring honest people.
b. Performing criminal background checks
c. Not having an open-door policy.
d. Having a well-understood and respected code of ethics
e. both a and d
f. All of the above
e. both a and d
MC 3
Which of the following personnel and operating policies contribute to high-fraud environments?
a. Management by crisis
b. Rigid Rules
c. High employee lifestyle expectations
d. Poor promotion opportunities
e. All of the above
e. All of the above
MC 4
The single most effective tool in preventing and detecting fraud is usually:
a. Monitoring employees
b. Having a good system of internal controls
c. Having a well-written company code of ethics
d. Following strict hiring procedures
b. Having a good system of internal controls
MC 5
A company’s control environment includes:
a. The tone that management establishes toward what is honest and acceptable behavior
b. Corporate hiring practices
c. Having an internal audit department
d. All of the above
d. All of the above
MC 6
Which of the following factors generally results in a high-fraud environment?
a. Hiring honest people
b. Providing an EAP
c. Autocratic management
d. Both a and b
c. Autocratic management
MC 7
Which of the following aspects of fraud usually results in the largest savings?
a. Fraud prevention
b. Fraud detection
c. Fraud investigation
d. It is impossible to tell
a. Fraud prevention
MC 8
Which of the following is usually the most effective tool in preventing and detecting raud?
a. Discouraging collusion between employees and customers or vendors
b. Effective investigations of fraud symptoms
c. Having a good system of internal controls
d. Creating an expectation of punishment in the company
c. Having a good system of internal controls
MC 9
Which of the following is the typical fraud model that describes most firms?
a. Fraud incident, assessing risk, investigation, reporting
b. Fraud incident, investigation, action, resolution
c. Assessing risk, fraud incident, investigation, resolution
d. Assessing risk, investigation, implementing a fraud program, reporting.
b. Fraud incident, investigation, action, resolution
MC 10
The “tone at the top” is an important element in fighting fraud, which involves:
a. Doing a good job of integrity risk assessment
b. Having a positive organization where effective fraud teaching and training is conducted
c. Setting a proper example or modeling appropriate management behavior
d. Both b and c
c. Setting a proper example or modeling appropriate management behavior
MC 11
Which of the following is not a recognized method of eliminating fraud opportunities?
a. Having good internal controls
b. Monitoring employees
c. Creating an expectation of punishment
d. Engendering employee goodwill by having lax rules
d. Engendering employee goodwill by having lax rules
MC 12
Which of the following is not a reason identified by Deloitte why whistle-blowing systems fail?
a. Lack of anonymity
b. Pressure to comply
c. Culture
d. Lack of awareness
b. Pressure to comply
MC 13
Alerting vendors and contractors to company policies often results in:
a. Loss of interest in the organization by vendors
b. Discovery of current frauds and the prevention of future frauds
c. Strained vendor/purchaser relationships
d. Heightened incidence of recurrent reverse vendor fraud
b. Discovery of current frauds and the prevention of future frauds
