Question 1

Which elements of culture help prevent fraud?

Accepted Answer

All of these elements—zero tolerance for fraud, expectation of integrity, and codes of conduct—are crucial in creating a culture that helps prevent fraud within an organization.

Question 2

External auditors for the firm alert management that the corporate culture could use some improvement with regards to fraud prevention. Which of the following could positively influence the company culture?

Accepted Answer

Each of the options (A, B, and C) outlines a strategy that can positively influence company culture towards fraud prevention by emphasizing the importance of honesty, integrity, and adherence to policies and codes of conduct.

Question 3

Ajla suggested to her company that they should consider financial statement analysis to identify potential fraud by comparing changes in items between different financial periods. What kind of analysis is Ajla suggesting?

Accepted Answer

Horizontal analysis involves comparing financial data and ratios across different periods to identify trends, anomalies, or unexpected changes that could indicate issues such as fraud.

Question 4

Filip, a new accountant for the internal audit team at Wofford, relayed that his previous employer used percentages of line items in financial statement analysis as one method to review for potential fraud. What kind of analysis is Filip suggesting?

Accepted Answer

Vertical analysis is the method where each line item in a financial statement is listed as a percentage of another item, typically used to analyze relationships and trends over time within the financial statements. This method can help in identifying potential fraud by highlighting inconsistencies or unusual changes in financial relationships.

Question 5

Which of the following is the top method of detecting fraud?

Accepted Answer

Tips are the most common and effective method for detecting fraud, as they often come from employees, customers, or vendors who have observed or suspect fraudulent activities.

Question 6

Which of the following is an example of a method to detect fraud within an organization?

Accepted Answer

All of these methods are used to detect fraud within an organization. A whistleblower hotline allows employees to report unethical behavior, data analytics can identify irregular patterns that may indicate fraud, and proper documentation and audit trails make it easier to uncover fraudulent activities.

Question 7

Which of the following terms refers to the theft of business owned cash, inventory, information, or intellectual property?

Accepted Answer

Asset misappropriation refers to the theft or misuse of an organization's resources, such as cash, inventory, or intellectual property.

Question 8

Though the least costly, this type of fraud is focused on by external auditors and is covered on the CPA exam?

Accepted Answer

Asset misappropriation is the least costly type of fraud compared to corruption and financial statement fraud, but it is the most common and thus heavily focused on by external auditors and covered on the CPA exam.

Question 9

Which of the following statements is TRUE?

Accepted Answer

Asset misappropriation schemes are indeed the most common type of fraud encountered, but they typically involve smaller amounts of money for each incident when compared to the financial statement fraud, which can have a much larger impact per case.

Question 10

Select the statement that is TRUE.

Accepted Answer

Skimming involves the theft of cash before it is recorded in the accounting records, making it hard to detect because the money is taken before it enters the system. Larceny, on the other hand, refers to the theft of assets, including cash, after they have been recorded in the books, which can be easier to detect through discrepancies in the records.

Question 11

Which of the following terms is most closely associated with an employee stealing cash before the cash is recorded in the accounting records?

Accepted Answer

Skimming refers to the theft of cash from a business by an employee before it is recorded on the business's books and records. This makes it difficult to detect because the money is taken before it enters the accounting system.

Question 12

Which of the following fraud situations would controls such as daily bank deposits or credit card only transactions help mitigate?

Accepted Answer

Daily bank deposits or credit card only transactions help mitigate skimming, which involves taking cash before it is recorded in the accounting system.

Question 13

Which of the following controls could mitigate cash skimming efforts in a restaurant?

Accepted Answer

Segregation of duties ensures that employees involved in sales do not have control over inventory counts and write-offs, reducing the opportunity for skimming by preventing manipulation of inventory records to cover up cash theft.

Question 14

Which of the following controls could mitigate accounts receivable skimming efforts?

Accepted Answer

Implementing segregation of duties so that employees receiving payments do not also send invoices to customers can mitigate accounts receivable skimming efforts by reducing the opportunity for an employee to misappropriate funds without detection.

Question 15

Which of the following controls could help mitigate billing schemes?

Accepted Answer

The answer of Which of the following controls could help...

Question 16

Which of the following controls could help mitigate expense reimbursement fraud?

Accepted Answer

Requiring receipts for all expenses helps ensure that claims are legitimate and can be verified, reducing the risk of fraudulent reimbursements.

Question 17

Which of the following terms is defined as the theft of company assets after the company has recorded the assets in its books?

Accepted Answer

Larceny refers to the theft of company assets after the company has recorded these assets in its books, distinguishing it from skimming, where the theft occurs before the assets are recorded.

Question 18

Which category of fraud is associated with an employee submitting a receipt twice for reimbursement that was paid for using the company credit card?

Accepted Answer

Double dipping refers to the fraudulent act of submitting the same expense more than once for reimbursement, in this case, an employee seeking reimbursement for an expense already paid for by the company, thus making it the correct category of fraud.

Question 19

Which category of fraud is associated with an employee selling the employer's customer list to a competitor?

Accepted Answer

The answer of Which category of fraud is associated with...

Question 20

Which category of fraud is associated when an employee submits an overpayment on a bill owed by the firm and then intercepts and cashes the overpayment reimbursement check from the vendor?

Accepted Answer

This scenario describes a "Pay and return scheme," where an employee intentionally manipulates payments (such as overpaying a bill) and then intercepts the refund or reimbursement, diverting it for personal use.

Quiz 15: Fraud