Question 1

It is necessary to use a computer to accomplish software piracy.

Accepted Answer

Software piracy involves the unauthorized copying, distribution, or use of copyrighted software. This can be done using a computer, but it can also be done using other means such as physical copies of software or mobile devices like smartphones and tablets. However, the majority of software piracy is done using computers, which makes them a common tool in the act of software piracy.

Question 2

A hacker is someone who has gained unauthorized access to the computer and must be someone outside the organization.

Accepted Answer

A hacker may be someone outside or inside the organization, as long as they gain unauthorized access to a computer system.

Question 3

The three conditions that make up the fraud triangle are theft, concealment, and conversion.

Accepted Answer

The three conditions that make up the fraud triangle are opportunity, rationalization, and pressure. Theft, concealment, and conversion are types of fraud actions that can occur as a result of the three conditions in the fraud triangle.

Question 4

The risk assessment is the foundation for all other components of internal control and provides the discipline and structure of all other components.

Accepted Answer

The control environment, not risk assessment, is the foundation for all other components of internal control, providing discipline and structure.

Question 5

Collusion can make it much easier to commit and conceal a fraud or theft, even when proper internal controls are in place.

Accepted Answer

Collusion involves two or more individuals working together to commit a fraud or theft. This can make it much easier to bypass internal controls and conceal the fraudulent activity since there is coordination between the perpetrators. Even with proper internal controls, collusion can still be a risk.

Question 6

If an organization has the policy of allowing employees to work from home via telecommunications, they could be opening themselves up to an opportunity for a hacker to break-in to their network.

Accepted Answer

Allowing employees to work from home via telecommunications can increase the risk of a hacker gaining access to the organization's network if proper security measures are not in place.

Question 7

Collusion between employees is one of the easiest frauds to detect and prevent.

Accepted Answer

Collusion between employees is difficult to detect and prevent because it involves multiple parties working together to conceal their actions, making it harder to identify discrepancies or irregularities.

Question 8

Industrial espionage can occur with or without the use of a computer.

Accepted Answer

Industrial espionage refers to the theft of trade secrets or confidential information from a company by a competitor or other malicious entity. While computer technology has certainly made it easier to steal this information, espionage can also occur through more traditional means, such as physical theft or human intelligence gathering.

Question 9

A good set of internal controls may not be as effective in reducing the chance of management fraud as it would be in reducing the chance of fraud committed by an employee.

Accepted Answer

Management has more authority and decision-making power than employees, so they may be able to override or manipulate internal controls more easily. Additionally, management may have access to more sensitive information and be able to conceal fraudulent activities more effectively than employees. Therefore, a good set of internal controls may not be as effective in detecting and preventing management fraud as it would be in reducing the chance of fraud committed by an employee.

Question 10

Collusion can occur only when two employees who work for the same firm conspire to circumvent the internal controls to commit fraud or theft.

Accepted Answer

Collusion can occur between employees of the same firm or between employees and external parties, such as vendors or customers, to commit fraud or theft.

Question 11

Companies that reward management with incentives to achieve a growth in earnings is running the risk that management will also have more motivation and pressure to falsify the financial statements to show the higher amounts.

Accepted Answer

The statement suggests that incentivizing management to achieve growth in earnings can lead to a risk of financial statement fraud due to the pressure to show higher profits.

Question 12

It is not always possible to avoid all mistakes and frauds because there will always be human error, human nature, and it is not always cost-effective to close all the holes.

Accepted Answer

While measures can and should be taken to minimize mistakes and prevent frauds, it is unrealistic to strive for complete perfection and it may not be feasible from a cost-benefit standpoint to implement all possible preventive measures. Human error and human nature can still play a role despite best efforts.

Question 13

A vendor audit occurs when a vendor examines the books and records of a customer.

Accepted Answer

A vendor audit occurs when a customer examines the books and records of a vendor.

Question 14

Customer fraud is a common problem for companies that sell merchandise online.

Accepted Answer

Customer fraud is a major concern for e-commerce businesses as it leads to financial loss and damages the company's reputation.

Question 15

A poor control environment can be overcome if the remaining components of internal control are strong.

Accepted Answer

A poor control environment sets a negative tone that can impact the effectiveness of the remaining components of internal control. It is difficult to compensate for a weak control environment with strong control activities, risk assessment, information and communication, and monitoring activities. All components of internal control should work together to provide reasonable assurance that objectives will be achieved.

Question 16

Defalcation and internal theft are names that refer to the misstatement of financial records.

Accepted Answer

Defalcation and internal theft refer to the misappropriation or embezzlement of funds, not the misstatement of financial records.

Question 17

The tone at the top of the organization tends to flow through the entire organization and affects behavior at all levels.

Accepted Answer

The tone at the top refers to the ethical and cultural values set by senior management, which tends to influence the behavior and attitudes of employees across the organization. A positive and ethical tone at the top creates a healthy work environment and encourages employees to act with integrity, while a negative or unethical tone can lead to a toxic work culture and unethical behavior at all levels.

Question 18

E-mail spoofing is more of an irritation to an organization that a fraud threat.

Accepted Answer

E-mail spoofing is a technique used to make an email appear to come from a different sender. This can be used for a variety of purposes, such as phishing, spam, or malware distribution. While e-mail spoofing can be an annoyance to organizations, it is not typically used for fraud.

Question 19

The most effective measure to prevent management fraud is to establish a professional internal audit staff that periodically checks up on management and reports directly to the audit committee of the board of directors.

Accepted Answer

Having a professional internal audit staff that reports directly to the audit committee of the board of directors can help detect and prevent management fraud. This staff can provide an independent and objective analysis of the company's accounting and financial reporting systems and identify any suspicious activities or irregularities. In addition, establishing a strong corporate culture that prioritizes ethical behavior and accountability can also help prevent management fraud.

Question 20

In order for a code of ethics to reduce opportunities for managers and employees to commit fraud, it is necessary that management emphasizes this code.Punishment related to violations of the code are not necessary.

Accepted Answer

Emphasizing a code of ethics is important, but punishment for violating the code provides a deterrent to committing fraudulent acts. Without consequences for unethical behavior, some individuals may still choose to engage in fraudulent actions despite the existence of a code of ethics.

Quiz 3: Fraud, Ethics, and Internal Control