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ACCT 453 - White Collar Crime > Midterm Multiple Choice > Flashcards

Midterm Multiple Choice Flashcards

1
Q

When Detecting fraud it is important that fraud investigators:

a. Remain objective and neutral
b. Assume Guilt
c. Assume innocence
d. None of the above

A

a

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2
Q

Data-Driven fraud detection:

a. determines the cost of fraud
b. identifies possible fraud suspects
c. Looks for errors in databases
d. All of the above

A

c

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3
Q

Once a buyer starts accepting kickbacks from a supplier:

a. prices often increase
b. purchases from other vendors decrease
c. The supplier usually takes control of the purchasing relationship
d. All of the above

A

d

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4
Q

The most obvious disadvantage of the data-driven approach is:

a. Databases are very large and often cannot be analyzed using analysis packages
b. High Cost
c. The decrease in employee morale
d. None of the above

A

b

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5
Q

Benford’s Law:

a. Is usually unsuccessful as a fraud detection tool
b. Predicts that the first digit of random number sets will begin with a 1 more often than a 2, a 2 more often than a 3 and so on
c. Applies to personal ID numbers
d. All of the above

A

b

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6
Q

A detection method that focuses on the kinds of frauds that can occur and then uses technology to determine whether those fraud actually exist is called:

a. Fishing fraud detection
b. Data Mining
c. Data-driven fraud detection
d. Benford’s Law

A

c

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7
Q

When deciding which detection method to use, it is important to:

a. Determine the advantages of each approach
b. Identify the costs involved
c. Determine which method will meet the client’s objectives.
d. All the above

A

d

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8
Q

Fraud is best detected through financial statements by focusing on:

a. Unexplained changes in financial statement balances
b. Consistencies
c. Intuition
d. Management’s behavior when financial statements are released

A

a

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9
Q

The most effective way to convert balance sheets and income statements from position and period statements to change statements is to:

a. Compare balances in the statements from one period to the next
b. Calculate key ratios and compare them from period to period
c. Perform horizontal and vertical analyses
d. All of the above

A

c

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10
Q

Profit margin, return on assets, and return on equity are all examples of:

a. Vertical Analysis
b. Key Financial statement ratios
c. Horizontal analysis
d. None of the above

A

b

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11
Q

When vertical analysis is performed:

a. Ratios are used to detect fraud
b. Changes in significant balance totals are examined
c. Financial statement balances are converted to percentages
d. Total revenues are compared to total expenses

A

c

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12
Q

Horizontal analysis is different from vertical analysis in that:

a. There is no difference between horizontal and vertical analysis
b. Horizontal analysis calculates the percentage change in balance sheet and income statement numbers from one period to the next, while vertical analysis converts balances in a single period to percentages
c. Horizontal analysis converts balances from a single period to percentages, while vertical analysis calculates the percentage change in balance sheet and income statement from one period to the next.
d. Key ratios are compared from one period to the next.

A

b

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13
Q

Which of the following is an advantage of using data analysis software to detect fraud?

a. It is a static approach, and results cannot be recombined in different ways
b. Data analysis software can only be used to analyze small data sets
c. Data analysis software can analyze entire populations rather than just samples
d. Significant numbers of hits can occur, requiring iterative refinement of analyses

A

c

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14
Q

Benford’s Law is:

a. The most expensive of all the digital analysis methods to implement and use
b. The most effective way to identify actual frauds
c. A method that uses vertical financial statement analysis
d. An effective way to identify errors in data sets

A

d

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15
Q

If a search reveals that an employee or vendor have the same telephone number, this may indicate that:

a. Vendors are overcharging for goods purchased
b. Employees may be establishing dummy vendors
c. Contractors are billing at the wrong rates
d. A Vendor is receiving kickbacks or other favors

A

b

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16
Q

When conducting financial statement analysis, which ratio will be the most useful in determining whether a company has erroneously inflated accounts receivable?

a. Current Ratio
b. Profit Margin
c. Accounts receivable turnover
d. Debt Percentage

A

c

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17
Q

When trying to identify outliers, what is one of the best statistical approaches?

a. A pie graph indicating the relative amounts
b. Stratification of cases by value
c. Time-trending using the high-low slope method
d. The Z score calculation

A

d

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18
Q

An advantage of using ODBC to import data into a data warehouse is that:

a. ODBC doesn’t require the use of corporate database servers
b. ODBC compresses data when stored on a CD or DVD
c. ODBC automatically retrieves column names and types from the database
d. ODBC keeps the investigator from dealing with the difficult SQL language

A

c

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19
Q

The Is Algorithm:

a. Uses consonants but ignores vowels
b. creates a numerical score representing how a word sounds
c. Is useful when fuzzy matching values
d. All of the above

A

d

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20
Q

Which of the following is not a category used in the fraud triangle plus inquiry paradigm?

a. theft investigative techniques
b. concealment investigative techniques
c. Action investigative techniques
d. Conversion Investigative techniques

A

c

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21
Q

When beginning and investigation, it is important that fraud examiners use techniques that will:

a. not arouse suspicion
b. identify the perpetrator
c. determine the amount of fraud
d. Identify when the fraud occurred

A

a

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22
Q

When conducting interviews during an investigation, which of the following words should usually be avoided?

a. Audit
b. Inquiry
c. Investigation
d. Record examination

A

c

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23
Q

When beginning a fraud investigation, which of the following methods is most useful in identifying possible suspects?

a. Preparing an identification chart
b. Preparing a vulnerability chart
c. preparing a surveillance log
d. Hiring a private investigator to tail the subject

A

b

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24
Q

Invigilation

A

Provides evidence to help determine whether fraud is occurring

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25
Q

Which of the following is not a theft act investigation method?

a. Invigilation
b. Honesty testing
c. Seizing and searching computers
d. Surveillance and covert operations

A

b

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26
Q

When deciding whether or not to investigate, which of the following factors should an organization not consider?

a. Possible cost of the investigation
b. Perceived strength of the predication
c. Possible public exposure resulting because of the investigation
d. All of the above should be considered.

A

d

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27
Q

Surveillance, when properly performed, is always done:

a. Without the perpetrator’s knowledge
b. During non working hours
c. Only by law enforcement agents
d. None of the above

A

a

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28
Q

Which of the following is not included in a vulnerability chart?

a. Explanations of the fraud triangle in relation to suspects of fraud
b. Breakdowns in key internal controls that may have created fraud opportunities
c. Internal controls that a company plans to institute in the future
d. theft act investigation methods

A

c

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29
Q

A Vulnerability chart:

a. forces investigators to explicitly consider all aspects of a fraud
b. Shows the history of fraud in a company
c. Identifies weaknesses in every aspect of a company’s internal control
d. gives a detailed record of all the movements and activities of the suspect

A

a

30
Q

Fixed-point, or stationary, observations can be conducted by:

a. Certified fraud examiners
b. Company personnel
c. Private investigators
d. Anyone, if conducted properly

A

d

31
Q

Surveillance logs should include all of the following except:

a. Time the observation began and ended
b. cost of the surveillance equipment used
c. Movements and activities of the suspect
d. Distance the observation was from the scene

A

b

32
Q

Wiretapping, a form of electronic surveillance, can usually be legally used by:

a. Internal auditors
b. Company controllers
c. CPAs
d. None of the above

A

d

33
Q

Which of the following investigation methods often raise concerns about employees’ privacy at work?

a. Electronic Surveillance
b. Invigilation
c. Forensic accounting
d. Interviewing and interrogation

A

a

34
Q

Who should be consulted before any form of surveillance takes place?

a. Public investors and the company’s board of directors
b. State attorney general
c. Legal counsel and human resources
d. All company executives

A

c

35
Q

When seizing computers, a calculation(also called a hash) that ensures you have an exact clone and have not changes data is called a(n):

a. NIST Number
b. ODBC Connection
c. Internet packet calculation
d CRC Checksum number

A

d

36
Q

A snapshot of active memory should be done:

a. Before seizure of the computer
b. After seizure of the computer but before turning off the computer
c. After turning off the computer but before calculation of the checksum number
d. After calculation of the checksum number but before searching

A

b

37
Q

In a Fraud Investigation, Documents:

a. usually contain extremely valuable information
b. are rarely used in court
c. Are not reliable sources of information
d. Are only valuable in obtaining a confession

A

a

38
Q

Chain of custody refers to:

a. Marking on a document so it can be identified later
b. a record of when a document is received and what has happened to it since its receipt
c. databases used in trials to assist lawyers
d. the way in which courts are organized

A

b

39
Q

Marking documentary evidence is important to ensure that:

a. documents are legal
b. databases can be created with valuable information
c. Documents can be identified later
d. Marking documentary evidence is not important

A

c

40
Q

Discovery Sampling

A

Deals with the probability of discovering at least one error in a given sample size if the population error is a certain percentage

41
Q

Documentary evidence such as private tax returns can usually be obtained only by:

a. Subpoena
b. search warrant
c. voluntary consent
d. All the above

A

d

42
Q

Graphologists

A

study handwriting as a way to interpret and identify personalities

43
Q

Although most perpetrators begin their thefts because of a perceived need, they usually continue to embezzle in order to:

a.beat the system
b. Fulfill an inner desire to commit fraud
c. improve their lifestyle
d. Acheive a higher self-esteem

A

c

44
Q

Evidence gathered from public records can be useful in:

a. Identifying with the suspect
b. obtaining a confession
c. making the suspect feel at ease
d. None of the above

A

b

45
Q

The data base of criminal records maintained by the FBI is:

A

The III
The NCIC

46
Q

The net worth method is a calculation based on a person’s:

A

Assets
Liabilities
Income
Living expenses

47
Q

The formula to calculate funds from unknown sources is:

A

Assets - Liabilities - Prior Year’s Net Worth + Living Expenses - Funds from known sources

48
Q

Financial statement fraud is usually committed by

A

Managers and Executives

49
Q

Which officer in a company is most likely to be the perpetrator of financial statement fraud?

A

CEO

50
Q

When looking at financial statement fraud, auditors should look for indicators of fraud by:

a. Examining Financial Statements
b. Evaluating changes in financial statements
c. Examining relationships the company has with other parties
d. Examining the operating characteristics of the company
e. all of the above

A

E

51
Q

The three aspects of management that a fraud examiner needs to be aware of include all of the following except:

a. Their backgrounds
b. Their motivations
c. their religious convictions
d. Their influence in making decisions for the organization

A

c

52
Q

Which of the following is least likely to be considered a financial reporting fraud symptom or red flag?

a. gray directors
b. Family relationships between directors or officers
c. Large increases in accounts receivable with no increase in sales
d. size of the firm

A

d

53
Q

Many indicators of fraud are circumstantial; that is, they can be caused by non-fraud factors. This fact can make convicting someone of fraud difficult. Which of the following types of evidence would be the most helpful in proving someone committed fraud?

a. Missing documentation
b. A general ledger that is out of balance
c. Analytical relationships that don’t make sense
d. A repeated pattern of similar fraudulent acts

A

d

54
Q

In the Phar-Mor fraud case, several different methods were used for manipulating the financial statements. These included all the following except:

a Funneling losses into unaudited subsidiaries
b. Overstating inventory
c. Recognizing revenue that should have been deferred
d. Manipulating accounts

A

a

55
Q

Most Financial Statement Frauds occur in smaller organizations with simple management structures, rather than in large, historically profitable organizations. This is because:

a. It is easier to implement good internal controls in a small organization
b. Smaller organizations do not have investors
c. Management fraud is more difficult to commit when there is a more formal organizational structure of management
d. People in large organizations are more honest

A

c

56
Q

Management fraud is usually committed on behalf of the organization rather than against it. Which if the following would not be a motivation of fraud on behalf of an organization?

a. CEO needs a new car
b. A highly competitive industry
c. Pressure to meet expected earnings
d. restructure debt covenants that can’t be met

A

a

57
Q

All of the following are indicators of financial statement fraud except:

a. Unusually rapid growth of profitability
b. Threat of a hostile takeover
c. dependence on one or two products
d. Large amounts of available cash

A

d

58
Q

During an audit an auditor considers the conditions of the auditee and plans the audit accordingly. This is an example of which of the following?

a. zero-order reasoning
b. high-order reasoning
c. first-order reasoning
d. fraudulent reasoning

A

c

59
Q

In the context of strategic reasoning, if an auditor only follows the established audit plan and does not consider other factors relating to the auditee, then this is an example of which of the following?

a. zero-order reasoning
b. high-order reasoning
c. first-order reasoning
d. fraudulent reasoning

A

a

60
Q

In recent years, many SEC investigations have taken place on the improper issuance of stock options to corporate executives. These practices increase executive compensation at the expense of shareholders. This practice is known as:

A

Backdating stock options

61
Q

The most common account manipulated when perpetrating financial statement fraud is

A

Revenues

62
Q

Why might a company want to understate net income?

a. To increase profits
b. to increase stock price
c. to gain consumer confidence
d. to pay less taxes

A

d

63
Q

Reported revenue and sales account balances that appear too high are examples of

a. Analytical symptoms
b. Documentary symptoms
c. Lifestyle symptoms
d. Verbal symptoms

A

a

64
Q

Horizontal analysis is a method that:

a. examines financial statement numbers from period to period
b. examines percent changes in account balances from period to period
c. examines transactions from period to period
d. none of the above

A

b

65
Q

Recording fictitious receivables will usually result in a(n):

a. Sales return percentage that remains constant
b. Increased sales discount percentage
c. Increase in accounts receivable turnover
d. Increase in the number of days in receivables

A

d

66
Q

Comparing recorded amounts in the financial statements with the real-world assets they are supposed to represent would be most effective in detecting:

a. cash and inventory fraud
b. accounts payable fraud
c. Revenue-related fraud
d. Accounts receivable fraud

A

a

67
Q

Lifestyle symptoms are most effective with:

a. revenue related financial statement frauds
b. inventory related financial statement frauds
c. Employee Frauds
d. Accounts payable financial statement frauds

A

c

68
Q

Which of the following is not an inventory related documentary symptom?

a. Duplicate purchase orders
b. Missing inventory during inventory counts
c. unsupported inventory sales transactions
d. All the above are inventory related documentary symptoms

A

d

69
Q

When looking for inventory fraud what are important questions to ask?

A

What is the nature of inventory

what is the age of inventory

What is the stability of inventory

70
Q

The asset turnover ratio measures:

A

Sales that are generated with each dollar of the assets

71
Q
A

ACCT 453 - White Collar Crime (1 decks)

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