Full download please email me stoneklopp@gmail.com
TEST BANK
Fraud Examination 7th Edition
by Albrecht All Chapters 1 to 18
Page 1
Full download please email me stoneklopp@gmail.com
TABLE OF CONTENTS
Part I: INTRODUCTION TO FRAUD.
1. The Nature of Fraud.
2. Who Commits Fraud and Why.
3. Fighting Fraud: An Overview.
Part II: FRAUD PREVENTION.
4. Preventing Fraud.
Part III: FRAUD DETECTION.
5. Recognizing the Symptoms of Fraud.
6. Data-Driven Fraud Detection
Part IV: FRAUD INVESTIGATION.
7. Investigating Theft Acts.
8. Investigating Concealment.
9. Conversion Investigation Methods.
10. Inquiry Methods and Fraud Reports.
Part V: MANAGEMENT FRAUD.
11. Financial Statement Fraud.
12. Revenue- and Inventory-Related Financial Statement Frauds.
13. Liability, Asset, and Inadequate Disclosure Frauds.
Part VI: OTHER TYPES OF FRAUD.
14. Fraud Against Organizations.
15. Consumer Fraud.
16. Bankruptcy, Divorce, and Tax Fraud.
17. e-Commerce Fraud.
Part VII: RESOLUTION OF FRAUD.
18. Legal Follow-Up.
Page 2
Chapter 01 - The Nature of Fraud
1. One way that criminal law differs from civil law is that it:
a. provides remedies for violations of private rights.
b. must yield a unanimous verdict.
c. can have a jury of fewer than 12 persons.
d. allows for various claims in one action.
ANSWER:
b
FEEDBACK:
a. Incorrect. The requirement to provide remedies for violations of private rights is a
characteristic of civil law; criminal law deals with crimes against society as awhole.
b. Correct. Criminal trials must result in a unanimous verdict.
c. Incorrect. The requirement for a unanimous vote characteristic of civil law;
criminal trial juries must have 12 persons.
d. Incorrect. In inclusion of various claims in one action is a characteristic of civillaw;
criminal law permits only one claim at a time.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Criminal and Civil Prosecution of Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER:
Source: 6e revised
DATE CREATED:
2/8/2024 7:10 AM
DATE MODIFIED:
2/8/2024 7:14 AM
2. Which of the following is NOT an common element of a Ponzi scheme?
a. Gaining other's confidence
b. Promising abnormally high returns
c. Investing collected money
d. Using part of the investment principle to pay previous investors
ANSWER:
c
FEEDBACK:
a. Incorrect. Gaining other’s confidence is one of the most important elements of the
“con.”
b. Incorrect. Promising abnormally high returns is how fraudsters lure in investors.
c. Correct. Investing collected money is very unlikely.
d. Incorrect. In Ponzi schemes, the original principle is often used to make interest
payments.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Types of Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER:
Source: 6e , revised
DATE CREATED:
2/9/2024 5:11 AM
DATE MODIFIED:
2/9/2024 5:32 AM
Page 3
Chapter 01 - The Nature of Fraud
3. The following are all elements of Title 26, U.S. Code Section 7201 EXCEPT:
a. not reporting bribe income may be grounds for being charged with tax evasion.
b. a tax filing that excludes income from fraud may be considered a false return.
c. bribes may be lawfully deducted as business expenses.
d. failure to report income from fraud may be grounds for being charged with tax evasion.
ANSWER:
c
FEEDBACK:
a. Incorrect. Not reporting bribe income may be grounds for being charged with tax
evasion.
b. Incorrect. Filing income tax that excludes income from fraud may be consideredan
improper tax filing.
c. Correct. Bribes cannot be deducted as legitimate business expenses.
d. Incorrect. Failure to report income from fraud or bribes may be prosecuted as taxevasion.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Criminal Law
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 5:38 AM
DATE MODIFIED:
2/9/2024 5:40 AM
4. Which one of the following is NOT a characteristic of a criminal proceeding?
a. Criminal proceedings deal with offenses against society.
b. Consequences of criminal proceedings include restitution and damage payments.
c. Criminal proceedings involve a jury of 12 individuals.
d. In criminal proceedings, only one claim may be heard at a time.
ANSWER:
b
FEEDBACK:
a. Incorrect. A crime is considered an offense against society.
b. Correct. In a criminal proceeding, the consequences are jail and/or fines.
c. Incorrect. A criminal jury consists of 12 jurors.
d. Incorrect. Only one claim is heard at a time, whereas in a civil case many claimsmay be
joined into a single case.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Criminal Law
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 6:36 AM
DATE MODIFIED:
2/9/2024 6:38 AM
Page 4
Chapter 01 - The Nature of Fraud
5. Management fraud is often referred to as:
a. stockholder fraud.
b. financial statement fraud.
c. employee fraud.
d. investment fraud.
ANSWER:
b
FEEDBACK:
a. Incorrect. In its most common form, management fraud involves top
management's deceptive manipulation of financial statements.
b. Correct. In its most common form, management fraud involves top management's
deceptive manipulation of financial statements.
c. Incorrect. In its most common form, management fraud involves top
management's deceptive manipulation of financial statements.
d. Incorrect. In its most common form, management fraud involves top
management's deceptive manipulation of financial statements.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Management Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 6:39 AM
DATE MODIFIED:
2/9/2024 6:43 AM
6. What is required to prove fraud, as opposed to error?
a. Negligence
b. Intent
c. Preponderance of the evidence
d. Confession from the perpetrator
ANSWER:
b
FEEDBACK:
a. Incorrect. Negligence does not constitute fraud because it lacks intent to gain
advantage over the victim through false pretenses.
b. Correct. To succeed in a criminal or civil prosecution, it is usually necessary toshow
that the perpetrator acted with intent to defraud the victim.
c. Incorrect. Preponderance of the evidence is what is proven in any civil case andis not
specific to fraud.
d. Incorrect. Confession is not required to prove fraud. In fact, many perpetratorsnever
admit their guilt.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Criminal and Civil Prosecution of Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 6:43 AM
Page 5
Chapter 01 - The Nature of Fraud
DATE MODIFIED:
2/9/2024 6:44 AM
7. Which of the following is the most common type of occupational fraud?
a. Management fraud
b. Mail fraud
c. Investment fraud
d. Employee embezzlement
ANSWER:
d
FEEDBACK:
a. Incorrect. Employee embezzlement is the most common type of occupational
fraud.
b. Incorrect. Employee embezzlement is the most common type of occupationalfraud.
c. Incorrect. Employee embezzlement is the most common type of occupationalfraud.
d. Correct. Employee embezzlement is the most common type of occupationalfraud.
POINTS:
1
DIFFICULTY:
Easy
REFERENCES:
Employee Embezzlement
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 6:45 AM
DATE MODIFIED:
2/9/2024 6:47 AM
8. Which of the following is NOT a characteristic of management fraud?
a. Top management deception
b. Manipulation of financial statements
c. Kickbacks or bribes
d. Hidden losses and fictitious revenues
ANSWER:
c
FEEDBACK:
a. Incorrect. Management fraud often involves top management's deceptive
manipulation. Management fraud is when the top management deceives
stockholders.
b. Incorrect. Management often uses the manipulation of financial statements tocommit
fraud. This is one of the easiest ways to commit a large fraud.
c. Correct. These are examples of employee embezzlement. Management fraudusually
deals with financial statement manipulation.
d. Incorrect. In an effort to inflate reportable profit, managers may hide losses and
exaggerate revenues.
POINTS:
DIFFICULTY:
REFERENCES:
QUESTION TYPE:
HAS VARIABLES:
1
easy
Management Fraud
Multiple Choice
False
Page 6
Chapter 01 - The Nature of Fraud
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 6:48 AM
DATE MODIFIED:
2/9/2024 6:49 AM
9. Customer fraud includes all of the following EXCEPT:
a. paying too little for goods received.
b. not paying for goods purchased.
c. receiving improper payments through collusion between buyers and vendors.
d. deceiving the organization into giving the customer something that it should not.
ANSWER:
c
FEEDBACK:
a. Incorrect. Paying too little for goods received is an example of customer fraud.
b. Incorrect. This is an example of customer fraud.
c. Correct. This is an example of vendor fraud.
d. Incorrect. This is an example of customer fraud.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Customer Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER:
Source: 6erevised
DATE CREATED:
2/9/2024 6:50 AM
DATE MODIFIED:
2/9/2024 6:51 AM
10. Which of the following is a frequently involved in of vendor fraud?
a. C Participation of buyers from the company being defrauded
b. False financial statement reporting by upper management
c. Physical removal of inventory from the business premises
d. Diversion of funds by an employee. manipulation
ANSWER:
a
FEEDBACK:
a. Correct. Vendor fraud frequently involves participation of buyers from the
company being defrauded.
b. Incorrect. Vendor fraud frequently involves participation of buyers from the
company being defrauded.
c. Incorrect. Vendor fraud frequently involves participation of buyers from the
company being defrauded.
d. Incorrect. Vendor fraud frequently involves participation of buyers from the
company being defrauded.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Vendor Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
Page 7
Chapter 01 - The Nature of Fraud
OTHER:
DATE CREATED:
DATE MODIFIED:
Source: 6e revised
2/9/2024 6:52 AM
2/9/2024 6:54 AM
11. Government agencies such as the FBI, FDIC, FTC, and the IRS publish fraud statistics from time to time. Which of
the following observations concerning such statistics is true?
a. Generally, their statistics are complete.
b. Such information is rarely used.
c. They provide only those statistics related to their jurisdiction.
d. They usually provide a total picture in the areas for which they have responsibility.
ANSWER:
c
FEEDBACK:
a. Incorrect. Government agencies only publish those statistics that are directly
related to their jurisdictions. As a result, their statistics are not complete and donot
provide a total picture of fraud—even in the areas for which they have responsibility.
b. Incorrect. Government agencies only publish those statistics that are directly related to
their jurisdictions. As a result, their statistics are not complete and donot provide a
total picture of fraud—even in the areas for which they have responsibility.
c. Correct. Government agencies only publish those statistics that are directly related to
their jurisdictions. As a result, their statistics are not complete and donot provide a
total picture of fraud—even in the areas for which they have responsibility.
d. Incorrect. Government agencies only publish those statistics that are directly related to
their jurisdictions. As a result, their statistics are not complete and donot provide a
total picture of fraud—even in the areas for which they have responsibility.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Seriousness of the Fraud Problem
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.1 - Understand the seriousness of fraud and how it affects individuals,
consumers, organizations, and society.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 6:54 AM
DATE MODIFIED:
2/9/2024 6:56 AM
12. Which legal code makes the bribing of public officials and witnesses illegal?
a. Title 18, U.S. Code §201
b. Title 41, U.S. Code §51 to 58
c. Title 18, U.S. Code Section §1341
d. Title 18, U.S. Code Section §1344
ANSWER:
a
FEEDBACK:
a. Correct. Title 18, U.S. Code Section 201 outlaws the bribing of public officials.
b. Incorrect. Title 18, U.S. Code Section 201 outlaws the bribing of public officials.
c. Incorrect. Title 18, U.S. Code Section 201 outlaws the bribing of public officials.
Page 8
Chapter 01 - The Nature of Fraud
d. Incorrect. Title 18, U.S. Code Section 201 outlaws the bribing of public officials.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Criminal Law
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 6:57 AM
DATE MODIFIED:
2/9/2024 6:58 AM
13. Fraud has a direct dollar-for-dollar impact on a company's:
a. revenues.
b. net income.
c. profit margin.
d. stock price.
ANSWER:
b
FEEDBACK:
a. Incorrect. Fraud has a direct dollar-for-dollar impact on a company’s net income.
b. Correct. Fraud has a direct dollar-for-dollar impact on a company’s net income.
c. Incorrect. Fraud has a direct dollar-for-dollar impact on a company’s net income.
d. Incorrect. Fraud has a direct dollar-for-dollar impact on a company’s net income.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Seriousness of the Fraud Problem
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.1 - Understand the seriousness of fraud and how it affects individuals,
consumers, organizations, and society.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 6:59 AM
DATE MODIFIED:
2/9/2024 7:00 AM
14. Which of the following is NOT a primary reason for the increased size and number of frauds?
a. The advent of computers
b. Complex accounting systems
c. Prevalence of electronic assets
d. The Internet
ANSWER:
c
FEEDBACK:
a. Incorrect. This is a primary reason for the increased frequency of fraud.
b. Incorrect. This is a primary reason for the increased frequency of fraud.
c. Correct. With the advent of computers and the Internet, fraudulent asset misplacement
can be accomplished without the need for physical possession ofstolen property.
d. Incorrect. This is a primary reason for the increased frequency of fraud.
Page 9
Chapter 01 - The Nature of Fraud
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Seriousness of the Fraud Problem
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.1 - Understand the seriousness of fraud and how it affects individuals,
consumers, organizations, and society.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 7:02 AM
DATE MODIFIED:
2/9/2024 7:03 AM
15. Which of the following statements regarding civil law is correct?
a. When fraud is committed, criminal prosecution usually precedes civil prosecution.
b. Civil law is the body of law that provides remedies for crimes against society.
c. Civil cases must be heard by 12 jurors.
d. In a civil case, the verdict of the jury must be unanimous.
ANSWER:
a
FEEDBACK:
a. Correct. Fraud may result in both civil and criminal charges; criminal prosecution
usually proceeds first.
b. Incorrect. Civil law is the body of law that provides remedies for violations of
private rights.
c. Incorrect. Civil cases are often heard by a judge only or by as few as 6 jurors.
d. Incorrect. The verdict of the jury need not be unanimous.
POINTS:
1
DIFFICULTY:
Easy
REFERENCES:
Civil Law
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 7:11 AM
DATE MODIFIED:
2/14/2024 11:49 PM
16. Fraud is deception that includes all of the following EXCEPT:
a. a material point is misrepresented.
b. the misrepresentation is intentional.
c. the misrepresentation is known to the victim.
d. the victim must sustain damages.
ANSWER:
c
FEEDBACK:
a. Incorrect. An essential element of fraud is that a material point was
misrepresented.
b. Incorrect. In every fraud there must be intent.
c. Correct. The victim must believe the misrepresentation.
d. Incorrect. For fraud to take place, the victim must sustain damages.
Page 10
Chapter 01 - The Nature of Fraud
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
What Is Fraud?
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.2 - Define Fraud.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 7:36 AM
DATE MODIFIED:
2/9/2024 7:37 AM
17. The burden of proof needed for conviction in a criminal case:
a. is beyond a reasonable doubt.
b. is determined by the majority of the jury members.
c. is the preponderance of evidence.
d. lies with the defendant.
ANSWER:
a
FEEDBACK:
a. Correct. In a criminal case, perpetrators must be proven guilty “beyond a
reasonable doubt” with unanimous rule of jurors. Plaintiffs in civil cases must onlyprove
their case by the “preponderance of the evidence.”
b. Incorrect. In a criminal case, perpetrators must be proven guilty “beyond a reasonable
doubt” with unanimous rule of jurors. Plaintiffs in civil cases must onlyprove their case
by the “preponderance of the evidence.”
c. Incorrect. In a criminal case, perpetrators must be proven guilty “beyond a reasonable
doubt” with unanimous rule of jurors. Plaintiffs in civil cases must onlyprove their case
by the “preponderance of the evidence.”
d. Incorrect. In a criminal case, perpetrators must be proven guilty “beyond a reasonable
doubt” with unanimous rule of jurors. Plaintiffs in civil cases must onlyprove their case
by the “preponderance of the evidence.”
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Criminal Law
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 7:39 AM
DATE MODIFIED:
2/9/2024 7:40 AM
18. Which of the following statements about criminal and civil cases is correct?
a. The purpose of a criminal case is "to right a wrong," the purpose of civil case is to obtain a remedy.
b. A jury must have 12 people in civil cases, but in criminal cases may consist of fewer than 12 people.
c. Both criminal cases and civil cases require a fraud perpetrator to make payments for damages.
d. Only one claim may be tried at a time in civil cases, but in criminal cases, various claims may be joined in one
action.
ANSWER:
a
FEEDBACK:
a. Correct. Since criminal law addresses crimes against society, the purpose of a
Page 11
Chapter 01 - The Nature of Fraud
criminal case is to right a wrong. Since civil law remedies violation of private
rights, the purpose of a civil case is to obtain a remedy for the victim(s).
b. Incorrect. For criminal cases, juries must have 12 people, but civil cases may beheard
by a judge or a jury of as few as 6 people.
c. Incorrect. Only civil cases require the convicted perpetrator to pay restitution for
damages to the victim. In criminal cases, the convicted perpetrator serves jail time
and/or pays fines.
d. Incorrect. In criminal cases, only one claim at a time may be heard, whereas incivil
cases various claims may be joined in one action.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Criminal and Civil Prosecution of Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 7:41 AM
DATE MODIFIED:
2/9/2024 7:42 AM
19. How is the confidence element established in a Ponzi scheme?
a. By investing in prime bonds
b. By issuing notarized certificates
c. By paying returns to investors initially
d. By returning money to all investors
ANSWER:
c
FEEDBACK:
a. Incorrect. By paying early “returns,” the perpetrator of a Ponzi scheme gains
investors' confidence and convinces them that they have a legitimate business.
b. Incorrect. By paying early “returns,” the perpetrator of a Ponzi scheme gains investors'
confidence and convinces them that they have a legitimate business.
c. Correct. By paying early “returns,” the perpetrator of a Ponzi scheme gains investors'
confidence and convinces them that they have a legitimate business.
d. Incorrect. By paying early “returns,” the perpetrator of a Ponzi scheme gains
investors' confidence and convinces them that he had a legitimate business.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Investment Scams and Other Consumer Frauds
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER:
Source: 6e Test Bank, revised
DATE CREATED:
2/9/2024 7:44 AM
DATE MODIFIED:
2/9/2024 7:45 AM
20. A common fraud committed on behalf of an organization is:
a. vendor fraud.
b. employee embezzlement.
Page 12
Chapter 01 - The Nature of Fraud
c. fraudulent financial reporting.
d. customer fraud.
ANSWER:
c
FEEDBACK:
a. Incorrect. Vendor fraud is not committed on behalf of the organization. Vendorfraud
is committed against the organization.
b. Incorrect. Employee embezzlement is an occupational fraud in which employeesuse
their positions to take or divert assets belonging to their employer.
c. Correct. In fraudulent financial reporting, an organization’s management commitfraud
“on behalf of” the organization by reporting financial results that appear better than
they actually are.
d. Incorrect. Customer fraud is not committed against the customer but by the
customer against the organization.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Types of Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER:
Source: 6e Test Bank, revised
DATE CREATED:
2/9/2024 7:46 AM
DATE MODIFIED:
2/9/2024 7:48 AM
21. How does a company’s profit margin affect the amount additional revenue needed to offset fraud losses in order to
avoid a reduction in net income?
a. Profit margin does not affect the amount of additional revenue needed to offset fraud losses.
b. A lower profit margin increases the revenue needed to offset fraud losses.
c. A higher profit margin increases the revenue needed to offset fraud losses.
d. Net income is not affected by fraud losses.
ANSWER:
b
FEEDBACK:
a. Incorrect. A lower profit margin increases the revenue needed to offset fraud
losses.
b. Correct. A lower profit margin increases the revenue needed to offset fraudlosses.
c. Incorrect. A lower profit margin increases the revenue needed to offset fraudlosses.
d. Incorrect. A lower profit margin increases the revenue needed to offset fraudlosses.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Seriousness of the Fraud Problem
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.1 - Understand the seriousness of fraud and how it affects individuals,
consumers, organizations, and society.
OTHER:
Source: newly authored
DATE CREATED:
2/9/2024 7:48 AM
Page 13
Chapter 01 - The Nature of Fraud
DATE MODIFIED:
2/14/2024 11:52 PM
22. The victim is a company or organization in all of the following EXCEPT:
a. vendor fraud.
b. investment scams.
c. employee embezzlement.
d. customer fraud.
ANSWER:
b
FEEDBACK:
a. Incorrect. In investment scams and other consumer frauds, the victims areunwary
individuals, not the organization.
b. Correct. In investment scams and other consumer frauds, the victims are unwary
individuals, not the organization.
c. Incorrect. In investment scams and other consumer frauds, the victims areunwary
individuals, not the organization.
d. Incorrect. In investment scams and other consumer frauds, the victims areunwary
individuals, not the organization.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Investment Scams and Other Consumer Frauds
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 7:55 AM
DATE MODIFIED:
2/9/2024 7:56 AM
23. The Anti-Kickback Act of 1986 intends to prevent:
a. bribery, by punishing perpetrators with up to 15 years in prison.
b. any scheme by a contractor to gain the business of a global entity.
c. the giving or receiving of anything of value by a subcontractor to a prime contractor in U.S. government
contracts.
d. lobbyists from giving gifts to influence laws regarding business transactions.
ANSWER:
c
FEEDBACK:
a. Incorrect. This is not addressed in the Anti-Kickback Act of 1986.
b. Incorrect. This is not addressed in the Anti-Kickback Act of 1986.
c. Correct. The giving or receiving of anything of value by a subcontractor to a prime
contractor in U.S. government contracts is addressed in the Anti-Kickback Act of 1986.
d. Incorrect. This is not addressed in the Anti-Kickback Act of 1986.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Criminal Law
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
Page 14
Chapter 01 - The Nature of Fraud
OTHER:
DATE CREATED:
DATE MODIFIED:
Source: 6e revised
2/9/2024 8:27 AM
2/9/2024 8:28 AM
24. Which of the following entails an insider who has material inside information to purchase or sell the company’s
securities, either through insider deals directly or through an exchange?
a. Bank fraud
b. Ponzi schemes
c. Management (financial statement) frauds
d. Securities fraud
ANSWER:
d
FEEDBACK:
a. Incorrect. Securities fraud involves an insider who purchases or sells the
company's securities based on material inside information.
b. Incorrect. Securities fraud involves an insider who purchases or sells the
company's securities based on material inside information.
c. Incorrect. Securities fraud involves an insider who purchases or sells the
company's securities based on material inside information.
d. Correct. Securities fraud involves an insider who purchases or sells the
company's securities based on material inside information.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Types of Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 8:29 AM
DATE MODIFIED:
2/9/2024 8:30 AM
25. Who are the primary victims of financial statement fraud?
a. Middle management
b. Organizations that buy goods or services
c. Analysts
d. Stockholders
ANSWER:
d
FEEDBACK:
a. Incorrect. While they are negatively affected by fraud, they do not rely on financial
statements to the same degree as stockholders.
b. Incorrect. Organizations that buy goods or services are victims of vendor fraud.
c. Incorrect. They may be fooled by financial statement fraud, but they would notsuffer
as much as stockholders.
d. Correct. Stockholders are the primary victims of management fraud because theyare the
ones who depend most on the accuracy of the financial statements.
POINTS:
DIFFICULTY:
REFERENCES:
QUESTION TYPE:
1
moderate
Management Fraud
Multiple Choice
Page 15
Chapter 01 - The Nature of Fraud
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.4 - Understand the difference between fraud committed against an
organization and fraud committed on behalf of an organization.
OTHER:
Source: 6erevised
DATE CREATED:
2/9/2024 8:32 AM
DATE MODIFIED:
2/9/2024 8:33 AM
26. Generally, applicants for CFE certification should have a minimum of a bachelor’s degree or equivalent from an
institution of higher learning. Alternatively, if applicants do not have a bachelor’s degree, how many months of fraudrelated professional experience may they substitute for each year of academic study?
a. 24
b. 18
c. 12
d. 9
ANSWER:
a
FEEDBACK:
a. Correct. Applicants may substitute 24 months (2 years) of fraud-related
professional experience for each year of academic study.
b. Incorrect. Applicants may substitute 24 months (2 years) of fraud-related
professional experience for each year of academic study.
c. Incorrect. Applicants may substitute 24 months (2 years) of fraud-related
professional experience for each year of academic study.
d. Incorrect. Applicants may substitute 24 months (2 years) of fraud-related
professional experience for each year of academic study.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Certified Fraud Examiners
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.6 - Understand the types of fraud-fighting careers available today.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 8:34 AM
DATE MODIFIED:
2/9/2024 8:35 AM
27. The ACFE does NOT include which of the following major categories of occupational fraud?
a. Asset misappropriations
b. Corruption
c. Fraudulent financial statements
d. Pension fraud
ANSWER:
d
FEEDBACK:
a. Incorrect. The ACFE includes three major categories of occupational fraud: (1)
asset misappropriations, (2) corruption, and (3) fraudulent financial statements.
b. Incorrect. The ACFE includes three major categories of occupational fraud: (1) asset
misappropriations, (2) corruption, and (3) fraudulent financial statements.
c. Incorrect. The ACFE includes three major categories of occupational fraud: (1) asset
misappropriations, (2) corruption, and (3) fraudulent financial statements.
d. Correct. The ACFE includes three major categories of occupational fraud: (1) asset
misappropriations, (2) corruption, and (3) fraudulent financial statements.
Page 16
Chapter 01 - The Nature of Fraud
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Types of Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 8:36 AM
DATE MODIFIED:
2/9/2024 8:37 AM
28. What is the most cost-effective way to minimize the cost of fraud?
a. Prevention
b. Detection
c. Investigation
d. Prosecution
ANSWER:
a
FEEDBACK:
a. Correct. Preventing fraud is the most cost-effective way to minimize the overall
cost of fraud.
b. Incorrect. Preventing fraud is the most cost-effective way to minimize the overallcost of
fraud.
c. Incorrect. Preventing fraud is the most cost-effective way to minimize the overallcost of
fraud.
d. Incorrect. Preventing fraud is the most cost-effective way to minimize the overallcost of
fraud.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Seriousness of the Fraud Problem
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.1 - Understand the seriousness of fraud and how it affects individuals,
consumers, organizations, and society.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 8:38 AM
DATE MODIFIED:
2/9/2024 8:39 AM
29. Well-known incidents of fraud in companies such as WorldCom, Enron, Waste Management, Sunbeam, Rite-Aid,
Phar-Mor, and Parmalat are examples of:
a. customer fraud.
b. investment scams.
c. vendor fraud.
d. management fraud.
ANSWER:
d
FEEDBACK:
a. Incorrect. In its most common form, management fraud involves top
management’s deceptive manipulation of financial statements.
b. Incorrect. In its most common form, management fraud involves top
management’s deceptive manipulation of financial statements.
Page 17
Chapter 01 - The Nature of Fraud
c. Incorrect. In its most common form, management fraud involves top
management’s deceptive manipulation of financial statements.
d. Correct. In its most common form, management fraud involves top management’s
deceptive manipulation of financial statements.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Management Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.4 - Understand the difference between fraud committed against an
organization and fraud committed on behalf of an organization.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 8:40 AM
DATE MODIFIED:
2/9/2024 8:41 AM
30. Which of the following statements is true?
a. Fraud usually results from unintentional errors.
b. Fraud is more violent and traumatic than robbery.
c. Fraud always involves deception, confidence, and trickery.
d. Losses from fraud are less than losses from robbery.
ANSWER:
c
FEEDBACK:
a. Incorrect. Fraud, by definition, is intentional.
b. Incorrect. Robbery is generally more violent and more traumatic than fraud.
c. Correct. Fraud involves deception, confidence, and trickery.
d. Incorrect. Losses from fraud far exceed losses from robbery.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
What Is Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.2 - Define Fraud.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 8:42 AM
DATE MODIFIED:
2/9/2024 8:43 AM
31. To be successful, plaintiffs in civil cases must prove their case by which of the following?
a. By the preponderance of the evidence
b. Beyond a reasonable doubt
c. To a degree of reasonable mitigation
d. To the standard of prima facie
ANSWER:
a
FEEDBACK:
a. Correct. To be successful, plaintiffs in civil cases must only prove their case by
the “preponderance of the evidence.”
b. Incorrect. To be successful, plaintiffs in civil cases must only prove their case bythe
“preponderance of the evidence.”
Page 18
Chapter 01 - The Nature of Fraud
c. Incorrect. To be successful, plaintiffs in civil cases must only prove their case bythe
“preponderance of the evidence.”
d. Incorrect. To be successful, plaintiffs in civil cases must only prove their case bythe
“preponderance of the evidence.”
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Civil Law
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 8:44 AM
DATE MODIFIED:
2/9/2024 8:49 AM
32. Which of the following is NOT an example of a fraud-fighting career?
a. Working for the criminal investigation division of the IRS
b. Serving as an expert witness
c. Maintaining the physical security of public records
d. Defending an organization being sued in a civil case
ANSWER:
c
FEEDBACK:
a. Incorrect. Working for the criminal investigation division of the IRS is a fraudfighting career.
b. Incorrect. This is a fraud-fighting career.
c. Correct. Experience as a security guard or equivalent does not count as fraud-related
experience.
d. Incorrect. This is a fraud-fighting career. Lawyers are needed to both defend and
prosecute cases.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Fraud-Related Careers
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.6 - Understand the types of fraud-fighting careers available today.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 8:50 AM
DATE MODIFIED:
2/9/2024 8:52 AM
33. Which of the following observations concerning occupational fraud is NOT true?
a. It is clandestine.
b. It is committed for the purpose of direct or indirect financial benefit to the employee.
c. It usually involves two or more employees.
d. It costs the employing organization assets, revenues, or reserves.
ANSWER:
c
FEEDBACK:
a. Incorrect. Occupational fraud, like all fraud, is clandestine (done in secret).
b. Incorrect. Occupational fraud is committed to gain direct or indirect benefits to the
Page 19
Chapter 01 - The Nature of Fraud
perpetrator.
c. Correct. Occupational fraud could be committed by a single person or a group ofpeople
acting in concert.
d. Incorrect. Occupational fraud costs the victim organization assets, lost time, and,often
times, lost reputation.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Types of Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.2 - Define Fraud.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 8:53 AM
DATE MODIFIED:
2/9/2024 8:55 AM
34. Which of the following is NOT one of the major types of fraud classification schemes?
a. Employee embezzlement
b. Government fraud
c. Investment scams
d. Customer fraud
ANSWER:
b
FEEDBACK:
a. Incorrect. The six types of fraud include employee embezzlement, management
fraud, investment scams, vendor fraud, customer fraud, and other
(miscellaneous) fraud.
b. Correct. The six types of fraud include employee embezzlement, managementfraud,
investment scams, vendor fraud, customer fraud, and other (miscellaneous) fraud.
c. Incorrect. The six types of fraud include employee embezzlement, managementfraud,
investment scams, vendor fraud, customer fraud, and other (miscellaneous) fraud.
d. Incorrect. The six types of fraud include employee embezzlement, managementfraud,
investment scams, vendor fraud, customer fraud, and other (miscellaneous) fraud.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Types of Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 8:56 AM
DATE MODIFIED:
2/9/2024 8:58 AM
35. Which of the following frauds is usually the most expensive?
a. Vendor fraud
b. Customer fraud
Page 20
Chapter 01 - The Nature of Fraud
c. Occupational fraud
d. Management (financial statement) fraud
ANSWER:
d
FEEDBACK:
a. Incorrect. Management fraud involves top management’s deceptive manipulation
of financial statements and results in the most losses to victims.
b. Incorrect. Management fraud involves top management’s deceptive manipulationof
financial statements and results in the most losses to victims.
c. Incorrect. Management fraud involves top management’s deceptive manipulationof
financial statements and results in the most losses to victims.
d. Correct. Management fraud involves top management’s deceptive manipulationof
financial statements and results in the most losses to victims.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Management Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 9:34 AM
DATE MODIFIED:
2/9/2024 9:35 AM
36. Civil claims begin when one party files a complaint against another, usually for the purpose of:
a. having a penalty imposed.
b. sending the perpetrator to prison.
c. proving the perpetrator guilty.
d. being awarded financial restitution.
ANSWER:
d
FEEDBACK:
a. Incorrect. The purpose of a civil lawsuit is to gain compensation for harm an
individual or organization believes has been done to them.
b. Incorrect. The purpose of a civil lawsuit is to gain compensation for harm an
individual or organization believes has been done to them.
c. Incorrect. The purpose of a civil lawsuit is to gain compensation for harm an
individual or organization believes has been done to them.
d. Correct. The purpose of a civil lawsuit is to gain compensation for harm an
individual or organization believes has been done to them.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Civil Law
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER:
Source: 6erevised
DATE CREATED:
2/9/2024 9:41 AM
DATE MODIFIED:
2/9/2024 9:46 AM
37. Employee embezzlement can be direct or indirect. Indirect fraud occurs when:
Page 21
Chapter 01 - The Nature of Fraud
a. an employee uses company assets to run their private business.
b. employees establish dummy companies and have their employers pay for goods that are not actually delivered.
c. an employee receives a kickback from a vendor.
d. an employee steals company cash, inventory, tools, or other assets.
ANSWER:
c
FEEDBACK:
a. Incorrect. An employee using company assets to run their private business is an
example of direct fraud.
b. Incorrect. This is an example of direct fraud.
c. Correct. This is an example of indirect fraud.
d. Incorrect. This is an example of direct fraud.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Employee Embezzlement
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 9:53 AM
DATE MODIFIED:
2/9/2024 9:54 AM
38. Telemarketing fraud usually falls into which of the following categories?
a. Investment scams
b. Management fraud
c. Vendor fraud
d. Embezzlement
ANSWER:
a
FEEDBACK:
a. Correct. Telemarketing fraud falls into the category of investment scams, in which
victims are often first contacted by telephone and convinced to make worthless
investments.
b. Incorrect. Telemarketing fraud falls into the category of investment scams, inwhich
victims are often first contacted by telephone and convinced to make worthless
investments.
c. Incorrect. Telemarketing fraud falls into the category of investment scams, inwhich
victims are often first contacted by telephone and convinced to make worthless
investments.
d. Incorrect. Telemarketing fraud falls into the category of investment scams, inwhich
victims are often first contacted by telephone and convinced to make worthless
investments.
POINTS:
1
DIFFICULTY:
Easy
REFERENCES:
Investment Scams and Other Consumer Frauds
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER:
DATE CREATED:
Source: 6e revised
2/9/2024 9:55 AM
Page 22
Chapter 01 - The Nature of Fraud
DATE MODIFIED:
2/9/2024 9:56 AM
39. Which of the following is NOT an essential element of fraud?
a. A representation about a material point which is false.
b. A representation which is believed and acted upon by the victim.
c. A representation about a material point which is true.
d. A representation about a material point which will be to the victim’s damage if acted upon.
ANSWER:
c
FEEDBACK:
a. Incorrect. Fraud involves a representation about a material point which is false.
b. Incorrect. Fraud involves a representation about a material point which is false.
c. Correct. Fraud involves a representation about a material point which is false.
d. Incorrect. Fraud involves a representation about a material point which is false.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
What is Fraud?
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.2 - Define Fraud.
OTHER:
Source: newly authored
DATE CREATED:
2/9/2024 9:56 AM
DATE MODIFIED:
2/9/2024 9:58 AM
40. In fraud prosecution cases, the underlying data and all corroborating information available are collectively known as
.
a. evidential matter
b. remedial justification
c. supplemental arguments
d. elementary evidence
ANSWER:
a
FEEDBACK:
a. Correct. Evidential matter consists of the underlying data and all corroborating
information available.
b. Incorrect. Evidential matter consists of the underlying data and all corroborating
information available.
c. Incorrect. Evidential matter consists of the underlying data and all corroborating
information available.
d. Incorrect. Evidential matter consists of the underlying data and all corroborating
information available.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Criminal and Civil Prosecution of Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER:
DATE CREATED:
Source: 6e revised
2/9/2024 9:59 AM
Page 23
Chapter 01 - The Nature of Fraud
DATE MODIFIED:
2/9/2024 10:00 AM
41. A study conducted by the Association of Certified Fraud Examiners in 2022 estimated that organizations lose roughly
what percent of their annual revenues to fraud?
a. 5
b. 8
c. 17
d. 23
ANSWER:
a
FEEDBACK:
a. Correct. The study estimated that organizations lose 5 percent of their annual
revenue to fraud.
b. Incorrect. The study estimated that organizations lose 5 percent of their annualrevenue
to fraud.
c. Incorrect. The study estimated that organizations lose 5 percent of their annualrevenue
to fraud.
d. Incorrect. The study estimated that organizations lose 5 percent of their annualrevenue
to fraud.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Seriousness of the Fraud Problem
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.1 - Understand the seriousness of fraud and how it affects individuals,
consumers, organizations, and society.
OTHER:
Source: 6erevised
DATE CREATED:
2/9/2024 10:01 AM
DATE MODIFIED:
2/14/2024 11:54 PM
42. Which of the following statements is correct:
a. Firms and individuals are the only victims of fraud.
b. National economies are largely unaffected by large-scale fraud and corruption.
c. Countries with lower fraud losses are more likely to attract foreign investment.
d. Large-scale fraud has minimal impact on a country’s GDP.
ANSWER:
c
FEEDBACK:
a. Incorrect. Firms and individuals are not the only victims of fraud.
b. Incorrect. National economies suffer from large-scale fraud and corruption.
c. Correct. Countries with lower fraud losses are more likely to attract foreign
investment.
d. Incorrect. Large-scale fraud negatively impacts a country’s GDP.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Seriousness of the Fraud Problem
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.1 - Understand the seriousness of fraud and how it affects individuals,
consumers, organizations, and society.
Page 24
Chapter 01 - The Nature of Fraud
OTHER:
DATE CREATED:
DATE MODIFIED:
Source: newly authored
2/9/2024 10:03 AM
2/9/2024 10:05 AM
43. Given below are the profit margins and fraud-related losses of four economies. Which economy will have to generate
the maximum dollar amount of additional revenues to recover the fraud-related loss? Economy A: 10%, $225 million;
Economy B: 10%, $150 million; Economy C: 5%, $100 million; Economy D: 2%, $50 million
a. Economy A
b. Economy D
c. Economy C
d. Economy B
ANSWER:
b
FEEDBACK:
a. Incorrect. The additional revenue requirements will be calculated as: additional
revenue = loss/profit margin (Economy A - $2.25 billion; Economy B - $1.5 billion;
Economy C - $2 billion; and Economy D - $2.5 billion)
b. Correct. The additional revenue requirements will be calculated as: additional revenue =
loss/profit margin (Economy A - $2.25 billion; Economy B - $1.5 billion;Economy C $2 billion; and Economy D - $2.5 billion)
c. Incorrect. The additional revenue requirements will be calculated as: additional revenue =
loss/profit margin (Economy A - $2.25 billion; Economy B - $1.5 billion;Economy C $2 billion; and Economy D - $2.5 billion)
d. Incorrect. The additional revenue requirements will be calculated as: additional revenue =
loss/profit margin (Economy A - $2.25 billion; Economy B - $1.5 billion;Economy C $2 billion; and Economy D - $2.5 billion)
POINTS:
1
DIFFICULTY:
Challenging
REFERENCES:
Seriousness of the Fraud Problem
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.1 - Understand the seriousness of fraud and how it affects individuals,
consumers, organizations, and society.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 10:05 AM
DATE MODIFIED:
2/9/2024 10:06 AM
44. The GDP in the economy of a particular country was initially $5 billion with a growth rate of 4%. Frauds during the
subsequent year reduce aggregate income by $200 million. During the subsequent year, the economy has:
a. shrunk by 1 percent.
b. grown by only 1 percent.
c. remained flat.
d. grown by 4 percent.
ANSWER:
c
FEEDBACK:
a. Incorrect. Since the frauds reduce aggregate income by $200 million, the GDP in
year 2 is only $5 billion (compared to $5.2 billion which would have been realized at 4
percent growth), and the economy has remained flat.
b. Incorrect. Since the frauds reduce aggregate income by $200 million, the GDP in year 2
is only $5 billion (compared to $5.2 billion which would have been realizedat 4 percent
growth), and the economy has remained flat.
Page 25
Chapter 01 - The Nature of Fraud
c. Correct. Since the frauds reduce aggregate income by $200 million, the GDP in year 2 is
only $5 billion (compared to $5.2 billion which would have been realizedat 4 percent
growth), and the economy has remained flat.
d. Incorrect. Since the frauds reduce aggregate income by $200 million, the GDP inyear 2
is only $5 billion (compared to $5.2 billion which would have been realizedat 4 percent
growth), and the economy has remained flat.
POINTS:
1
DIFFICULTY:
Challenging
REFERENCES:
Seriousness of the Fraud Problem
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.1 - Understand the seriousness of fraud and how it affects individuals,
consumers, organizations, and society.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 10:07 AM
DATE MODIFIED:
2/9/2024 10:08 AM
45. What is the single most critical element for a fraud to be successful?
a. Criminal intent
b. Confidence
c. Greed
d. Compulsion
ANSWER:
b
FEEDBACK:
a. Incorrect. Confidence in the perpetrator is the most critical element for successful
fraud perpetration.
b. Correct. Confidence in the perpetrator is the most critical element for successfulfraud
perpetration.
c. Incorrect. Confidence in the perpetrator is the most critical element for successfulfraud
perpetration.
d. Incorrect. Confidence in the perpetrator is the most critical element for successfulfraud
perpetration.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
What is Fraud?
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.2 - Define Fraud.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 10:10 AM
DATE MODIFIED:
2/9/2024 10:13 AM
46. Fraud statistics come from all of the following sources EXCEPT:
a. government agencies.
b. insurance companies.
c. victims.
d. fraud perpetrators.
Page 26
Chapter 01 - The Nature of Fraud
ANSWER:
FEEDBACK:
d
a. Incorrect. Fraud statistics come from government agencies, researchers,
insurance companies, and victims of fraud.
b. Incorrect. Fraud statistics come from government agencies, researchers,
insurance companies, and victims of fraud.
c. Incorrect. Fraud statistics come from government agencies, researchers,
insurance companies, and victims of fraud.
d. Correct. Fraud statistics come from government agencies, researchers, insurance
companies, and victims of fraud. Fraud perpetrators do not generally provide statistics
about their crimes.
POINTS:
1
DIFFICULTY:
easy
REFERENCES:
Seriousness of the Fraud Problem
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.1 - Understand the seriousness of fraud and how it affects individuals,
consumers, organizations, and society.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 10:14 AM
DATE MODIFIED:
2/9/2024 10:15 AM
47. Which of the following skills would be LEAST beneficial in a career as a fraud-fighting professional?
a. Analytical skills
b. Mechanical skills
c. Communication skills
d. Technological skills
ANSWER:
b
FEEDBACK:
a. Incorrect. Some of the most important skills for a fraud-fighting professional are
analytical, communication, and technological skills.
b. Correct. Compared to analytical, mechanical, and technological skills, mechanicalskills
are the least beneficial for a fraud-fighting professional are analytical, communication,
and technological skills.
c. Incorrect. Some of the most important skills for a fraud-fighting professional are
analytical, communication, and technological skills.
d. Incorrect. Some of the most important skills for a fraud-fighting professional are
analytical, communication, and technological skills.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
How to Prepare to Be a Fraud-Fighting Professional
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.6 - Understand the types of fraud-fighting careers available today.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 10:19 AM
DATE MODIFIED:
2/9/2024 10:19 AM
48. Which of the following resume items would NOT be acceptable as fraud-related experience to satisfy the education
Page 27
Chapter 01 - The Nature of Fraud
requirements to apply for CFE certification?
a. Auditor (internal or external)
b. Investigator for a law enforcement agency or in the private sector
c. Experience in the Human Resources department of an organization
d. Paralegal for a prosecuting attorney
ANSWER:
c
FEEDBACK:
a. Incorrect. To be considered fraud-related experience, an individual’s responsibilities mustinclude
the detection, investigation, or deterrence of fraud.
b. Incorrect. To be considered fraud-related experience, an individual’s responsibilities mustinclude
the detection, investigation, or deterrence of fraud.
c. Correct. To be considered fraud-related experience, an individual’s responsibilities mustinclude
the detection, investigation, or deterrence of fraud.
d. Incorrect. To be considered fraud-related experience, an individual’s responsibilities mustinclude
the detection, investigation, or deterrence of fraud.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
How to Prepare to Be a Fraud-Fighting Professional
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
OTHER:
Source: 6e revised
DATE CREATED: 2/9/2024 10:20 AM
DATE MODIFIED: 2/9/2024 10:21 AM
49. Which of the following statements regarding fraud on behalf of an organization is true?
a. Middle management is usually the perpetrator.
b. Fraud on behalf of an organization typically benefits top executives by increasing the stock price
c. Fraud on behalf of an organization includes deflating expenses in order to save on corporate income taxes
d. Fraud on behalf of an organization is likely to occur among publicly traded companies that are experiencing
windfall profits
ANSWER:
b
FEEDBACK:
a. Incorrect. Top management is usually the perpetrator.
b. Correct. Executives of the company benefit because a company’s stock price
increases or remains artificially high.
c. Incorrect. Corporate tax fraud to benefit the company would involve inflating
expenses rather than deflating them.
d. Incorrect. Financial statement fraud, a type of fraud on behalf of an organization, often
occurs in companies that are experiencing net losses or have profits much less than
expected.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Types of Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.4 - Understand the difference between fraud committed against an
organization and fraud committed on behalf of an organization.
OTHER:
Source: 6e revised
Page 28
Chapter 01 - The Nature of Fraud
DATE CREATED:
DATE MODIFIED:
2/9/2024 10:22 AM
2/9/2024 10:23 AM
50. Which of the following individuals is most likely to commit financial statement fraud in order to benefit an
organization?
a. An executive
b. An employee
c. A vendor
d. A consumer
ANSWER:
a
FEEDBACK:
a. Correct. It is executives that usually commit fraud “on behalf” of an organization.
b. Incorrect. It is executives that usually commit fraud “on behalf” of an organization.
c. Incorrect. It is executives that usually commit fraud “on behalf” of an organization.
d. Incorrect. It is executives that usually commit fraud “on behalf” of an organization.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
Types of Fraud
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.4 - Understand the difference between fraud committed against an
organization and fraud committed on behalf of an organization.
OTHER:
Source: 6e revised
DATE CREATED:
2/9/2024 10:24 AM
DATE MODIFIED:
2/9/2024 10:25 AM
51. Which of the following are NOT job roles that a fraud-fighting professional would perform at a CPA firm?
a. Provide internal audits
b. Perform internal consulting work
c. Perform bankruptcy-related accounting work
d. Inspect U.S. mail
ANSWER:
d
FEEDBACK:
a. Incorrect. Fraud-related careers at CPA firms include conducting investigations,
supporting firms in litigation, doing bankruptcy-related accounting work, providing
internal audits and control consulting work. Inspection of U.S. mail is performed by
postal inspectors employed by the U.S. government.
b. Incorrect. Fraud-related careers at CPA firms include conducting investigations,
supporting firms in litigation, doing bankruptcy-related accounting work, providing
internal audits and control consulting work. Inspection of U.S. mail is performed by
postal inspectors employed by the U.S. government.
c. Incorrect. Fraud-related careers at CPA firms include conducting investigations,
supporting firms in litigation, doing bankruptcy-related accounting work, providing
internal audits and control consulting work. Inspection of U.S. mail is performed by
postal inspectors employed by the U.S. government.
d. Correct. Fraud-related careers at CPA firms include conducting investigations,
supporting firms in litigation, doing bankruptcy-related accounting work, providing
internal audits and control consulting work. Inspection of U.S. mail is performed by
postal inspectors employed by the U.S. government.
Page 29
Chapter 01 - The Nature of Fraud
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
How to Prepare to Be a Fraud-Fighting Professional
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.6 - Understand the types of fraud-fighting careers available today.
OTHER:
Source: newly authored
DATE CREATED:
2/9/2024 10:26 AM
DATE MODIFIED:
2/9/2024 10:28 AM
52. Although most universities do not have a major called “fraud prevention, detection, and investigation,” which of the
following degree programs, which are available at many universities, would best prepare a student to become a fraudfighting professional?
a. Advertising
b. Public relations
c. Chemical engineering
d. Forensic accounting
ANSWER:
d
FEEDBACK:
a. Incorrect. Although advertising includes communication skills, it does not
necessarily provide the skills necessary to be a successful fraud-fighter.
b. Incorrect. Although public relations includes communication skills, it does not
necessarily provide the skills necessary to be a successful fraud-fighter.
c. Incorrect. Although chemical engineering includes analytical and technologyskills,
it does not necessarily provide the skills necessary to be a successfulfraud-fighter.
d. Correct. Forensic accounting and cybersecurity undergraduate programs are
excellent courses of study for aspiring fraud-fighting professionals.
POINTS:
1
DIFFICULTY:
moderate
REFERENCES:
How to Prepare to Be a Fraud-Fighting Professional
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.6 - Understand the types of fraud-fighting careers available today.
OTHER:
Source: newly authored
DATE CREATED:
2/9/2024 10:29 AM
DATE MODIFIED:
2/9/2024 10:30 AM
53. Which of the following is true of online frauds compared to in-person frauds?
a. Online frauds are more difficult to perpetrate than in-person frauds.
b. Online frauds are usually much smaller than in-person frauds.
c. Unlike in-person frauds, online frauds do not require that the victim have confidence in the perpetrator.
d. Unlike in-person fraud, online fraud can be easily scaled by adding a few more zeros.
ANSWER:
d
FEEDBACK:
a. Incorrect. Online frauds are much easier to perpetrate than in-person frauds and
are often much larger.
b. Incorrect. Online frauds are much easier to perpetrate than in-person frauds and
Page 30
Chapter 01 - The Nature of Fraud
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