Module 2 Knowledge Check.docx

QUESTION 1 1. All of the following factors can be associated with high levels of fraud and detract from a positive work environment EXCEPT: 2. a . unrealistically low pay. b . top management that does not pay attention to behavior of employees. c . lack of recognition of job performance. d . low turnover. 10 points QUESTION 2 1. Recent research has shown that there is an ethical maturity model (EMM) that explains why people make unethical decisions, and there are four levels in it. Which of the following is NOT one of them? 2. a . Memorization of the corporate code of ethics b . Ethical leadership c . Personal ethical understanding d . Ethical courage 10 points QUESTION 3 1. Stuart, a CFE, is investigating a possible management fraud. He found an email on an employee's computer to use as evidence in the case. Under which category of evidence would an email message fall? 2. a . Physical evidence b . Testimonial evidence c . Documentary evidence d . Personal observation

10 points QUESTION 4 1. When perceived pressures and/or opportunities are low, a person needs more ________ to commit fraud. 2. a . support from people at workplace b . rationalization c . courage d . motivation 10 points QUESTION 5 1. Which of the following approaches is most useful in creating a culture of honesty and integrity in the workplace? 2. a . Peer evaluations b . Security cameras c . Ergonomics d . Hiring the right kind of employees 10 points QUESTION 6 1. Which of the following is a possible indication that fraud may be present? 2. a . An employee's lifestyle changes suddenly. b . An employee reports that another employee is a gambling addict. c . An employee's spouse has a serious vehicle accident. d . An employee's spouse is diagnosed with Alzheimer's disease. 10 points

QUESTION 7 1. A good fraud auditing involves four steps. Which of the following is the correct sequence? 2. a . Building audit programs that proactively check for symptoms and exposures; identifying fraud risk exposures; identifying the fraud symptoms of each exposure; and investigating fraud symptoms identified. b . Identifying fraud risk exposures; identifying the fraud symptoms of each exposure; building audit programs to proactively look for symptoms and exposures; and investigating fraud symptoms identified. c . Identifying fraud risk exposures; building audit programs to proactively look for symptoms and exposures; investigating fraud symptoms identified; and identifying the fraud symptoms of each exposure. d . Identifying the fraud symptoms of each exposure; identifying fraud risk exposures; investigating fraud symptoms identified; and building audit programs to proactively look for symptoms and exposures. 10 points QUESTION 8 1. Fraud is most commonly detected by: 2. a . tips and complaints. b . discouraging collusion. c . monitoring employees. d . auditors. 10 points QUESTION 9 1. Identify a situation that could usually lead to a conflict of interest. 2. a . A sales supervisor has to allocate targets to her team members, based on revenue generation probability per region. b . A market analyst is asked to create a comparative growth forecast for four firms in an industry. c . A purchase manager in the company runs an operation that produces the raw materials required by the company. d . A manager has to choose between two of his best employees for the post of assistant manager.

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10 points QUESTION 10 1. The correct order of the six elements of the fraud-fighting model is: 2. a . education and training; integrity risk and controls; reporting and monitoring; proactive detection; investigation and follow-up; tone at the top. b . education and training; tone at the top; integrity risk and controls; reporting and monitoring; proactive detection; investigation and follow-up. c . tone at the top; education and training; proactive detection; integrity risk and controls; reporting and monitoring; investigation and follow-up. d . tone at the top; education and training; integrity risk and controls; reporting and monitoring; proactive detection; investigation and follow-up. ACFE Video Quiz #2: Other People's Money QUESTION 1 1. Donald Cressey interviewed over 200 fraudster's and developed the fraud triangle. {Answer TRUE} True False 25 points QUESTION 2 1. In the video, Daniel's pressure was a large tax debt. {Answer TRUE} True False 25 points QUESTION 3 1. A common rationalization is that the fraudster is only "borrowing" the money and will pay it back. True False 25 points QUESTION 4 1. One method to find a ghost employee is to periodically deliver printed payroll checks.

True False

QUESTION 1 1. One way to create and communicate clear expectations about what is and is not acceptable in an organization is: 2. a . creating an expectation of punishment. b . having a clearly defined code of conduct in place. c . having separate, nonintegrated personnel and operating policies. d . following a reactive management style. 5 points QUESTION 2 1. Company X has a good whistle-blowing program in place. Sara used the whistle-blowing system to alert management about a fraud being committed by a senior employee in the human resources department. The company investigated the allegation and punished the fraudster. However, Sara was shocked to find later that everyone on her team knew that she was the one who blew the whistle. What could be a major issue with the program at the company? 2. a . Management inaction regarding anonymity policies b . Lack of adherence to anonymity policies c . Lack of awareness about the program d . Unclear policies regarding whistle-blowing 5 points QUESTION 3 1. Which of the following would usually be an environment conducive to fraud? 2. a . Supportive rather than rivalrous relationships b . Low turnover c . Reactive rather than proactive management d Long-term business focus

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. 5 points QUESTION 4 1. Which of the following questions should be avoided during a job interview? 2. a . If the opportunities in your previous assignment were good, why did you leave it? b . Can you tell me your birth date? c . What motivates you at work? d . Can you relate an instance in which you resolved a conflict with a co-worker? 5 points QUESTION 5 1. What is the last stage in the current (default) model that most organizations typically use for dealing with fraud? 2. a . Action b . Resolution c . Fraud incident d . Investigatio n 5 points QUESTION 6 1. Which of the following allows managers and others to become aware of employees’ pressures, problems, and rationalizations, thus enabling them to take fraud prevention steps? 2. a . Office grapevine b . Code of ethics c . Pygmalion effect d . Open-door

policies 5 points QUESTION 7 1. Approximately ____ of all frauds are committed by an individual acting alone. The remaining ____ involve collusion and often involve the ____ thefts. 2. a . 63%, 37%, smallest b . 71%, 29%, largest c . 47%, 53%, smallest d . 18%, 82%, largest 5 points QUESTION 8 1. When only a very small amount of money has been embezzled: 2. a . taking no action is the best course of action. b . the company should transfer the perpetrator to a position with more supervision. c . the perpetrator should be punished by publishing the details of the fraud in the local newspapers. d . the perpetrator should be prosecuted. 5 points QUESTION 9 1. An employee recently bought three new cars and remodeled his/her home. These facts would be considered as a: 2. a . spending addiction symptom. b . lifestyle symptom. c . financial symptom. d . extravagant behavior symptom.

5 points QUESTION 10 1. The correct order of the six elements of the fraud-fighting model is: 2. a . tone at the top; education and training; proactive detection; integrity risk and controls; reporting and monitoring; investigation and follow-up. b . education and training; integrity risk and controls; reporting and monitoring; proactive detection; investigation and follow-up; tone at the top. c . tone at the top; education and training; integrity risk and controls; reporting and monitoring; proactive detection; investigation and follow-up. d . education and training; tone at the top; integrity risk and controls; reporting and monitoring; proactive detection; investigation and follow-up. 5 points QUESTION 11 1. Which of the following statements is NOT true? 2. a . It is much more difficult to get a criminal conviction than it is to get a judgment in a civil case. b . A preponderance of the evidence (more than 50 percent) is necessary to win a civil case. c . Criminal convictions are only successful if there is overwhelming, undeniable proof that the perpetrator "intentionally" stole money or other assets. d . Civil actions are quite rare in cases of employee fraud because perpetrators have usually spent the money they stole. 5 points QUESTION 12 1. Recent research has shown that there is an ethical maturity model (EMM) that explains why people make unethical decisions. Which of the following represents the foundation of ethics according to this model? 2. a . Ethical leadership b . Personal ethical understanding c . Ethical courage d . Application of ethics to business situations

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5 points QUESTION 13 1. Which of the following is a result of the presence of fraud prevention controls within an organization? 2. a . The organization’s insurance company will reduce its bond rate based on the controls in place. b . The auditors will be less thorough during audits. c . Employees are less likely to commit fraud. d . Employees feel more trusted. 5 points QUESTION 14 1. When perceived pressures and/or opportunities are low, a person needs more ________ to commit fraud. 2. a . rationalization b . support from people at workplace c . courage d . motivation 5 points QUESTION 15 1. In recent years, organizations have implemented a number of initiatives to more proactively detect fraud. The first and most common proactive fraud detection approach has been to: 2. a . collect physical evidence. b . conduct undercover operations. c . install surveillance cameras. d . install reporting hotlines. 5 points

QUESTION 16 1. In the ethical maturity model, instilling in others a desire to develop ethical awareness and courage is referred to as: 2. a . ethical leadership. b . ethical motivation. c . personal codes of ethics. d . the application of ethics to business situations. 5 points QUESTION 17 1. What is the overall term for the investigative technique that includes gathering evidence through data mining, audits, computer searches, net worth calculations, and financial statement analysis? 2. a . Testimonial evidence b . Documentary evidence c . Personal observation d . Physical evidence 5 points QUESTION 18 1. Which of the following is NOT one of the ways in which a fraud investigation must be conducted? 2. a . Investigators should closely guard all hypotheses regarding guilt or innocence of individuals being investigated. b . Investigators should keep all managers apprised of investigation activities. c . Investigators should be experienced and objective professionals. d . Investigators must be sure to follow appropriate investigative techniques. 5 points

QUESTION 19 1. Which of the following is NOT a proactive hiring procedure? 2. a . Conducting background investigations on prospective employees b . Learning how to interpret responses to inquiries of references about job candidates c . Thoroughly checking references provided d . Instilling in employees a desire to develop ethical awareness and courage to do the right thing 5 points QUESTION 20 1. Which of the following statements is accurate? 2. a . Less than 5 percent of all frauds are detected by auditors. b . Audits of books and records rarely discover frauds. c . The presence of auditors provides a major deterrent effect. d . External auditors are usually specifically trained to detect fraud.

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QUESTION 1 1. Which of the following key activities related to fraud is the most important and cost-effective way to reduce losses from fraud? 2. a . Fraud investigation b . Follow-up legal action c . Early fraud detection d . Fraud prevention 5 points QUESTION 2 1. Investigative techniques under which approach include invigilation, surveillance, and covert operations? 2. a . Personal observation b . Testimonial evidence c . Documentary evidence d . Physical evidence 5 points QUESTION 3 1. Which type of evidence is gathered from individuals using investigative techniques such as interviewing, interrogation, and honesty tests? 2. a . Testimonial evidence b . Documentary evidence c . Physical evidence d . Personal observation 5 points

QUESTION 4 1. In recent years, organizations have implemented a number of initiatives to more proactively detect fraud. The first and most common proactive fraud detection approach has been to: 2. a . conduct undercover operations. b . collect physical evidence. c . install reporting hotlines. d . install surveillance cameras. 5 points QUESTION 5 1. Which of the following is true of why fraud should be detected early? 2. a . Determining motive is a strong tool to prevent similar frauds in the future. b . When top management is the perpetrator, preventions can be implemented once the fraud has been discovered. c . Fraud is often obvious and more easily detected when first committed. d . Most frauds start small and get larger over time. 5 points QUESTION 6 1. Investigative methods utilized to catch a fraud perpetrator while he/she is actually receiving a kickback fall under which of the following categories? 2. a . Collusion investigative methods b . Conversion investigative methods c . Concealment investigative methods d . Theft act investigative methods 5 points

QUESTION 7 1. According to the text, which of the following is a consideration that influences the risk of fraud when identifying a company's fraud risks? 2. a . Customer demographics b . Current employee demographics c . Top management personal characteristics d . Industry characteristics 5 points QUESTION 8 1. All of the following factors can be associated with high levels of fraud and detract from a positive work environment EXCEPT: 2. a . lack of recognition of job performance. b . top management that does not pay attention to behavior of employees. c . unrealistically low pay. d . low turnover. 5 points QUESTION 9 1. Which of the following approaches is most useful in creating a culture of honesty and integrity in the workplace? 2. a . Hiring the right kind of employees b . Ergonomics c . Security cameras d . Peer evaluations 5 points QUESTION 10 1. In the past, most frauds were detected:

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2. a . by surveillance and undercover operations. b . by accident. c . by examining transaction records and documents to determine if there were anomalies that could represent fraud. d . by providing ways for people to report suspicions of fraud. 5 points QUESTION 11 1. Fraud is most commonly detected by: 2. a . monitoring employees. b . discouraging collusion. c . tips and complaints. d . auditors. 5 points QUESTION 12 1. Developing and promoting a well-defined corporate code of conduct is related to which element of the fraud-fighting model? 2. a . Proactive fraud detection b . Tone at the top c . Education and training d . Investigation and follow-up 5 points QUESTION 13 1. A "right-to-audit" clause: 2. a . provides rights to the vendor to audit the company's books at any time.

b . is considered in civil court as an invasion of privacy. c . alerts vendors that the company reserves the right to audit the vendor's books at any time. d . gives an external auditor the right to audit the company’s books. 5 points QUESTION 14 1. Once a fraud has occurred and a preventive solution developed, the solution should: 2. a . always be implemented by default. b . not be implemented because of the reactive circumstance in which it was created. c . be implemented only if it meets the cost-effectiveness test. d . be implemented only after testing by external auditors. 5 points QUESTION 15 1. Which of the following would usually be an environment conducive to fraud? 2. a . Low turnover b . Supportive rather than rivalrous relationships c . Reactive rather than proactive management d . Long-term business focus 5 points QUESTION 16 1. What does the acronym "EAP" stand for? 2. a . Employee Anti-Fraud Program b . Employee Assistance Program c Ethical Awareness Program

. d . Entrepreneurial Assistance Program 5 points QUESTION 17 1. Which of the following observations is true? 2. a . A control system by itself can provide assurance that fraud will be prevented. b . No internal control structure can ever be completely effective, regardless of the care followed in its design and implementation. c . The effectiveness of an ideal control system should be independent of the people enforcing it. d . The types of control activities include reactive controls and proactive controls. 5 points QUESTION 18 1. One way to create and communicate clear expectations about what is and is not acceptable in an organization is: 2. a . creating an expectation of punishment. b . having separate, nonintegrated personnel and operating policies. c . having a clearly defined code of conduct in place. d . following a reactive management style. 5 points QUESTION 19 1. Recruitment interview questions that deal with an applicant’s race, sex, age, religion, color, national origin, or disability: 2. a . are prohibited unless the criterion is pre-approved by the company management. b . are allowed as long as the interviewee has verbally agreed. c . are allowed in most circumstances.

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d . are usually prohibited unless the criterion is a bona fide occupational qualification. 5 points QUESTION 20 1. Which method will result in the biggest savings? 2. a . Investigation—including criminal prosecution b . Promotion—including raising rank or position c . Fraud prevention—including EAP plans d . Fraud detection—including audit proactively, monitoring