Topic 4 Symptoms of Fraud Flashcards
- 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 committed.
d. Many witnesses are usually available when fraud occurs.
Answer b)
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.
Answer c)
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.
Answer e)
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.
Answer a)
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.
Answer a)
- 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.
Answer d)
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.
Answer d)
- 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.
Answer D)
- 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.
Answer c)
- 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.
Answer D)
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.
Answer B)
- 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.
Answer a)
- Fraud is usually detected by recognizing and pursuing:
a. Synonyms.
b. Symptoms.
c. Equity.
d. Legends.
Answer B)
- 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.
Answer c)
- 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.
Answer D)
- 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 balances that do not equal the sum of the individual customer or vendor balances.
d. Both a and c.
Answer D)
- 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.
Answer b)
Who in an organization is NOT in a good position to recognize fraud during the theft act?
a. Other employees
b. Managers
c. Auditors
d. Coworkers
Answer c)
In which stage do auditors have a good chance of detecting fraud, if the audit samples include altered documents and
miscounts?
a. Theft act
b. Concealment
c. Conversion
d. Layering
Answer b)
Implementing a system of independent checks is one of the most effective ways to deter fraud. Which one of the
following is NOT a way of providing independent checks on employees?
a. Employee transfers
b. Audits
c. Mandatory vacations
d. Authorization required for purchases of over $2,000 or more
Answer d)
Increased scrap, excessive purchases, and physical abnormalities are examples of:
a. accounting anomalies.
b. external control weaknesses.
c. analytical anomalies.
d. unusual behavior
Answer c)
There are three simple procedures that small business owners should do on a timely basis to prevent fraud when they
can’t afford sufficient employees to guarantee effective segregation of duties. Which of the following is NOT one
among them?
a. Pay everything by check so that there is a record.
b. Always open the bank statement and reconcile it themselves.
c. Allow one key employee to operate the bank account personally.
d. Sign every check themselves and not delegate the signing to anyone else.
Answer c)
Recording an expense to conceal fraud involves making a fictitious journal entry. A faulty journal entry is an example
of which fraud symptom?
a. Accounting anomaly
b. Internal control weakness
c. Unusual behavior
d. Analytical anomaly
Answer a)
Fraud examiners must be able to recognize signals that a journal entry may have been manufactured to conceal a
fraud. Which of the following is a common journal entry fraud symptom?
a. Journal entries with documentary support
b. Journal entries that balance
c. Adjustments to receivables or payables that are made monthly
d. Journal entries made near the end of an accounting period
Answer d)
