Chapter 5: Recognizing the Symptoms of Fraud Flashcards
TF 1
Analytical anomalies are present in every fraud
F
TF 2
Recording an expense is a possible way to conceal the theft of cash
T
TF 3
A check is an example of a source document
T
TF 4
Internal control weaknesses give employees opportunities to commit fraud
T
TF 5
The internal control system of an organization is comprised of the control environment, the accounting system, and the control procedures (activities).
T
TF 6
Analytical fraud symptoms are the least effective way to detect fraud
F
TF 7
Most people who commit fraud use the embezzled funds to save for retirement
F
TF 8
As fraud perpetrators become more confident in their fraud schemes, they usually steal and spend increasingly larger amounts
T
TF 9
First-time offenders usually exhibit no psychological changes
F
TF 10
Psychopaths feel no guilt because they have no conscience
T
TF 11
It is safe to assume that fraud has not occurred if one or more elements of the fraud triangle cannot be observed
F
TF 12
The three elements of a typical fraud consist of concealment, conversion, and completion
F
TF 13
Auditors can best help detect fraud at the conversion stage
F
TF 14
Some complaints and tips turn out to be unjustified
T
TF 15
Fraud is a crime that is seldom observed
T
TF 16
Because of the nature of fraud, auditors are often in the best position to detect its occurrence
F
TF 17
Most people who commit fraud feel a perceived financial pressure
T
TF 18
Studies have found that the most common internal control problem when frauds occur is having a lack of proper authorizations
F
TF 19
Fraud perpetrators who manipulate accounting records to conceal embezzlements often attempt to balance the accounting equation by recording expenses
T
TF 20
Employee transfers, audits, and mandatory vacations are all ways to provide independent checks on employees
T
TF 21
New whistle-blowing laws have helped make tips and complaints more effective
T
TF 22
Co-workers are usually in the best position to detect fraud
T
TF 23
Fraud perpetrators often live beyond their means since their income does not support their lifestyle
T
TF 24
Nearly all individuals and organizations are subject to real or perceived pressures and can rationalize
T
MC 1
Which of the following is true regarding fraud?
a. It is easily identified
b. It is seldom observed
c. When a fraud occurs, there is no question whether or not a crime has been commuted
d. Many witnesses are usually available when fraud occurs
b. It is seldom observed
MC 2
Which of the following is not a fraud symptom related to source documents?
a. Duplicate payments
b. Missing documents
c. A tip from an employee
d. Photocopied documents
c. A tip from an employee
MC 3
Which of the following is a fraud symptom related to an internal control weakness?
a. Lack of proper authorization
b. Lack of independent checks
c. Inadequate accounting system
d. Lack of physical safeguards
e. All of the above are fraud symptoms related to internal controls
e. All of the above are fraud symptoms related to internal controls
MC 4
In the three elements of fraud (theft act, concealment, conversion), who is usually in the best position to detect the fraud?
a. Co-workers and managers
b. Customers
c. Owners
d. Vendors
a. Co-workers and managers
MC 5
When a person commits a crime:
a. He or she usually becomes engulfed by emotions of fear and guilt
b. He or she will experience no changes in behavior
c. He or she usually becomes friendly and nice
d. He or she experiences a lower stress level
a. He or she usually becomes engulfed by emotions of fear and guilt
MC 6
Most people who commit fraud:
a. Use the embezzled funds to increase their savings accounts
b. Give the embezzled funds to charity
c. Experience no change in their lifestyle
d. Use the embezzled funds to improve their lifestyle
d. Use the embezzled funds to improve their lifestyle
MC 7
Which of the following is not a reason why people are hesitant to come forward with knowledge or suspicions of fraud?
a. They often think that squealing on someone is wrong
b. They fear reprisal for being a whistle-blower
c. it is usually impossible to know for sure that a fraud is taking place
d. People who report fraud are not rewarded monetarily
d. People who report fraud are not rewarded monetarily
MC 8
Which of the following is not one of the categories of employee fraud symptoms?
a. Accounting anomalies
b. Analytical anomalies
c. Tips and complaints
d. Firm structure
d. Firm structure
MC 9
Embezzlement of assets reduces the left side of the accounting equation. To conceal the theft, the embezzler must find a way to reduce the right side of the accounting equation. A perpetrator would most likely reduce the right side of the equation by:
a. Reducing accounts payable
b. Paying dividends
c. Increasing expenses
d. Altering stock accounts
c. Increasing expenses
MC 10
Which of the following is not a fraud symptom related to journal entries?
a. Unexplained adjustments to receivables, payables, revenues, or expenses
b. Journal entries that do not balance
c. Journal entries without documentary support
d. Journal entries made near the beginning of accounting periods
d. Journal entries made near the beginning of accounting periods
MC 11
Which of the following is not a common internal control fraud symptom or problem?
a. Lack of segregation of duties
b. Unexplained adjustments to receivables, payables, revenues, or expenses
c. Lack of independent checks
d. Overriding of existing controls
b. Unexplained adjustments to receivables, payables, revenues, or expenses
MC 12
Once in a while, someone commits fraud or another crime and does not feel stress. Such people are referred to as:
a. Psychopathic
b. Altruistic
c. Philanthropic
d. Magnanimous
a. Psychopathic
MC 13
Fraud is usually detected by recognizing and pursuing:
a. Synonyms
b. Symptoms
c. Equity
d. Legends
b. Symptoms
MC 14
A letter is most likely to be fraudulent if:
a. It is signed by only one person
b. It is addressed to an individual, rather than a department
c. It is a photocopy of an original letter
d. It is written on outdated company letterhead
c. It is a photocopy of an original letter
MC 15
If a perpetrator has stolen assets, which of the following is the easiest method for concealing the theft?
a. Reduce liabilities (such as payables)
b. Manipulate dividend or stock accounts
c. Increase other assets (such as receivables)
d. Increase expenses
d. Increase expenses
MC 16
Which of the following is a common fraud symptom relating to ledgers?
a. A ledger that does not balance
b. A ledger that balances too perfectly
c. Master account valances that do not equal the sum of the individual customer or vendor balances
d. Both a and c
d. Both a and c
MC 17
Which element is not a common element of fraud?
a. Concealment
b. Coercion
c. Conversion
d. Theft act
e All of the above are common elements of fraud
b. Coercion
