Fraud Prevention and Deterrence Flashcards
In response to a risk identified during a fraud risk assessment, management decides to purchase a bond to help protect the company against the associated risk of loss. This response is known as: A. Transferring the risk B. Avoiding the risk C. Mitigating he risk D. Assuming the risk
A. Transferring the risk, When responding to the organization’s residual fraud risks, management may transfer some or all of the risk by purchasing fidelity insurance or a bond. The cost to the organization is the premium paid for the insurance or bond. The covered risk of loss is then transferred to the insurance company.
When gathering information as part of a fraud risk assessment, surveys and anonymous feedback mechanisms both provide an effective way to conduct candid one-on-one conversations with employees. True or False
False, These do not enable one on one conversations
Which of the following customer due diligence (CDD) procedures would be MOST APPROPRIATE for an organization to perform if it determines that a potential customer has little opportunity to commit fraud and therefore presents a minimal risk of engaging in illegal activity? A. Contacting the customer's bank B. Verifying the customer's identity C. Analyzing the customer's net worth D. Identifying the customer
D. Identifying the customer
According to the ACFE’s 2020 Report to the Nations, what is the primary reason why organizations decline to prosecute white-collar crime cases?
They believe internal discipline is sufficient
An entity’s corporate governance structure specifies the distribution of rights and responsibilities among the different participants in the organization and lays down the rules and procedures for organizational decision-making. True or False
True,
The majority of people who commit occupational fraud are repeat offenders with prior criminal records. True or False
False, The ACFE’s research indicates that the vast majority of occupational fraudsters have no prior history of criminal fraud convictions. Only 4% of the perpetrators in the 2020 Report to the Nations study had previously been convicted of a fraud-related offense, which is consistent with the findings in every study dating back to 1996.
Which of the following is NOT one of the components of the Committee of Sponsoring Organizations of the Treadway Commission’s (COSO) Enterprise Risk Management—Integrating with Strategy and Performance? A. Governance and culture B. Risk tolerance C. Performance D. Review and revision
B. Risk tolerance
The five components of the enterprise risk management (ERM) framework are:
• Governance and culture
• Strategy and objective-setting
• Performance
• Review and revision
• Information, communication, and reporting
A behaviorist view of the workplace advocates the use of incentive programs and task-related bonuses as a way to deter employees from ethical and legal violations. True or False
True,
The board of directors holds the primary responsibility for designing, implementing, monitoring, and improving the fraud risk management program. True or False
False, The board of directors is responsible for developing and supporting the organization’s underlying fraud risk management strategy. However, senior management has the primary responsibility for designing, implementing, monitoring, and improving the fraud risk management program.
Under the ACFE Code of Professional Ethics, fraud examiners are strictly prohibited from accepting assignments to uncover fraud in a company in which they have a major interest. True or False
False, since the goal of the fraud examiner is to gather facts regarding a potential fraud, not to express an opinion. The fraud examiner should, however, make appropriate disclosures regarding their ownership.
An entity’s corporate culture is most effectively assessed using a checklist of initiatives to make sure all the elements of a strong tone at the top are in place. True or False
False, A strong corporate culture can most often be observed by its outcome, rather than by any individual component.a culture of corruption can exist even in companies with seemingly sound policies in place.
The Fraud Triangle hypothesis can be used to explain every instance of fraudulent conduct. True or False
False, Common sense dictates that no one model—not even Cressey’s—fits every situation.
A person’s social status plays no role in their ability to commit white-collar crime. True or False
False, Status plays a role, Individuals of higher status may influence decision making
Risk management involves weighing an organization’s strategic, operational, reporting, and compliance objectives against how much risk management is willing to accept. True or False
True, More specifically, risk management balances risk appetite—how much risk management is willing to accept—with the ability to meet the organization’s strategic, operational, reporting, and compliance objectives.
In a public company, the chief executive officer (CEO) should be charged with having primary responsibility for the oversight of the company’s compliance program. True or False
False, Its the BoD
Which of the following should be covered in employee anti-fraud training?
A. Company’s ant fraud controls
B. Examples of past transgression and how they were handled
C. Procedures that management uses to detect fraud
D. All the above
B. Examples of past transgression and how they were handled, case studies
According to the authors of Crimes of the Middle Classes, advertising influences economic crimes by promising that no one has to settle for second best. True or False
True
Of the following parties, who is responsible for developing a strategy to assess and manage fraud risks that aligns with the organization’s risk appetite and strategic plans? A. The shareholders B. Internal audit department C. The legal department D. The board of directors
D. The board of directors
During an audit of a public-sector organization’s financial statements, a government auditor uncovers evidence of a potential fraud. The auditor’s requirements for reporting these findings are substantially the same as those for external auditors in the private sector. True or False
False,
public-sector audits can involve additional requirements for communications about fraud-related matters. For example, public-sector auditors may be required or may decide to communicate matters with other parties, such as the legislature, in addition to those charged with governance.
Which of the following is NOT one of the principles involved in the risk assessment process, as laid out by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)?
A. Assessing changes that could significantly impact the internal control system
B. Considering the potential for Fraud
C. Conducting ongoing monitoring of the risk management strategy
D. Setting clear organizational objectives
C. Conducting ongoing monitoring of the risk management strategy
International Standard on Auditing (ISA) 240 requires auditors to discuss how management could perpetrate and conceal fraudulent financial reporting. True or False
True.
There are specific anti-retaliation laws in every country that protect whistleblowers against adverse action for reporting misconduct in the workplace. True or False
False, Some jurisdictions do not have formal legal protection for whistleblowers
