Corruption

Question 1

What is corruption?

Answer 1

A term used to describe various types of wrongful acts designed to cause an unfair advantage.

Question 2

_________ may be defined as the offering, giving, receiving, or soliciting of corrupt payments to influence an official act or business decision.

Answer 2

Bribery

Question 3

Name the two types of Bribery schemes.

Answer 3

Official Bribery

Commercial Bribery

Question 4

What type of bribery refers to the corruption of a public official to influence an official act of government?

Answer 4

Official Bribery

Question 5

What is commercial bribery?

Answer 5

It is the corruption of a private individual to gain a commercial or business advantage.

Question 6

What is a form of negotiated bribery in which a commission is paid to the bribe-taker in exchange for the services rendered?

Answer 6

Kickbacks

Question 7

Why are kickbacks classified as a corruption scheme rather than an asset misappropriation scheme?

Answer 7

They involve collusion between employees and third parties.

Question 8

Once a vendor knows it has an ________ purchasing agreement, it is motivated to raise prices to pay for the cost of the kickback.

Answer 8

Exclusive.

Question 9

TRUE of FALSE:

In kickback schemes involving overbilling, a vendor submits inflated invoices to the victim organization, and the false invoices either overstate the cost of actual goods and services or reflect fictitious sales.

Answer 9

True.

Question 10

TRUE of FALSE

The ability of the employee to authorize purchases, including the ability to authorize fraudulent purchases, is ALWAYS a key to kickback schemes.

Answer 10

FALSE.

Question 11

What are items of value given to reward a decision, often after the recipient has made the decision?

Answer 11

Illegal Gratuities

Question 12

Name three types of threats that can constitute extortion.

Answer 12

Physical Harm
Property Damage
Accusing a person of a crime
Disgracing a person
Public exposure

Question 13

Other than Gifts, Travel and Entertainment, name two other methods of making corrupt payments.

Answer 13

Cash Payments
Checks and Other Financial Instruments
Hidden Interests
Loans
Credit Cards
Transfers Not at Fair Market Value
Promise of Favorable Treatment

Question 14

TRUE or FALSE:

Two common red flags of corrupt employees are:
Tendency of employees to insert themselves into areas in which they are normally not involved and a history of not filing conflict of interest forms.

Answer 14

True.

Question 15

TRUE or FALSE:

Some common red flags of a corrupt third party include a party who provides poor-quality products or services but is continually awarded contracts and receives or pays fees in cash.

Answer 15

True

Question 16

What are the two methods used to conceal corrupt payments in a business?

Answer 16

On-book

Off-book

Question 17

TRUE or FALSE:

On-book schemes are more difficult to trace than off-book schemes.

Answer 17

FALSE

Question 18

The ________ _______ begins the examination process. It will contain all the important information about a subject organization, such as its money flow pattern and financial condition, and it will identify prospective witnesses and targets, as well as relevant documents and transactions.

Answer 18

Business Profile

Question 19

To establish a business profile, fraud examiners should seek to answer specific questions. Name two of these questions.

Answer 19

How is the business organized, legally and structurally?
Who are the key personnel associated with the enterprise?
What is the money flow pattern involved in the suspect transaction?
Where are the company’s bank accounts?
What is the financial condition of the business?
What is the company’s recordkeeping system?

Question 20

TRUE or FALSE:

When examining on-book payments, the most important information is the _______ _______ information when obtaining records from the entity suspected of making illegal payments.

Answer 20

Bank Account

Question 21

Off-book payments are typically proven at the point of _______.

Answer 21

Receipt.

Question 22

When trying to prove illegal payments from the point of receipt, the _______ ________ will identify most illicit funds deposited to accounts or expended in significant amounts.

Answer 22

Financial profile.

Question 23

TRUE or FALSE:

When trying to prove corrupt payments from the point of receipt, the fraud examiner should never request an interview with the target.

Answer 23

False

Question 24

A _______ ________ _______ occurs when an employee or agent - someone who is authorized to act on behalf of a principal - has an undisclosed personal or economic interest in a matter that could influence their professional role.

Answer 24

Conflict Of Interest

Question 25

Breach of ______ _____ is a civil action that can be used to redress a variety of conduct that might also constitute fraud, commercial bribery, and conflicts of interest.

Answer 25

Fiduciary Duty

Question 26

TRUE or FALSE:

Conflicts of interest do not necessarily constitute legal violations, if they are properly disclosed.

Answer 26

True

Question 27

What are three common conflict schemes?

Answer 27

Purchase schemes
Sales schemes
Delayed billings
Business Diversions
Resource Diversions
Financial interest in companies under perpetrator's supervision
Financial disclosures

Question 28

If a bill originates from a _____ _____ in which the fraudster has an economic or personal interest, and if the fraudster’s interest in the company is undisclosed to the victim company, then the scheme is a conflict of interest.

Answer 28

Real Company

Question 29

What are the two principal types of conflict schemes associated with sales of goods or services by the victim company?

Answer 29

Underselling

Writing Off Sales

Question 30

TRUE or FALSE:

The most harmful of the two principal types of conflict in sale schemes is writing off sales.

Answer 30

FALSE.

Question 31

Name three ways to detect a conflict of interest scheme.

Answer 31

-Review Tips and Complaints
-Compare Vendor Addresses with Employee Addresses
-Review Vendor Master File
-Review Exit Interviews and Compare Vendor Addresses to Addresses of Subsequent Employees
-Interview Purchasing Personnel Regarding Favorable Treatment of One or More
Vendors
-Implement Policies Requiring Certain Employees to Provide the Names and
Employers of Immediate Family Members

Question 32

There is not a more effective tool in the ________ and _________ of fraud than a network of employees who are knowledgeable about fraud and look for indicators of their organization’s vulnerabilities.

Answer 32

Prevention and Detection

Question 33

What program is a good strategy to communicate an organization’s philosophy regarding fraud and ethical behavior?

Answer 33

Anti-Corruption