Quiz chap 8

Predication is a technical term that refers to:

• The ability of internal auditors to predict fraud successfully.

• The ability of a fraud examiner to commence an investigation if a form of evidence exists that fraud has occurred.

• The activities of fraud perpetrators in concealing their tracks so that fraud is covered up and may not be discovered.

• Management’s analysis of fraud risks so they can put in place effective anti-fraud programs and controls.

What fraud schemes were reported to be most common in the ACFE’s 2016 Report to the Nations?

• Corruption.

• Fraudulent billing.

• Misappropriation of assets by employees.

• Inappropriately reporting revenues in published financial results.

Which of the following is not a typical “rationalization” of a fraud perpetrator?

• It’s in the organization’s best interest.

• The company owes me because I’m underpaid.

• I want to get back at my boss (revenge).

• I’m smarter than the rest of them.

Which of the following is not something all levels of employees should do?

• Understand their role within the internal control framework.

• Have a basic understanding of fraud and be aware of the red flags.

• Report suspicions of incidences of fraud.

• Investigate suspicious activities that they believe may be fraudulent.

An organization that manufactures and sells computers is trying to boost sales between now and the end of the year. It decides to offer its sales representatives a bonus based on the number of units they deliver to customers before the end of the year. The price of all computers is determined by the vice president of sales and cannot be changed by sales representatives. Which of the following presents the greatest reason a sales representative may commit fraud with this incentive program?

• Sales representative may sell units that have a lower margin than other units.

• Customers have the right to return a laptop for up to 90 days after purchase.

• The units delivered may be defective.

• The customers may not pay for the computers timely.

How should an organization handle an anonymous accusation from an employee that a supervisor in the organization has manipulated time reports?

• Assign a staff internal auditor to review all time reports for the past six months in the supervisor’s area.

• Make a record of the accusation but do nothing, as anonymous accusations are typically not true.

• Assess the facts provided by the anonymous party against pre-established criteria to determine whether a formal investigation is warranted.

• Turn the issue over to the HR department because this type of anonymous accusation is usually just a human resource issue.

Which of the following is an example of misappropriation of assets?

• A small amount of petty cash is stolen.

• A journal entry is modified to improve reported financial results.

• A foreign official is bribed by the chief operating officer (COO) to facilitate approval of a new product.

• A duplicate bill is sent to a customer in hopes that they will pay it twice.

Which of the following is not an example of a fraud prevention program element?v

• Background investigations of new employees.

• Exit interviews of departing employees.

• Establishing authority limits related to purchasing commitments.

• Analyzing cash disbursements to determine whether any duplicate payments have been made.

Which of the following types of companies would most likely need the strongest anti-fraud controls?

• A manufacturer of popular athletic shoes.

• A grocery store.

• A bank.

• An internet-based electronics retailer.

A payroll clerk increased the hourly pay rate of a friend and shared the resulting overpayment with the friend. Which of the following controls would have best served to prevent this fraud?

• Requiring that all changes to pay records be recorded on a standard form.

• Limiting the ability to make changes in payroll system personnel information to authorized HR department supervisors.

• Periodically reconciling pay rates per personnel records with those of the payroll system.

• Monitoring payroll costs by department supervisors monthly.