FRAUD AND ERROR

Question 1

An intentional act involving the
use of deception that results in a material
misstatement of the financial statements.

Answer 1

FRAUD

Question 2

What distinguishes fraud from errors?

Answer 2

The intent to deceive.

Question 3

A kind of fraud that results in manipulated
fs and misleading accounting report and
records in order to show that the company
performed well, when in fact it performed
poorly.

Answer 3

Fraudulent Financial Reporting
or
Window Dressing

Question 4

The three categories of fraud, according to The Association of Fraud Examiners (ACFE).

Answer 4

1. Fraudulent financial reporting (window dressing)
2. Misappropriation of assets
3. Corruption

Question 5

Involves theft of company assets, fund or
resources. These include embezzlement of
cash, inventory pilferage, theft of fixed
assets, theft of intellectual property rights,
false billing schemes, and ghost employee
schemes, among others.

Answer 5

Misappropriation of assets

Question 6

Involves irregularities that result to illegal
kickbacks, under the table schemes,
bribery and the like.

Answer 6

Corruption

Question 7

The three elements of the fraud triangle.

Answer 7

1. Incentive to commit fraud
2. Opportunity to commit fraud
3. Rationalization

Question 8

It is the mindset of the fraudster to justify committing the fraud.

Answer 8

Rationalization

Question 9

INCENTIVIZATION, OPPORTUNITY, or RATIONALIZATION OF FRAUD?

In need of money

Answer 9

Incentivization

Question 10

INCENTIVIZATION, OPPORTUNITY, or RATIONALIZATION OF FRAUD?

Pressure from family or friends to live a
more lavish lifestyle

Answer 10

Incentivization

Question 11

INCENTIVIZATION, OPPORTUNITY, or RATIONALIZATION OF FRAUD?

Addictions to gambling or drugs

Answer 11

Incentivization

Question 12

INCENTIVIZATION, OPPORTUNITY, or RATIONALIZATION OF FRAUD?

Financial results tied to survival of the
company

Answer 12

Incentivization

Question 13

INCENTIVIZATION, OPPORTUNITY, or RATIONALIZATION OF FRAUD?

Management compensation
schemes

Answer 13

Incentivization

Question 14

INCENTIVIZATION, OPPORTUNITY, or RATIONALIZATION OF FRAUD?

Weak or nonexistent internal controls

Answer 14

Opportunity of committing fraud

Question 15

It is part of the fraud triangle wherein lack of control or complexities of a transaction are such that the perpetrator
assesses the risk of being found out is low.

Answer 15

Opportunity of committing fraud

Question 16

INCENTIVIZATION, OPPORTUNITY, or RATIONALIZATION OF FRAUD?

Ineffective monitoring of BOD or management

Answer 16

Opportunity of committing fraud

Question 17

INCENTIVIZATION, OPPORTUNITY, or RATIONALIZATION OF FRAUD?

An individual believes internal control
can be overridden

Answer 17

Opportunity of committing fraud