Question 1

According to Cressey, the perceived opportunity to commit fraud consists of two elements: general information and technical skill.

Accepted Answer

Cressey's fraud triangle consists of three elements: opportunity, rationalization, and pressure. The perceived opportunity component is made up of general information and technical skill.

Question 2

The basic tenet of Edwin Sutherland's theory of differential association is that crime is passed on genetically; that is, the offspring of criminals commit crimes because their parents did.

Accepted Answer

Edwin Sutherland's theory of differential association states that criminal behavior is learned through interaction with others, primarily within small social groups such as family and peers. It does not suggest that crime is passed on genetically.

Question 3

In a study by Steve Albrecht, Marshall Romney, and Keith Howe, participants were asked to rank characteristics of the organizational environment that contributed to fraud. The highest ranked factor was:
A) Lack of clear lines of authority
B) Inadequate attention to detail
C) Lack of an internal audit function
D) Placing too much trust in key employees

Accepted Answer

Placing too much trust in key employees was ranked as the highest factor contributing to fraud in the study. This is likely because when key employees are trusted without appropriate checks and balances in place, they may feel empowered to engage in fraudulent activities.

Question 4

Research in the Hollinger-Clark study suggests that the best way to deter employee theft is by:
A) Increasing sanctions imposed on occupational fraudsters
B) Increasing the perception of detection
C) Strengthening internal controls
D) Communicating the organization's fraud policies to employees

Accepted Answer

Increasing the perception of detection is considered the most effective deterrent against employee theft, as it makes employees more aware that their actions are being monitored and that they are likely to be caught if they engage in theft.

Question 5

Which of the following is the correct order for a fraud examiner to interview witnesses?
A) Corroborative witnesses, neutral third-parties, co-conspirators, suspect
B) Suspect, co-conspirators, corroborative witnesses, neutral third-parties
C) Neutral third-parties, corroborative witnesses, co-conspirators, suspect
D) Suspect, corroborative witnesses, co-conspirators, neutral third-parties

Accepted Answer

It is best for a fraud examiner to first interview neutral third-parties to gain an unbiased perspective, followed by corroborative witnesses to verify facts, then co-conspirators to gather more information, and finally the suspect last to avoid potentially alerting them to the investigation.

Question 6

In a fraud examination, evidence is usually gathered in a manner that moves from general to specific.

Accepted Answer

Typically, in a fraud examination, investigators follow a general-to-specific approach to gathering evidence. They begin by gathering broad information before focusing on specific areas or details. This helps to ensure that all relevant evidence is gathered and that the investigation is conducted in a thorough and effective manner.

Question 7

Predication, although important, is not required in a fraud examination.

Accepted Answer

Predication is essential in any fraud examination. It refers to the basis or reason for launching an investigation. Without predication, an investigation may not be justified, and any evidence gathered may not be admissible in court. Therefore, predication is a critical element in any fraud examination.

Question 8

In the 2010 Report to the Nations on Occupational Fraud and Abuse, the category that committed the smallest percentage of occupational fraud was:
A) Managers
B) Employees
C) Owners/Executives

Accepted Answer

Owners/Executives committed the smallest percentage of occupational fraud according to the 2010 Report to the Nations on Occupational Fraud and Abuse. This category typically has fewer individuals than employees or managers, which contributes to the lower percentage of fraud cases attributed to them.

Question 9

Fraud examination differs from auditing in that fraud examination is:
A) Recurring
B) 	Adversarial
C)General in scope
D) All of the above

Accepted Answer

Fraud examination is adversarial in nature as it involves discovering and proving fraudulent activities carried out by someone. Auditing, on the other hand, is a process of examining financial statements and records to ensure they are accurate and comply with accounting standards. Fraud examination may be part of auditing, but they are different processes.

Question 10

The discipline of fraud examination includes all of the following except:
A) Writing investigative reports
B) Determining the guilt of the suspect
C) Testifying to findings
D) Interviewing witnesses

Accepted Answer

The discipline of fraud examination includes writing investigative reports, testifying to findings, and interviewing witnesses. However, determining the guilt of the suspect is the responsibility of the court or jury system, not the fraud examiner.

Question 11

Who developed the Fraud Scale?
A) Joseph T. Wells
B) W. Steve Albrecht
C) Richard C. Hollinger
D) Donald R. Cressey

Accepted Answer

W. Steve Albrecht developed the Fraud Scale, which is a tool used to assess the likelihood of fraud occurring within an organization.

Question 12

Which of the following is not one of the legs of the Fraud Triangle?
A) Situational environment
B) Perceived non-sharable financial need
C) Perceived opportunity
D) Rationalization

Accepted Answer

The Fraud Triangle consists of three elements - Perceived opportunity, Perceived non-sharable financial need, and Rationalization. Situational environment is not a leg of the Fraud Triangle.

Question 13

In the 2010 Report to the Nations on Occupational Fraud and Abuse, the median loss in schemes committed by males was higher than the median loss in schemes committed by females.

Accepted Answer

According to the 2010 Report to the Nations on Occupational Fraud and Abuse, the median loss in schemes committed by males was $168,000, while the median loss in schemes committed by females was $100,000. Therefore, the statement is true.

Question 14

In order to prove that fraud occurred, four elements must be present. Which of the following is not one of those elements?
A) A material false statement
B) Knowledge that the statement was false
C) Reliance on the false statement by the victim
D) Intent to cause the victim damages

Accepted Answer

The four elements of fraud are: (1) a material false statement, (2) knowledge that the statement was false, (3) reliance on the false statement by the victim, and (4) damages suffered by the victim as a result. Intent to cause damages may be a factor, but it is not a necessary element of fraud.

Question 15

In a study by Steve Albrecht, Marshall Romney, and Keith Howe, participants were asked to rank personal characteristics as motivating factors that contributed to fraud. The highest ranked factor was:
A) Undue family or peer pressure
B) Lack of recognition of job performance
C) Living beyond one's means
D) Lack of appreciation by management

Accepted Answer

Living beyond one's means was ranked as the highest motivating factor that contributed to fraud. This suggests that employees who feel financially strained or insecure may be more likely to engage in fraudulent behavior.

Question 16

Which of the following is not a part of the fraud theory approach?
A) Analyze available data.
B) Develop "what-if" scenarios.
C) Identify who committed the fraud.
D) Refine the hypothesis.

Accepted Answer

Identifying who committed the fraud is not a part of the fraud theory approach. The approach focuses on analyzing available data, developing "what-if" scenarios, and refining the hypothesis. Once a hypothesis is refined, then investigators may focus on identifying the individuals involved in committing the fraud.

Question 17

Which of the following best describes the objective of a fraud examination?
A) To make recommendations to management about how to prevent fraud
B) To determine whether financial statements are free of misstatements due to fraud
C) To express an opinion on the guilt or innocence of a suspect
D) To determine whether a crime has been committed, and if so, who is responsible

Accepted Answer

The primary objective of a fraud examination is to determine whether a crime has been committed and, if so, to identify who is responsible. This involves gathering evidence, analyzing financial transactions, and conducting interviews to establish the facts of the case.

Question 18

In the 2010 Report to the Nations on Occupational Fraud and Abuse, most frauds were initially detected during an external audit.

Accepted Answer

According to the 2010 Report to the Nations on Occupational Fraud and Abuse, most frauds were actually initially detected through tips or complaints, rather than during an external audit.

Question 19

Once sufficient predication has been established, what is the first step a fraud examiner following the fraud theory approach should take?
A) Create a hypothesis.
B) Analyze data.
C) Interview witnesses.
D) Interview the suspect.

Accepted Answer

The answer of Once sufficient predication has been established, what...

Question 20

According to the results of the Hollinger-Clark study, employees steal primarily because of:
A) Job dissatisfaction
B) Greed
C) Informal organizational structures
D) Economic pressures

Accepted Answer

The Hollinger-Clark study found that job dissatisfaction is a primary reason why employees engage in theft, as it can lead to a lack of commitment and rationalization of dishonest behavior.

Quiz 1: Introduction

According to Cressey, the perceived opportunity to commit fraud consists of two elements: general information and technical skill.

The basic tenet of Edwin Sutherland's theory of differential association is that crime is passed on genetically; that is, the offspring of criminals commit crimes because their parents did.

In a study by Steve Albrecht, Marshall Romney, and Keith Howe, participants were asked to rank characteristics of the organizational environment that contributed to fraud. The highest ranked factor was:

Research in the Hollinger-Clark study suggests that the best way to deter employee theft is by:

Which of the following is the correct order for a fraud examiner to interview witnesses?

In a fraud examination, evidence is usually gathered in a manner that moves from general to specific.

Predication, although important, is not required in a fraud examination.

In the 2010 Report to the Nations on Occupational Fraud and Abuse, the category that committed the smallest percentage of occupational fraud was:

Fraud examination differs from auditing in that fraud examination is:

The discipline of fraud examination includes all of the following except:

Who developed the Fraud Scale?

Which of the following is not one of the legs of the Fraud Triangle?

In the 2010 Report to the Nations on Occupational Fraud and Abuse, the median loss in schemes committed by males was higher than the median loss in schemes committed by females.

In order to prove that fraud occurred, four elements must be present. Which of the following is not one of those elements?

In a study by Steve Albrecht, Marshall Romney, and Keith Howe, participants were asked to rank personal characteristics as motivating factors that contributed to fraud. The highest ranked factor was:

Which of the following is not a part of the fraud theory approach?

Which of the following best describes the objective of a fraud examination?

In the 2010 Report to the Nations on Occupational Fraud and Abuse, most frauds were initially detected during an external audit.

Once sufficient predication has been established, what is the first step a fraud examiner following the fraud theory approach should take?

According to the results of the Hollinger-Clark study, employees steal primarily because of: