Question 1

While conducting a routine internal audit, Sally Franks overheard one of the company's purchasing agents bragging about receiving a substantial discount on a new SUV from the company's supplier of fleet cars. Is there sufficient predication to initiate a fraud examination?
A) Yes
B) No

Accepted Answer

The purchasing agent's bragging about receiving a substantial discount on a new SUV from the company's supplier of fleet cars could indicate the possibility of fraudulent activity, such as receiving kickbacks or other illegal benefits. Therefore, there is sufficient predication to initiate a fraud examination.

Question 2

Richard Moore is the controller for Ajax Company. Recently, he suffered several large losses at the race track, causing him to incur enormous personal debts. Which type of non-sharable financial problem best describes Richard's situation?
A) Business reversal
B) Physical isolation
C) Violation of ascribed obligations
D) Status gaining

Accepted Answer

Richard's situation best describes a violation of ascribed obligations because he has incurred enormous personal debts, which is a violation of his obligation to his creditors.

Question 3

Joel Baker, a customer of ABC Electronics, stole a box containing computer games while the sales associate waited on another customer. Which of the following could Joel be charged with?
A) Larceny
B) Embezzlement
C) Fraud
D) All of the above

Accepted Answer

Larceny involves stealing someone else's property without force or intimidation. In this scenario, Joel stole a box of computer games from ABC Electronics, which falls under the category of larceny. Embezzlement and fraud involve more deliberate and premeditated actions to deceive or steal, which is not the case in this scenario.

Question 4

Samantha Lewis, CFE, is conducting an investigation into possible skimming of the accounts receivable at Southwest Paint and Supply Co. If Lewis plans to interview all of the following parties, whom should she interview first?
A) Marie Riley, the primary suspect
B) Jose Rodriguez, an accounts receivable clerk who filled in for Riley while she was on vacation
C) Sean Miles, a regular customer of the company, whose complaint about his account balance prompted the investigation
D) Thomas Banks, Riley's supervisor, who is suspected of helping Riley cover up the fraud in exchange for a portion of the proceeds

Accepted Answer

It is important for Samantha Lewis to prioritize her interviews in a way that she can obtain the most information that can possibly lead to the truth about the suspected fraud. In this case, it is best for her to interview Sean Miles first as he is the one who triggered the investigation by complaining about his account balance. By interviewing him first, Lewis can get a better understanding of what he saw or observed that led him to file a complaint. This can then lead to potential leads that can help her in her investigation. As for the other choices, it is important to interview all of them as well, but Sean Miles should be the first priority.

Question 5

Eddie Dolan is the manager of shipping and receiving and has been working at the UFA Company for twenty years. He rarely calls in sick and gets good performance reviews every year. For the past year, his wife's company, ABC Co., has been in serious financial trouble. ABC Co. likely will not be able to make the payroll for next month and may have to close down. Which leg of the Fraud Triangle best applies to Dolan's situation?
A) Motive
B) Perceived opportunity
C) Rationalization
D) Non-sharable financial need

Accepted Answer

Dolan's wife's financial need is creating a non-sharable financial need for him, which could lead to him being more susceptible to committing fraud.

Question 6

Alice Durant works in the accounts payable department for the BC Group. She recently found out that Della Granger, another A/P clerk, received a bigger raise than she did, even though Durant has been with the company longer and frequently has to correct Granger's errors. Which leg of the Fraud Triangle best applies to Durant's situation?
A) Motive
B) Perceived opportunity
C) Rationalization
D) Non-sharable financial need

Accepted Answer

Durant may rationalize committing fraud due to perceived unfair treatment, believing she deserves more due to her tenure and correcting Granger's mistakes.

Question 7

In the 2010 Report to the Nations on Occupational Fraud and Abuse, most perpetrators of fraud had been previously charged with or convicted of a fraud-related offense.

Accepted Answer

According to the 2010 Report to the Nations on Occupational Fraud and Abuse, most perpetrators had not been previously charged with or convicted of a fraud-related offense before committing the fraud in question.

Question 8

When Jill Michaels, an assistant to the director of procurement, moved into her new home, she used the company's flat bed truck to move her furnishings on an afternoon when her boss was out of town. Which of the following best describes Michael's act?
A) Fraud
B) Abuse
C) Embezzlement
D) Larceny

Accepted Answer

Michaels' use of the company's truck for her personal use without permission from her boss or proper authorization is an abuse of company resources. It is not fraud because she did not deceive or misrepresent anything, embezzlement because she did not steal funds, or larceny because she did not take something without permission with the intention of permanently depriving the company of its property.

Question 9

In the 2010 Report to the Nations on Occupational Fraud and Abuse, fraudulent financial statements schemes had a higher median loss than asset misappropriation and corruption schemes.

Accepted Answer

According to the 2010 Report to the Nations on Occupational Fraud and Abuse, fraudulent financial statements schemes had a median loss of $1 million, compared to a median loss of $150,000 for asset misappropriation schemes and $250,000 for corruption schemes. Therefore, fraudulent financial statements schemes had a higher median loss than the other two types of schemes.

Question 10

Arthur Baxter, a manager in records retention for SWC Company, has ordered seven laptop computers for his department, even though he only has five employees. In addition to each laptop, he ordered extra copies of several software programs. When the equipment arrives, Baxter sends one of the extra laptops to his son who is a freshman at Eastern University and sells three of the original software packages to friends. Which of the following offenses could Baxter be charged with?
A) Larceny
B) Embezzlement
C) Conversion
D) All of the above

Accepted Answer

Arthur Baxter could be charged with all of the offenses listed: Larceny, for unlawfully taking the laptops and software; Embezzlement, for misappropriating company assets entrusted to him; and Conversion, for unauthorized use of company property.

Quiz 1: Introduction

While conducting a routine internal audit, Sally Franks overheard one of the company's purchasing agents bragging about receiving a substantial discount on a new SUV from the company's supplier of fleet cars. Is there sufficient predication to initiate a fraud examination?

Richard Moore is the controller for Ajax Company. Recently, he suffered several large losses at the race track, causing him to incur enormous personal debts. Which type of non-sharable financial problem best describes Richard's situation?

Joel Baker, a customer of ABC Electronics, stole a box containing computer games while the sales associate waited on another customer. Which of the following could Joel be charged with?

Samantha Lewis, CFE, is conducting an investigation into possible skimming of the accounts receivable at Southwest Paint and Supply Co. If Lewis plans to interview all of the following parties, whom should she interview first?

In the 2010 Report to the Nations on Occupational Fraud and Abuse, most perpetrators of fraud had been previously charged with or convicted of a fraud-related offense.

When Jill Michaels, an assistant to the director of procurement, moved into her new home, she used the company's flat bed truck to move her furnishings on an afternoon when her boss was out of town. Which of the following best describes Michael's act?

In the 2010 Report to the Nations on Occupational Fraud and Abuse, fraudulent financial statements schemes had a higher median loss than asset misappropriation and corruption schemes.