Association of Certified Fraud Examiners ACFE - Questions + Answers
Posted: Tue Feb 22, 2022 4:55 pm
Exam A QUESTION 1
In Cressey’s fraud triangle, its three of the legs are Opportunity, Pressure and
A. Violation
B. Isolation
C. Rationalization
D. None of the above
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 2
Which of the following offender types in which people who take the money and run away?
A. Absconders
B. Long-term violators C. Offender types
D. None of the above
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 3
When situational pressures and perceived opportunities are low and personal integrity is high, occupational fraud is much more likely to occur than when the opposite is true.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 4
__________ can be defined as conduct detrimental to the organization and to the employee.
A. Employee deviance B. Employee theft
C. Employee fraud
D. All of the above
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 5
According to a survey, in principal perpetrator, males in a majority of cases, accounting for ___ percent of frauds versus ___ percent in which a female was the primary culprit.
A. 62 versus 36
B. 61 versus 39
C. 62 versus 37
D. None of the above
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 6
The principal way to detect omitted credits from books of account is through:
A. Forced Balance B. Trend analysis C. Expense account D. None of all
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 7
Which of the following is NOT the reason why senior management will overstate business statement?
A. Comply with debit covenants
B. Meet personal performance criteria
C. Trigger performance related compensation
D. Show a pattern of growth to support sale of a business
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 8
Which of the four basic measures, if properly installed and implemented may help prevent inventory fraud?
A. Proper documentation, segregation of duties, independent checks and physical safeguards
B. Proper documentation, segregation of duties, independent checks and inventory control
C. Proper documentation, physical padding, independent checks and physical safeguards
D. prenumbered affiliations, segregation of duties, independent checks and physical safeguards
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 9
Which of the following are the classifications for the Corruption?
A. Bribery, economic extortion, illegal gratuities and conflicts of interest B. Corruption, bribery, economic extortion, conflicts of interest
C. Overbilling, bribery, bid-ridding and illegal gratuities
D. economic extortion, bribery, illegal gratuities and corruption
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 10
The most common method of detection in corruption cases is:
A. Internal audits B. Internal controls C. Tips
D. By accident
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 11
Undisclosed payments made by vendors to employees of purchasing companies are referred to as:
A. Bid-rigging
B. Kickbacks
C. Presolicitaion
D. None of the above
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 12
Every bribe is a two-sided transaction, in which where a vendor bribes a purchaser, there is someone on the vendor’s side of the transaction who is not making an illicit payment.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 13
In which of the following process, all bidders are legally supposed to be placed on the same plane of equality, bidding on the same terms and conditions?
A. Bid-rigging
B. Kickbacks
C. Competitive bidding D. Bid solicitation
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 14
The more power a person has over the bidding process, the more likely the person can influence the selection of a supplier.
A. True B. False
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 15
When a victim company purchases unnecessary goods or services from a supplier at the direction of the corrupt employee, this results in:
A. Presolicitation scheme
B. Need recognition scheme C. False sole-source scheme D. Submission scheme
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 16
In which phase of competitive bidding process, fraudsters attempt to influence the selection of a contractor by restricting the pool of competitors from whom bids are sought?
A. Need recognition B. Solicitation
C. False specification D. Submission
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 17
Another way to eliminate competition in the solicitation phase of the selection process is to:
A. Solicit bid from fictitious suppliers
B. Solicit transaction from fictitious vendors C. Solicit bid-splitting from fictitious vendors D. None of the above
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 18
The person or persons who have access to __________ are often the targets of unethical vendors seeking an advantage in the process.
A. Bid-splitting
B. Sealed bids
C. General purchasing D. Tailor specifications
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 19
Which of the following is NOT the reason to bribe employees of the purchaser?
A. To ensure receipt of a late bid B. To extend the bid opening date C. To ensure bid-splitting
D. To falsify the bid log
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 20
Collusion or bid-rigging between bidders is called
A. Bribery receipt
B. Bid solicitation
C. To withdraw low bids D. Contract acceptance
Correct Answer: D
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 21
A ___________ occurs when an employee, manager or executive has an undisclosed economic or personal interest in a transaction that adversely affects the organization.
A. Conflict of interest
B. Illegal sale
C. Unauthorized purchase D. Financial disclosure
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 22
The fraudsters’ interest lies with an employer other than a company.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 23
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
A special scheme in which employees know their employer is seeking to purchase a certain asset and take advantage of the situation by purchasing the asset themselves is:
A. Conflict of interest in sale
B. Turnaround sale or flip
C. Unauthorized sale
D. Written sale of unique assets
QUESTION 24
__________ is required if and when officers, executives or other persons in trusted positions become subjects of a criminal indictment.
A. Conflict of interest
B. Turnaround sale or flip C. Disclosure
D. Resource diversion
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 25
Which are check tempering frauds in which an employee prepares a fraudulent check and submits it usually along with legitimate checks to an authorized maker who signs it without a proper review?
A. Endorse check scheme B. Legitimate check scheme C. Payable check scheme D. Concealed check scheme
Correct Answer: D
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 26
Maintain the presence of a manager or supervisor near the area of the cash register as a deterrent to theft is a prevention for:
A. Fraudulent statement scheme B. Asset misappropriation scheme C. Larceny scheme
D. Register disbursement scheme
Correct Answer: D
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 27
The most common method for billing scheme is:
A. Register
B. Tips
C. Accident
D. None of the above
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 28
Which of the following is NOT the type of billing scheme?
A. Invoicing via shell companies
B. Invoicing via non-accomplice companies C. Invoicing via accomplice companies
D. Personal purchases with company funds
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 29
A voucher is:
A. a file that includes the purchase order that was send to the vendor, the vendor invoice listing the cost and quantity of items purchased, and the internal receiving reports that verify the purchased items have been delivered.
B. a figure that includes the sale order that was send to the dealer, the vendor invoice listing the cost and quantity of items sold, and the internal receiving reports that verify the purchased items have been delivered.
C. a report that includes the purchase order that was send to the vendor, the vendor invoice listing the quality and quantity of items purchased, and the external receiving reports that verify the items have been sold.
D. a mammogram that includes the purchase order that was send to the purchaser, the purchaser invoice listing the benefits and quantity of items purchased, and the internal receiving reports that verify the purchased items have been sold.
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 30
A fabricated name and the post office box that an employee uses to collect disbursements from false billings is called:
A. Accomplice residence B. Shell company
C. Perpetrator check
D. Cash generator
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 31
One reason employees might be hesitant to use PO boxes in shell company schemes is that some businesses are specially vary of sending checks to vendors that have street addresses only.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 32
Most of the shell company schemes involve the purchase of goods rather than services.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 33
A person is said to be in ________ act, when the business which he transacts, or the money or property which he handles, is not for his own benefit, but for another person:
A. Fiduciary Capacity B. Embezzlement
C. Conversion
D. None of the above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 34
Larceny by Fraud or deception means that: A. Creates or reinforce a false impression
B. Fails to correct a false impression
C. Fails to disclose a known lien, adverse claim or other legal impediment D. All of the above
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 35
Which of the following are not of Basic types of non-sharable problems?
A. Violation of ascribed obligations B. Business reversals
C. Physical Isolation
D. Larceny by Fraud
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 36
According to Marshall, ______ are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.
A. Assets
B. Liabilities
C. Credentials
D. None of above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 37
A tangible asset is one which is:
A. capable of being perceived B. capable of being appraised C. Both A & B
D. Neither A nor B
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 38
_________ normally are carried on an organization’s books as expenses because they tend to be consumed by the organization within a year of purchase.
A. Supplies B. Expenses C. Assets
D. Equity
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 39
__________ are the amounts which are owned to other entities:
A. Supplies B. Expenses C. Assets
D. Liabilities
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 40
Asset misappropriations have an effect on the liabilities and do also have an indirect effect on the equity account.
A. True B. False
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 41
Occupational fraud and abuse is a (an) __________ of doing business, in much the same way that we pay expenses for electricity, taxes and wages.
A. Equity
B. Balance sheet C. Expense
D. Financial record
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 42
When expenses used to produce income- all of them- should be matched in a consistent manner against that income, this is referred to: A. Equity
B. Accrual basis accounting C. Expense
D. Financial record
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 43
Any expenses that are incurred but not paid by the end of the year are counted in our records of profit and loss, are called:
A. Accruals
B. Depreciations C. Expenses
D. Financial record
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 44
____________ is a process by which a bookkeeper records all transactions and can adjust the books.
A. Journal Entries
B. Accounting Cycle C. Financial statement D. None of all
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 45
________ increase assets and expenses and/or decrease liabilities and/or equity
A. Journal Entries B. Debit
C. Credit
D. None of all
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 46
________ decrease assets and expenses and/or increase liabilities and/or equity
A. Journal Entries B. Debit
C. Credit
D. None of all
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 47
Delivery has not occurred or services have not been rendered when:
A. Until installation and customer testing and acceptance has occurred. B. A written order exists but contains a right of return.
C. Both A & B
D. Neither A nor B
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 48
___________ and __________ are used to increase (or decrease) the equity account.
A. Journal Entries & Debit
B. Journal Entries & transactions C. Journal Entries & Credit
D. None of all
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 49
By removing a tangible asset from the business (a debit), the books will be ___________ by the exact amount of the tangible asset misappropriated.
A. Journal Entries B. Out-of-balance C. False debits D. None of all
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 50
Once the expense account is closed, it becomes a historical item and probably will never be reviewed again.
A. True B. False
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 51
According to fraud tree, cash has three following schemes:
A. Skimming, cash larceny and fraudulent disbursements
B. Fraud analysis, skimming and cash misappropriations
C. Cash larceny, cash distribution and fraudulent disbursements D. Cash distribution, skimming and fraud analysis
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 52
Skimming cases can more likely to be detected by:
A. Internal audits
B. Accidents
C. Internal controls
D. occupational frauds
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 53
The most basic skimming scheme occurs when:
A. An employee sells goods or services to a customer, collects the customer’s payment, but makes no record of the sale.
B. An employee buy goods or services from a customer, drop the customer’s payment, but makes no record of the purchase.
C. An employee sells goods or services to a stakeholder, collects the stakeholder’s payment and makes record of the sale too.
D. An employee buy goods or services from a stakeholder, drop the stakeholder’s payment and makes record of the purchase too.
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 54
The prime targets for skimming schemes which are hard to monitor and predict such as late fees and parking fees, are:
A. Revenue sources
B. Recorded sales
C. Internal audits
D. Register manipulations
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 55
Theft of incoming checks usually occurs when ________ is (are) in charge of opening the mail and recording the receipt of payments.
A. Single employee
B. Two employees
C. More than two employees D. None of the above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 56
Financial statement fraud is committed by:
A. Organized criminals
B. Mid and lower level employees C. Senior Management
D. All of the above
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 57
In which approach, fraudsters produce whatever financial statements they wish, perhaps using just a typewriter or a personal computer.
A. Organized accounting
B. Playing the accounting
C. Beating accounting
D. Outside accounting system
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 58
Which of the following is NOT standard of generally accepted accounting principles?
A. Conservatism B. Cost
C. Full disclosure D. Quality control
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 59
A typical issue involving material and fraud would be:
A. Fraudulent statement B. Misappropriations
C. Civil lawsuit
D. Quality control
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 60
By what accountant means that the financial figures presented by the company are at least as much as reflected in the statements, if not more.
A. Fraudulent statement B. Misappropriations
C. Conservatism
D. Matching
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 61
“Anticipate possible losses and omit potential profits”, this results in:
A. Asymmetrical accounting B. Symmetrical accounting C. Playing accounting
D. Bearing accounting
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 62
_________ assumes the business will go on indefinitely in the future.
A. Materiality
B. Going concern C. Cost
D. Fair value
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 63
Which of the following is the amount of money that would be realized upon the sale of the asset at some point in the future, less the costs associated with owing, operating and selling it?
A. Net realizable value
B. Going concern C. Cost
D. Fair value
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 64
How many accounts are affected in fraudulent accounting entries and therefore same number of categories on the financial statement?
A. One
B. At least two
C. More than two D. None of above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 65
_________ revenues involve the recording sales of goods or services hat did not occur.
A. Fictitious or fabricated revenues B. Financial revenues
C. Red flag revenues
D. Concealed revenues
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 66
Revenue is recognized when it is:
A. Realized and Earned
B. Fictitious and Earned
C. Realized and Evidenced D. All of the above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 67
According to SAB 104, for the revenue to be typically considered realized or realizable and earned, which of the following criteria is NOT met:
A. Persuasive evidence of an arrangement exists B. Services has been rendered
C. Timings have been met
D. Collectability is reasonably assured
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 68
Which of the following is true for Red flags associated with fictitious revenues?
A. Slow growth or usual profitability, when not compared to other companies in the same industry.
B. Usual growth in the number of days purchase in receivables
C. A significant volume of sales to entries whose substance and ownership is not known.
D. A usual surge in purchase by a majority of units within a company, or of purchase recorded by corporate headquarters.
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 69
According to accounting principles, ________ and ________ should be recorded or atched in the same accounting period; failing to do so violates the matching principle of AAP.
A. Revenue and corresponding expenses
B. Revenue and Income statement
C. Income statement and Long-term contracts D. Capitalized expenses and Liabilities
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 70
Physical assets including _________ and ________ are the most commonly misappropriated noncash asset in our study.
A. Interest & Collusion
B. Inventory & Equipment C. Inventory & Purchase D. Sales & Equipment
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 71
Which sale occurs when the accomplice of the employee-fraudster “buys” merchandise, but the employee does not ring up the sale, and the accomplice takes the merchandise without making any payment?
A. Whole sale
B. Fake sale
C. Fraudster sale D. Preliminary sale
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 72
False billing scheme states that:
A. employees do not cause their company to purchase merchandise that the company does not need. B. employees cause their company to sale merchandise that the company does not need.
C. employees do not cause their company to sale merchandise that the company does not need.
D. employees cause their company to purchase merchandise that the company does not need
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 73
If the assets are intentionally purchased by the company but simply misappropriated by the fraudster, this is referring to as:
A. Inventory larceny scheme B. Asset receiving scheme C. Fraudulent purchase
D. Falsify shipping
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 74
____________ corrupt employees can cause inventory to be fraudulently delivered to themselves or accomplices.
A. False shipping slip
B. False packing slip
C. Fraudulent inventory slip D. False credit slip
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 75
According to Hollinger and Clark for Policy development, management must pay attention to:
A. A clear understanding regarding theft behavior B. Enforcement of sanctions
C. Both A & B
D. Neither A nor B
Correct Answer: C Section: Investigation Explanation
Explanation/Reference:
QUESTION 76
A journal in which all sales made on credit or cash are listed is: A. Disbursement journal
B. Accounts receivable journal C. Accounts payable journal D. General journal
Correct Answer: B Section: Investigation Explanation
Explanation/Reference:
QUESTION 77
Which counts sometimes can give rise to inventory theft detection?
A. Perpetual inventory counts
B. Physical inventory counts
C. Concealment inventory counts D. None of the above
Correct Answer: B Section: Investigation Explanation
Explanation/Reference:
QUESTION 78
The scheme in which the same vendor is receiving favorable treatment can be found in purchases by vendor searches.
A. True B. False
Correct Answer: A Section: Investigation Explanation
Explanation/Reference:
QUESTION 79
Which of the following search is used for unusually high incidence of returns and allowances scheme?
A. Allowances by vendors
B. Disposals of allowances than reorders C. Returns and allowances
D. None of the above
Correct Answer: C Section: Investigation Explanation
Explanation/Reference:
QUESTION 80
Bank cut-off statements should be requested for 10-15 days after the closing date of the balance sheet.
A. True B. False
Correct Answer: A Section: Investigation Explanation
Explanation/Reference:
QUESTION 81
Verify supporting documentation on outstanding checks written for a material amount is a test used to conduct for:
A. Check disbursement B. Bank confirmation C. Bank confirmation D. Cut-off statements
Correct Answer: C Section: Investigation Explanation
Explanation/Reference:
QUESTION 82
Which check tampering red flag may indicate employees have embezzled cash and charged the embezzlement to expense accounts?
A. Voided checks B. Payable checks C. Missing checks D. Duplicate checks
Correct Answer: C Section: Investigation Explanation
Explanation/Reference:
QUESTION 83
Physical tampering prevention is a check tampering technique that is used to secure bank assisted controls.
A. True B. False
Correct Answer: B Section: Investigation Explanation
Explanation/Reference:
QUESTION 84
In physical tampering prevention technique, hidden images can be seen only when the check is held at an angle through:
A. High-resolution sprays B. Holographic safety inks C. Watermark backers
D. Chrome coloring
Correct Answer: C
Section: Investigation Explanation
Explanation/Reference:
QUESTION 85
When employees committing the fraud removes cash from the register and also the item allegedly being returned is debited back into the inventory, this refers to:
A. Registry destroying records
B. Register false voids
C. Fraudulent register occurrences D. Concealing register disbursement
Correct Answer: D Section: Investigation Explanation
Explanation/Reference:
QUESTION 86
When employees avoid detection in a refund scheme to keep the sizes of the disbursement low, is referred to:
A. Small disbursements
B. Very small disbursements C. Simple disbursements
D. None of the above
Correct Answer: A Section: Investigation Explanation
Explanation/Reference:
QUESTION 87
One final means of concealing a register scheme, as with many kinds of fraud, is to destroy all records of the transaction. A. True
B. False
Correct Answer: A Section: Investigation Explanation
Explanation/Reference:
QUESTION 88
______________ can be detected by closely examining the documentation submitted with the cash receipts.
A. Voided purchases
B. Fictitious refunds
C. Approved transaction D. None of the above
Correct Answer: B Section: Investigation Explanation
Explanation/Reference:
QUESTION 89
Persuasive evidence of an arrangement does not exist when:
A. Revenue and corresponding expenses doesn’t match each other. B. No written or verbal agreement exists.
C. Timings not meet properly
D. Capitalized expenses and Liabilities will not be up to satisfied level
Correct Answer: B Section: Law Explanation
Explanation/Reference:
Number: CFE Passing Score: 800 Time Limit: 120 min File Version: 1.0
Sections
1. FraudPreventionandDeterrence
2. FinancialTransactionsandFraudSchemes 3. Investigation
4. Law
CFE.exam.97q
CFE
Certified Fraud Examiner
Exam A
QUESTION 1
The act of an official or fiduciary person who unlawfully and wrongfully uses his station or character to procure some benefit, contrary to duty and rights of others is called:
A. Conflictofinterest B. Corruption
C. Bribery
D. Overbilling
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 2
Which of the following are the classifications for the Corruption?
A. Bribery,economicextortion,illegalgratuitiesandconflictsofinterest B. Corruption,bribery,economicextortion,conflictsofinterest
C. Overbilling, bribery, bid-ridding and illegal gratuities
D. economic extortion, bribery, illegal gratuities and corruption
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 3
__________ may be defined as the offering, giving, receiving or soliciting anything of value to influence an official act.
A. Corruption
B. Divertingbusinesstovendors C. Bribery
D. Lacking approval authority
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 4
Which of the following can constitute a bribe, even if the illicit payment is never actually made?
A. Offeringapayment
B. Corruptioninpayment C. kickback payment
D. Overbilling in payment
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 5
The most common method of detection in corruption cases is:
A. Internalaudits B. Internalcontrols C. Tips
D. Byaccident
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 6
Undisclosed payments made by vendors to employees of purchasing companies are referred to as:
A. Bid-rigging
B. Kickbacks
C. Presolicitaion
D. None of the above
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 7
Bid-rigging scheme occurs when:
A. anemployeefraudulentlyassistsavendorinwinningacontractthroughthecompetitivebiddingprocess. B. anemployeedoesnotassistavendorinwinningacontractthroughthecompetitivebiddingprocess.
C. an employee once assists a vendor in winning a contract through a single competitive bidding process. D. an employee once assists a vendor in winning a contract through a single competitive bidding process.
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 8
Every bribe is a two-sided transaction, in which where a vendor bribes a purchaser, there is someone on the vendor’s side of the transaction who is not making an illicit payment.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 9
In which of the following process, all bidders are legally supposed to be placed on the same plane of equality, bidding on the same terms and conditions?
A. Bid-rigging
B. Kickbacks
C. Competitive bidding D. Bid solicitation
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 10
The more power a person has over the bidding process, the more likely the person can influence the selection of a supplier.
A. True B. False
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 11
Which of the following is NOT the phase of the bidding process?
A. Presolicitation B. Postsolicitation C. Solicitation
D. Submission
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 12
When a victim company purchases unnecessary goods or services from a supplier at the direction of the corrupt employee, this results in:
A. Presolicitationscheme
B. Needrecognitionscheme C. False sole-source scheme D. Submission scheme
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 13
In ____________ scheme, a supplier pays an employee of the purchasing company to write specifications that will require amendments at a later date.
A. Deliberatewritingofvaguespecifications B. Needrecognition
C. False specification
D. Bid-splitting
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 14
In which phase of competitive bidding process, fraudsters attempt to influence the selection of a contractor by restricting the pool of competitors from whom bids are sought?
A. Needrecognition B. Solicitation
C. False specification D. Submission
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 15
A process by which several bidders conspire to split contracts up and ensure that each gets a certain amount of work is called:
A. Bidopening
B. FictitiousBidding C. Bid pooling
D. Bid log
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 16
Another way to eliminate competition in the solicitation phase of the selection process is to:
A. Solicitbidfromfictitioussuppliers
B. Solicittransactionfromfictitiousvendors C. Solicit bid-splitting from fictitious vendors D. None of the above
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 17
The person or persons who have access to __________ are often the targets of unethical vendors seeking an advantage in the process.
A. Bid-splitting
B. Sealedbids
C. General purchasing D. Tailor specifications
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 18
Which of the following is NOT the reason to bribe employees of the purchaser?
A. Toensurereceiptofalatebid
B. T o extend the bid opening date
C. To ensure bid-splitting
D. To falsify the bid log
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 19
Placing any restriction in the solicitation documents that tend to restrict competition is called prebid solicitation.
A. True B. False
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 20
Which of the following is the criterion for bid solicitation?
A. Containingfalsestatements
B. Allowingthepurchasertodiscusspossibleemploymentwiththecontractor C. To withdraw low bids
D. To falsify the bid log
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 21
The fraudsters’ interest lies with an employer other than a company.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 22
A special scheme in which employees know their employer is seeking to purchase a certain asset and take advantage of the situation by purchasing the asset themselves is:
A. Conflictofinterestinsale
B. Turnaroundsaleorflip
C. Unauthorized sale
D. Written sale of unique assets
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 23
__________ is required if and when officers, executives or other persons in trusted positions become subjects of a criminal indictment. A. Conflictofinterest
B. Turnaroundsaleorflip C. Disclosure
D. Resource diversion
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 24
Which of the following method is NOT used to detect conflicts of interest?
A. Tips&Complaints
B. Reviewofvendorownershipfiles
C. Underbillings of assets
D. Interviews with purchasing personnel
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 25
Conflict of interest cases are more easily prevented than detected.
A. True B. False
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 26
Which are check tempering frauds in which an employee prepares a fraudulent check and submits it usually along with legitimate checks to an authorized maker who signs it without a proper review?
A. Endorsecheckscheme B. Legitimatecheckscheme C. Payable check scheme D. Concealed check scheme
Correct Answer: D
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 27
Multiple cashiers operate from a single cash drawer without separate access codes is a red flag for:
A. Fraudulentscheme
B. Disbursementscheme C. Register scheme
D. Forceinventoryscheme
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 28
Maintain the presence of a manager or supervisor near the area of the cash register as a deterrent to theft is a prevention for:
A. Fraudulentstatementscheme B. Assetmisappropriationscheme C. Larcenyscheme
D. Register disbursement scheme
Correct Answer: D
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 29
The scheme which reduces victim companies to issue fraudulent payments for goods or services that they have not received is called:
A. Bogusclaims
B. Billingscheme
C. Reliance billing
D. Misappropriate claims
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 30
The most common method for billing scheme is:
A. Register
B. Tips
C. Accident
D. None of the above
Correct Answer: B
Section: Fraud Prevention and Deterrence
Explanation Explanation/Reference:
QUESTION 31
Which of the following is NOT the type of billing scheme?
A. Invoicingviashellcompanies
B. Invoicingvianon-accomplicecompanies C. Invoicing via accomplice companies
D. Personal purchases with company funds
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 32
In ___________ scheme, an employee creates false vouchers or submits false invoices to the employer.
A. Salerequisition
B. Purchaserequisition C. Voucher handling
D. Cash generating
Correct Answer: D
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 33
A voucher is:
A. afilethatincludesthepurchaseorderthatwassendtothevendor,thevendorinvoicelistingthecostandquantityofitemspurchased,andtheinternalreceiving
reports that verify the purchased items have been delivered.
B. afigurethatincludesthesaleorderthatwassendtothedealer,thevendorinvoicelistingthecostandquantityofitemssold,andtheinternalreceivingreports that verify the purchased items have been delivered.
C. a report that includes the purchase order that was send to the vendor, the vendor invoice listing the quality and quantity of items purchased, and the external receiving reports that verify the items have been sold.
D. a mammogram that includes the purchase order that was send to the purchaser, the purchaser invoice listing the benefits and quantity of items purchased, and the internal receiving reports that verify the purchased items have been sold.
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 34
A fabricated name and the post office box that an employee uses to collect disbursements from false billings is called:
A. Accompliceresidence B. Shellcompany
C. Perpetrator check
D. Cash generator
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 35
One reason employees might be hesitant to use PO boxes in shell company schemes is that some businesses are specially vary of sending checks to vendors that have street addresses only.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence
Explanation Explanation/Reference:
QUESTION 36
What is sometimes used to overcome well-designed internal controls of a victim company?
A. Shellcompany
B. Fraudulentinvoices
C. Collusion
D. Rubber stamp supervisors
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 37
Most of the shell company schemes involve the purchase of goods rather than services.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 38
A shell company scheme in which actual goods or services are sold to the victim company is known as:
A. Maintenancescheme B. Allocationscheme
C. Distribution scheme D. Pass-through scheme
Correct Answer: D
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 39
A person is said to be in ________ act, when the business which he transacts, or the money or property which he handles, is not for his own benefit, but for another person:
A. FiduciaryCapacity B. Embezzlement
C. Conversion
D. None of the above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 40
The essential elements of a ________ are an actual or constructive taking away of the goods or property of another with the without the consent and against the will of the owner and with a felonious intent.
A. Larceny
B. Abuse
C. Fiduciary
D. None of the above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 41
Larceny by Fraud or deception means that:
A. Createsorreinforceafalseimpression
B. Failstocorrectafalseimpression
C. Fails to disclose a known lien, adverse claim or other legal impediment D. All of the above
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 42
The seller’s price to the buyer is not fixed or determinable when:
A. Whenthepriceisnotcontingentonsomefutureevents
B. Thetransactionincludesanoptiontoexchangetheproductforothers.
C. A service or membership fee is not subject predictable cancellation during the contract period. D. Payment terms are not extended for a substantial period.
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 43
Which of the following are not of Basic types of non-sharable problems?
A. Violationofascribedobligations B. Businessreversals
C. Physical Isolation
D. LarcenybyFraud
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 44
_____________ involves purposeful misreporting of financial information about the organization that is intended to mislead those who read it.
A. Fraudulentstatement
B. Corruption
C. Asset misappropriations D. None of above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 45
Asset misappropriation schemes were the “middle children” of the study; they were more common than fraudulent statements and more costly than corruption.
A. True B. False
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 46
According to Marshall, ______ are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.
A. Assets
B. Liabilities
C. Credentials
D. None of above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 47
Assets that are long-lived and that differ from property, plant and equipment hat has been purchased outright or acquired under a capital lease are:
A. Tangible Assets B. Intangible Assets C. Forced Assets D. None of above
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 48
A tangible asset is one which is:
A. capableofbeingperceived B. capableofbeingappraised C. BothA&B
D. Neither A nor B
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 49
_________ normally are carried on an organization’s books as expenses because they tend to be consumed by the organization within a year of purchase.
A. Supplies B. Expenses C. Assets
D. Equity
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 50
__________ are the amounts which are owned to other entities:
A. Supplies B. Expenses C. Assets
D. Liabilities
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 51
Depreciation is especially applicable when companies try to overvalue their assets and net worth; the lower their depreciation expense, the higher the company’s profits.
A. True B. False
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 52
Any expenses that are incurred but not paid by the end of the year are counted in our records of profit and loss, are called:
A. Accruals
B. Depreciations C. Expenses
D. Financial record
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 53
The heart of book keeping system is the ___________. A. Asset
B. Liability
C. Checkbook D. Journal
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 54
____________ is a summary of the account balances carried in a ledger.
A. Balancesheet
B. Incomestatement C. Financial statement D. General journal
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 55
____________ is a process by which a bookkeeper records all transactions and can adjust the books.
A. JournalEntries
B. AccountingCycle C. Financial statement D. None of all
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 56
________ increase assets and expenses and/or decrease liabilities and/or equity
A. JournalEntries B. Debit
C. Credit
D. None of all
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 57
________ decrease assets and expenses and/or increase liabilities and/or equity
A. JournalEntries B. Debit
C. Credit
D. None of all
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 58
The excess credits (or debits) on the income statement are used to decrease (or increase) the equity account.
A. True B. False
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 59
Delivery has not occurred or services have not been rendered when:
A. Untilinstallationandcustomertestingandacceptancehasoccurred. B. Awrittenorderexistsbutcontainsarightofreturn.
C. BothA&B
D. Neither A nor B
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 60
___________ and __________ are used to increase (or decrease) the equity account.
A. JournalEntries&Debit
B. JournalEntries&transactions C. Journal Entries & Credit
D. None of all
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 61
By removing a tangible asset from the business (a debit), the books will be ___________ by the exact amount of the tangible asset misappropriated.
A. JournalEntries B. Out-of-balance C. False debits D. None of all
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 62
Once the expense account is closed, it becomes a historical item and probably will never be reviewed again.
A. True B. False
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 63
When an incorrect total is carried from the journal to the ledger or from ledger to the financial statements, this method is called:
A. ForcedBalance B. Out-of-balance C. False balance D. None of all
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 64
Skimming is:
A. Theremovalofcashfromavictimentitypriortoitsentryinanaccountingsystem. B. Theadditionofcashfromavictimentitypriortoitsentryinanaccountingsystem. C. The removal of cash from a victim entity after its entry in an accounting system. D. None of above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 65
Which of the following is not the skimming scheme?
A. Unrecordedsales
B. Fraud&Cost
C. Theft of checks through the mail D. Understand sales and receivables
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 66
According to fraud tree, cash has three following schemes:
A. Skimming,cashlarcenyandfraudulentdisbursements
B. Fraudanalysis,skimmingandcashmisappropriations
C. Cash larceny, cash distribution and fraudulent disbursements D. Cash distribution, skimming and fraud analysis
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 67
Skimming cases can more likely to be detected by:
A. Internalaudits
B. Accidents
C. Internal controls
D. occupational frauds
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 68
Theft of incoming checks usually occurs when ________ is (are) in charge of opening the mail and recording the receipt of payments.
A. Singleemployee
B. Twoemployees
C. More than two employees D. None of the above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes
Explanation Explanation/Reference:
QUESTION 69
Which of the following are used in a short-term skimming scheme?
A. Unrecordedsales,understatedsalesandtheftofincomingchecks
B. Unrecordedsales,understatedsalesanddualendorsements
C. False company accounts, understated sales and theft of incoming checks
D. Understated sales, theft of incoming checks and check-for-currency substitutions
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 70
Employees steal an incoming payment and then place the incoming funds in an interest bearing account for:
A. Convertingstolenchecks B. Concealingthefraud
C. Short-term skimming
D. All of the above
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 71
Financial statement fraud is committed by: A. Organizedcriminals
B. Midandlowerlevelemployees C. Senior Management
D. All of the above
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 72
Fraudsters use the accounting system as a tool to generate the results they want in ___________ approach:
A. Organizedaccounting B. Playingtheaccounting C. beating accounting
D. All of the above
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 73
In which approach, fraudsters produce whatever financial statements they wish, perhaps using just a typewriter or a personal computer.
A. Organizedaccounting
B. Playingtheaccounting
C. Beating accounting
D. Outside accounting system
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 74
Which of the following is NOT standard of generally accepted accounting principles?
A. Conservatism B. Cost
C. Full disclosure D. Qualitycontrol
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 75
A typical issue involving material and fraud would be:
A. Fraudulentstatement B. Misappropriations
C. Civil lawsuit
D. Qualitycontrol
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 76
By what accountant means that the financial figures presented by the company are at least as much as reflected in the statements, if not more.
A. Fraudulentstatement B. Misappropriations
C. Conservatism
D. Matching
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 77
“Anticipate possible losses and omit potential profits”, this results in:
A. Asymmetricalaccounting B. Symmetricalaccounting C. Playing accounting
D. Bearing accounting
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 78
_________ assumes the business will go on indefinitely in the future.
A. Materiality
B. Goingconcern C. Cost
D. Fair value
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 79
The price of an asset on which the asset is selling at on the open market in a transaction between a willing buyer and a wiling seller is called:
A. Absolutevalue B. Fairvalue
C. Cost value
D. material value
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 80
Accounting records are designed to be kept on subjective rather than objective evidence.
A. True B. False
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 81
Which of the following is the amount of money that would be realized upon the sale of the asset at some point in the future, less the costs associated with owing, operating and selling it?
A. Netrealizablevalue
B. Goingconcern C. Cost
D. Fair value
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 82
Which of the following factors is NOT included in most financial statement schemes?
A. Fictitiousrevenues
B. PersuasiveEvidence
C. Concealed liabilities and expenses D. Improper asset valuations
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 83
How many accounts are affected in fraudulent accounting entries and therefore same number of categories on the financial statement?
A. One
B. Atleasttwo
C. More than two D. None of above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 84
_________ revenues involve the recording sales of goods or services hat did not occur.
A. Fictitiousorfabricatedrevenues B. Financialrevenues
C. Red flag revenues
D. Concealed revenues
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 85
Revenue is recognized when it is:
A. RealizedandEarned
B. FictitiousandEarned
C. Realized and Evidenced D. All of the above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 86
According to SAB 104, for the revenue to be typically considered realized or realizable and earned, which of the following criteria is NOT met:
A. Persuasiveevidenceofanarrangementexists B. Serviceshasbeenrendered
C. Timings have been met
D. Collectabilityisreasonablyassured
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 87
Which of the following is true for Red flags associated with fictitious revenues?
A. Slowgrowthorusualprofitability,whennotcomparedtoothercompaniesinthesameindustry.
B. Usualgrowthinthenumberofdayspurchaseinreceivables
C. A significant volume of sales to entries whose substance and ownership is not known.
D. Ausualsurgeinpurchasebyamajorityofunitswithinacompany,orofpurchaserecordedbycorporateheadquarters.
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 88
According to accounting principles, ________ and ________ should be recorded or atched in the same accounting period; failing to do so violates the matching principle of AAP.
A. Revenueandcorrespondingexpenses
B. RevenueandIncomestatement
C. Income statement and Long-term contracts D. Capitalized expenses and Liabilities
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 89
Physical assets including _________ and ________ are the most commonly misappropriated noncash asset in our study.
A. Interest&Collusion
B. Inventory&Equipment C. Inventory&Purchase D. Sales & Equipment
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 90
If the assets are intentionally purchased by the company but simply misappropriated by the fraudster, this is referring to as:
A. Inventorylarcenyscheme B. Assetreceivingscheme C. Fraudulent purchase
D. Falsifyshipping
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 91
____________ corrupt employees can cause inventory to be fraudulently delivered to themselves or accomplices.
A. Falseshippingslip
B. Falsepackingslip
C. Fraudulentinventoryslip D. False credit slip
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 92
A variation between the physical inventory and the perpetual inventory totals is called:
A. Alteredinventory B. Accountreceivable C. Shrinkage
D. Write-offs
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 93
Inventory shrinkage is the unaccounted-for reduction in the company’s inventory that does not results from theft.
A. True B. False
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 94
A running count that records how much inventory should be on hand is referred to:
A. Alteredinventory B. Perpetualinventory C. Shrinking inventory D. Fictitious inventory
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 95
Forced reconciliation of the account says:
A. toconcealshrinkageistoalterinventoryrecordsothatitmatchesthephysicalinventorycount.
B. toconcealinventoryistoaltershrinkagerecordsothatitmatchesthephysicalinventorycount.
C. to conceal shrinkage is to change the perpetual inventory record so that it matches the physical inventory count. D. to conceal write-offs is to change the perpetual inventory record so that it matches the physical inventory count.
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 96
__________ inventory and other assets is relatively common way for fraudsters to remove assets from the books before or after they are stolen.
A. Altered
B. Perpetual
C. False shipping slip D. Write-offs
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 97
According to Hollinger and Clark for Policy development, management must pay attention to:
A. Aclearunderstandingregardingtheftbehavior B. Enforcementofsanctions
C. BothA&B
D. Neither A nor B
Correct Answer: C Section: Investigation Explanation
Explanation/Reference:
In Cressey’s fraud triangle, its three of the legs are Opportunity, Pressure and
A. Violation
B. Isolation
C. Rationalization
D. None of the above
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 2
Which of the following offender types in which people who take the money and run away?
A. Absconders
B. Long-term violators C. Offender types
D. None of the above
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 3
When situational pressures and perceived opportunities are low and personal integrity is high, occupational fraud is much more likely to occur than when the opposite is true.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 4
__________ can be defined as conduct detrimental to the organization and to the employee.
A. Employee deviance B. Employee theft
C. Employee fraud
D. All of the above
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 5
According to a survey, in principal perpetrator, males in a majority of cases, accounting for ___ percent of frauds versus ___ percent in which a female was the primary culprit.
A. 62 versus 36
B. 61 versus 39
C. 62 versus 37
D. None of the above
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 6
The principal way to detect omitted credits from books of account is through:
A. Forced Balance B. Trend analysis C. Expense account D. None of all
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 7
Which of the following is NOT the reason why senior management will overstate business statement?
A. Comply with debit covenants
B. Meet personal performance criteria
C. Trigger performance related compensation
D. Show a pattern of growth to support sale of a business
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 8
Which of the four basic measures, if properly installed and implemented may help prevent inventory fraud?
A. Proper documentation, segregation of duties, independent checks and physical safeguards
B. Proper documentation, segregation of duties, independent checks and inventory control
C. Proper documentation, physical padding, independent checks and physical safeguards
D. prenumbered affiliations, segregation of duties, independent checks and physical safeguards
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 9
Which of the following are the classifications for the Corruption?
A. Bribery, economic extortion, illegal gratuities and conflicts of interest B. Corruption, bribery, economic extortion, conflicts of interest
C. Overbilling, bribery, bid-ridding and illegal gratuities
D. economic extortion, bribery, illegal gratuities and corruption
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 10
The most common method of detection in corruption cases is:
A. Internal audits B. Internal controls C. Tips
D. By accident
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 11
Undisclosed payments made by vendors to employees of purchasing companies are referred to as:
A. Bid-rigging
B. Kickbacks
C. Presolicitaion
D. None of the above
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 12
Every bribe is a two-sided transaction, in which where a vendor bribes a purchaser, there is someone on the vendor’s side of the transaction who is not making an illicit payment.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 13
In which of the following process, all bidders are legally supposed to be placed on the same plane of equality, bidding on the same terms and conditions?
A. Bid-rigging
B. Kickbacks
C. Competitive bidding D. Bid solicitation
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 14
The more power a person has over the bidding process, the more likely the person can influence the selection of a supplier.
A. True B. False
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 15
When a victim company purchases unnecessary goods or services from a supplier at the direction of the corrupt employee, this results in:
A. Presolicitation scheme
B. Need recognition scheme C. False sole-source scheme D. Submission scheme
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 16
In which phase of competitive bidding process, fraudsters attempt to influence the selection of a contractor by restricting the pool of competitors from whom bids are sought?
A. Need recognition B. Solicitation
C. False specification D. Submission
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 17
Another way to eliminate competition in the solicitation phase of the selection process is to:
A. Solicit bid from fictitious suppliers
B. Solicit transaction from fictitious vendors C. Solicit bid-splitting from fictitious vendors D. None of the above
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 18
The person or persons who have access to __________ are often the targets of unethical vendors seeking an advantage in the process.
A. Bid-splitting
B. Sealed bids
C. General purchasing D. Tailor specifications
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 19
Which of the following is NOT the reason to bribe employees of the purchaser?
A. To ensure receipt of a late bid B. To extend the bid opening date C. To ensure bid-splitting
D. To falsify the bid log
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 20
Collusion or bid-rigging between bidders is called
A. Bribery receipt
B. Bid solicitation
C. To withdraw low bids D. Contract acceptance
Correct Answer: D
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 21
A ___________ occurs when an employee, manager or executive has an undisclosed economic or personal interest in a transaction that adversely affects the organization.
A. Conflict of interest
B. Illegal sale
C. Unauthorized purchase D. Financial disclosure
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 22
The fraudsters’ interest lies with an employer other than a company.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 23
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
A special scheme in which employees know their employer is seeking to purchase a certain asset and take advantage of the situation by purchasing the asset themselves is:
A. Conflict of interest in sale
B. Turnaround sale or flip
C. Unauthorized sale
D. Written sale of unique assets
QUESTION 24
__________ is required if and when officers, executives or other persons in trusted positions become subjects of a criminal indictment.
A. Conflict of interest
B. Turnaround sale or flip C. Disclosure
D. Resource diversion
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 25
Which are check tempering frauds in which an employee prepares a fraudulent check and submits it usually along with legitimate checks to an authorized maker who signs it without a proper review?
A. Endorse check scheme B. Legitimate check scheme C. Payable check scheme D. Concealed check scheme
Correct Answer: D
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 26
Maintain the presence of a manager or supervisor near the area of the cash register as a deterrent to theft is a prevention for:
A. Fraudulent statement scheme B. Asset misappropriation scheme C. Larceny scheme
D. Register disbursement scheme
Correct Answer: D
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 27
The most common method for billing scheme is:
A. Register
B. Tips
C. Accident
D. None of the above
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 28
Which of the following is NOT the type of billing scheme?
A. Invoicing via shell companies
B. Invoicing via non-accomplice companies C. Invoicing via accomplice companies
D. Personal purchases with company funds
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 29
A voucher is:
A. a file that includes the purchase order that was send to the vendor, the vendor invoice listing the cost and quantity of items purchased, and the internal receiving reports that verify the purchased items have been delivered.
B. a figure that includes the sale order that was send to the dealer, the vendor invoice listing the cost and quantity of items sold, and the internal receiving reports that verify the purchased items have been delivered.
C. a report that includes the purchase order that was send to the vendor, the vendor invoice listing the quality and quantity of items purchased, and the external receiving reports that verify the items have been sold.
D. a mammogram that includes the purchase order that was send to the purchaser, the purchaser invoice listing the benefits and quantity of items purchased, and the internal receiving reports that verify the purchased items have been sold.
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 30
A fabricated name and the post office box that an employee uses to collect disbursements from false billings is called:
A. Accomplice residence B. Shell company
C. Perpetrator check
D. Cash generator
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 31
One reason employees might be hesitant to use PO boxes in shell company schemes is that some businesses are specially vary of sending checks to vendors that have street addresses only.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 32
Most of the shell company schemes involve the purchase of goods rather than services.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 33
A person is said to be in ________ act, when the business which he transacts, or the money or property which he handles, is not for his own benefit, but for another person:
A. Fiduciary Capacity B. Embezzlement
C. Conversion
D. None of the above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 34
Larceny by Fraud or deception means that: A. Creates or reinforce a false impression
B. Fails to correct a false impression
C. Fails to disclose a known lien, adverse claim or other legal impediment D. All of the above
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 35
Which of the following are not of Basic types of non-sharable problems?
A. Violation of ascribed obligations B. Business reversals
C. Physical Isolation
D. Larceny by Fraud
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 36
According to Marshall, ______ are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.
A. Assets
B. Liabilities
C. Credentials
D. None of above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 37
A tangible asset is one which is:
A. capable of being perceived B. capable of being appraised C. Both A & B
D. Neither A nor B
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 38
_________ normally are carried on an organization’s books as expenses because they tend to be consumed by the organization within a year of purchase.
A. Supplies B. Expenses C. Assets
D. Equity
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 39
__________ are the amounts which are owned to other entities:
A. Supplies B. Expenses C. Assets
D. Liabilities
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 40
Asset misappropriations have an effect on the liabilities and do also have an indirect effect on the equity account.
A. True B. False
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 41
Occupational fraud and abuse is a (an) __________ of doing business, in much the same way that we pay expenses for electricity, taxes and wages.
A. Equity
B. Balance sheet C. Expense
D. Financial record
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 42
When expenses used to produce income- all of them- should be matched in a consistent manner against that income, this is referred to: A. Equity
B. Accrual basis accounting C. Expense
D. Financial record
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 43
Any expenses that are incurred but not paid by the end of the year are counted in our records of profit and loss, are called:
A. Accruals
B. Depreciations C. Expenses
D. Financial record
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 44
____________ is a process by which a bookkeeper records all transactions and can adjust the books.
A. Journal Entries
B. Accounting Cycle C. Financial statement D. None of all
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 45
________ increase assets and expenses and/or decrease liabilities and/or equity
A. Journal Entries B. Debit
C. Credit
D. None of all
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 46
________ decrease assets and expenses and/or increase liabilities and/or equity
A. Journal Entries B. Debit
C. Credit
D. None of all
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 47
Delivery has not occurred or services have not been rendered when:
A. Until installation and customer testing and acceptance has occurred. B. A written order exists but contains a right of return.
C. Both A & B
D. Neither A nor B
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 48
___________ and __________ are used to increase (or decrease) the equity account.
A. Journal Entries & Debit
B. Journal Entries & transactions C. Journal Entries & Credit
D. None of all
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 49
By removing a tangible asset from the business (a debit), the books will be ___________ by the exact amount of the tangible asset misappropriated.
A. Journal Entries B. Out-of-balance C. False debits D. None of all
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 50
Once the expense account is closed, it becomes a historical item and probably will never be reviewed again.
A. True B. False
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 51
According to fraud tree, cash has three following schemes:
A. Skimming, cash larceny and fraudulent disbursements
B. Fraud analysis, skimming and cash misappropriations
C. Cash larceny, cash distribution and fraudulent disbursements D. Cash distribution, skimming and fraud analysis
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 52
Skimming cases can more likely to be detected by:
A. Internal audits
B. Accidents
C. Internal controls
D. occupational frauds
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 53
The most basic skimming scheme occurs when:
A. An employee sells goods or services to a customer, collects the customer’s payment, but makes no record of the sale.
B. An employee buy goods or services from a customer, drop the customer’s payment, but makes no record of the purchase.
C. An employee sells goods or services to a stakeholder, collects the stakeholder’s payment and makes record of the sale too.
D. An employee buy goods or services from a stakeholder, drop the stakeholder’s payment and makes record of the purchase too.
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 54
The prime targets for skimming schemes which are hard to monitor and predict such as late fees and parking fees, are:
A. Revenue sources
B. Recorded sales
C. Internal audits
D. Register manipulations
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 55
Theft of incoming checks usually occurs when ________ is (are) in charge of opening the mail and recording the receipt of payments.
A. Single employee
B. Two employees
C. More than two employees D. None of the above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 56
Financial statement fraud is committed by:
A. Organized criminals
B. Mid and lower level employees C. Senior Management
D. All of the above
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 57
In which approach, fraudsters produce whatever financial statements they wish, perhaps using just a typewriter or a personal computer.
A. Organized accounting
B. Playing the accounting
C. Beating accounting
D. Outside accounting system
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 58
Which of the following is NOT standard of generally accepted accounting principles?
A. Conservatism B. Cost
C. Full disclosure D. Quality control
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 59
A typical issue involving material and fraud would be:
A. Fraudulent statement B. Misappropriations
C. Civil lawsuit
D. Quality control
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 60
By what accountant means that the financial figures presented by the company are at least as much as reflected in the statements, if not more.
A. Fraudulent statement B. Misappropriations
C. Conservatism
D. Matching
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 61
“Anticipate possible losses and omit potential profits”, this results in:
A. Asymmetrical accounting B. Symmetrical accounting C. Playing accounting
D. Bearing accounting
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 62
_________ assumes the business will go on indefinitely in the future.
A. Materiality
B. Going concern C. Cost
D. Fair value
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 63
Which of the following is the amount of money that would be realized upon the sale of the asset at some point in the future, less the costs associated with owing, operating and selling it?
A. Net realizable value
B. Going concern C. Cost
D. Fair value
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 64
How many accounts are affected in fraudulent accounting entries and therefore same number of categories on the financial statement?
A. One
B. At least two
C. More than two D. None of above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 65
_________ revenues involve the recording sales of goods or services hat did not occur.
A. Fictitious or fabricated revenues B. Financial revenues
C. Red flag revenues
D. Concealed revenues
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 66
Revenue is recognized when it is:
A. Realized and Earned
B. Fictitious and Earned
C. Realized and Evidenced D. All of the above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 67
According to SAB 104, for the revenue to be typically considered realized or realizable and earned, which of the following criteria is NOT met:
A. Persuasive evidence of an arrangement exists B. Services has been rendered
C. Timings have been met
D. Collectability is reasonably assured
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 68
Which of the following is true for Red flags associated with fictitious revenues?
A. Slow growth or usual profitability, when not compared to other companies in the same industry.
B. Usual growth in the number of days purchase in receivables
C. A significant volume of sales to entries whose substance and ownership is not known.
D. A usual surge in purchase by a majority of units within a company, or of purchase recorded by corporate headquarters.
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 69
According to accounting principles, ________ and ________ should be recorded or atched in the same accounting period; failing to do so violates the matching principle of AAP.
A. Revenue and corresponding expenses
B. Revenue and Income statement
C. Income statement and Long-term contracts D. Capitalized expenses and Liabilities
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 70
Physical assets including _________ and ________ are the most commonly misappropriated noncash asset in our study.
A. Interest & Collusion
B. Inventory & Equipment C. Inventory & Purchase D. Sales & Equipment
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 71
Which sale occurs when the accomplice of the employee-fraudster “buys” merchandise, but the employee does not ring up the sale, and the accomplice takes the merchandise without making any payment?
A. Whole sale
B. Fake sale
C. Fraudster sale D. Preliminary sale
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 72
False billing scheme states that:
A. employees do not cause their company to purchase merchandise that the company does not need. B. employees cause their company to sale merchandise that the company does not need.
C. employees do not cause their company to sale merchandise that the company does not need.
D. employees cause their company to purchase merchandise that the company does not need
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 73
If the assets are intentionally purchased by the company but simply misappropriated by the fraudster, this is referring to as:
A. Inventory larceny scheme B. Asset receiving scheme C. Fraudulent purchase
D. Falsify shipping
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 74
____________ corrupt employees can cause inventory to be fraudulently delivered to themselves or accomplices.
A. False shipping slip
B. False packing slip
C. Fraudulent inventory slip D. False credit slip
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 75
According to Hollinger and Clark for Policy development, management must pay attention to:
A. A clear understanding regarding theft behavior B. Enforcement of sanctions
C. Both A & B
D. Neither A nor B
Correct Answer: C Section: Investigation Explanation
Explanation/Reference:
QUESTION 76
A journal in which all sales made on credit or cash are listed is: A. Disbursement journal
B. Accounts receivable journal C. Accounts payable journal D. General journal
Correct Answer: B Section: Investigation Explanation
Explanation/Reference:
QUESTION 77
Which counts sometimes can give rise to inventory theft detection?
A. Perpetual inventory counts
B. Physical inventory counts
C. Concealment inventory counts D. None of the above
Correct Answer: B Section: Investigation Explanation
Explanation/Reference:
QUESTION 78
The scheme in which the same vendor is receiving favorable treatment can be found in purchases by vendor searches.
A. True B. False
Correct Answer: A Section: Investigation Explanation
Explanation/Reference:
QUESTION 79
Which of the following search is used for unusually high incidence of returns and allowances scheme?
A. Allowances by vendors
B. Disposals of allowances than reorders C. Returns and allowances
D. None of the above
Correct Answer: C Section: Investigation Explanation
Explanation/Reference:
QUESTION 80
Bank cut-off statements should be requested for 10-15 days after the closing date of the balance sheet.
A. True B. False
Correct Answer: A Section: Investigation Explanation
Explanation/Reference:
QUESTION 81
Verify supporting documentation on outstanding checks written for a material amount is a test used to conduct for:
A. Check disbursement B. Bank confirmation C. Bank confirmation D. Cut-off statements
Correct Answer: C Section: Investigation Explanation
Explanation/Reference:
QUESTION 82
Which check tampering red flag may indicate employees have embezzled cash and charged the embezzlement to expense accounts?
A. Voided checks B. Payable checks C. Missing checks D. Duplicate checks
Correct Answer: C Section: Investigation Explanation
Explanation/Reference:
QUESTION 83
Physical tampering prevention is a check tampering technique that is used to secure bank assisted controls.
A. True B. False
Correct Answer: B Section: Investigation Explanation
Explanation/Reference:
QUESTION 84
In physical tampering prevention technique, hidden images can be seen only when the check is held at an angle through:
A. High-resolution sprays B. Holographic safety inks C. Watermark backers
D. Chrome coloring
Correct Answer: C
Section: Investigation Explanation
Explanation/Reference:
QUESTION 85
When employees committing the fraud removes cash from the register and also the item allegedly being returned is debited back into the inventory, this refers to:
A. Registry destroying records
B. Register false voids
C. Fraudulent register occurrences D. Concealing register disbursement
Correct Answer: D Section: Investigation Explanation
Explanation/Reference:
QUESTION 86
When employees avoid detection in a refund scheme to keep the sizes of the disbursement low, is referred to:
A. Small disbursements
B. Very small disbursements C. Simple disbursements
D. None of the above
Correct Answer: A Section: Investigation Explanation
Explanation/Reference:
QUESTION 87
One final means of concealing a register scheme, as with many kinds of fraud, is to destroy all records of the transaction. A. True
B. False
Correct Answer: A Section: Investigation Explanation
Explanation/Reference:
QUESTION 88
______________ can be detected by closely examining the documentation submitted with the cash receipts.
A. Voided purchases
B. Fictitious refunds
C. Approved transaction D. None of the above
Correct Answer: B Section: Investigation Explanation
Explanation/Reference:
QUESTION 89
Persuasive evidence of an arrangement does not exist when:
A. Revenue and corresponding expenses doesn’t match each other. B. No written or verbal agreement exists.
C. Timings not meet properly
D. Capitalized expenses and Liabilities will not be up to satisfied level
Correct Answer: B Section: Law Explanation
Explanation/Reference:
Number: CFE Passing Score: 800 Time Limit: 120 min File Version: 1.0
Sections
1. FraudPreventionandDeterrence
2. FinancialTransactionsandFraudSchemes 3. Investigation
4. Law
CFE.exam.97q
CFE
Certified Fraud Examiner
Exam A
QUESTION 1
The act of an official or fiduciary person who unlawfully and wrongfully uses his station or character to procure some benefit, contrary to duty and rights of others is called:
A. Conflictofinterest B. Corruption
C. Bribery
D. Overbilling
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 2
Which of the following are the classifications for the Corruption?
A. Bribery,economicextortion,illegalgratuitiesandconflictsofinterest B. Corruption,bribery,economicextortion,conflictsofinterest
C. Overbilling, bribery, bid-ridding and illegal gratuities
D. economic extortion, bribery, illegal gratuities and corruption
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 3
__________ may be defined as the offering, giving, receiving or soliciting anything of value to influence an official act.
A. Corruption
B. Divertingbusinesstovendors C. Bribery
D. Lacking approval authority
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 4
Which of the following can constitute a bribe, even if the illicit payment is never actually made?
A. Offeringapayment
B. Corruptioninpayment C. kickback payment
D. Overbilling in payment
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 5
The most common method of detection in corruption cases is:
A. Internalaudits B. Internalcontrols C. Tips
D. Byaccident
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 6
Undisclosed payments made by vendors to employees of purchasing companies are referred to as:
A. Bid-rigging
B. Kickbacks
C. Presolicitaion
D. None of the above
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 7
Bid-rigging scheme occurs when:
A. anemployeefraudulentlyassistsavendorinwinningacontractthroughthecompetitivebiddingprocess. B. anemployeedoesnotassistavendorinwinningacontractthroughthecompetitivebiddingprocess.
C. an employee once assists a vendor in winning a contract through a single competitive bidding process. D. an employee once assists a vendor in winning a contract through a single competitive bidding process.
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 8
Every bribe is a two-sided transaction, in which where a vendor bribes a purchaser, there is someone on the vendor’s side of the transaction who is not making an illicit payment.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 9
In which of the following process, all bidders are legally supposed to be placed on the same plane of equality, bidding on the same terms and conditions?
A. Bid-rigging
B. Kickbacks
C. Competitive bidding D. Bid solicitation
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 10
The more power a person has over the bidding process, the more likely the person can influence the selection of a supplier.
A. True B. False
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 11
Which of the following is NOT the phase of the bidding process?
A. Presolicitation B. Postsolicitation C. Solicitation
D. Submission
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 12
When a victim company purchases unnecessary goods or services from a supplier at the direction of the corrupt employee, this results in:
A. Presolicitationscheme
B. Needrecognitionscheme C. False sole-source scheme D. Submission scheme
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 13
In ____________ scheme, a supplier pays an employee of the purchasing company to write specifications that will require amendments at a later date.
A. Deliberatewritingofvaguespecifications B. Needrecognition
C. False specification
D. Bid-splitting
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 14
In which phase of competitive bidding process, fraudsters attempt to influence the selection of a contractor by restricting the pool of competitors from whom bids are sought?
A. Needrecognition B. Solicitation
C. False specification D. Submission
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 15
A process by which several bidders conspire to split contracts up and ensure that each gets a certain amount of work is called:
A. Bidopening
B. FictitiousBidding C. Bid pooling
D. Bid log
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 16
Another way to eliminate competition in the solicitation phase of the selection process is to:
A. Solicitbidfromfictitioussuppliers
B. Solicittransactionfromfictitiousvendors C. Solicit bid-splitting from fictitious vendors D. None of the above
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 17
The person or persons who have access to __________ are often the targets of unethical vendors seeking an advantage in the process.
A. Bid-splitting
B. Sealedbids
C. General purchasing D. Tailor specifications
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 18
Which of the following is NOT the reason to bribe employees of the purchaser?
A. Toensurereceiptofalatebid
B. T o extend the bid opening date
C. To ensure bid-splitting
D. To falsify the bid log
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 19
Placing any restriction in the solicitation documents that tend to restrict competition is called prebid solicitation.
A. True B. False
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 20
Which of the following is the criterion for bid solicitation?
A. Containingfalsestatements
B. Allowingthepurchasertodiscusspossibleemploymentwiththecontractor C. To withdraw low bids
D. To falsify the bid log
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 21
The fraudsters’ interest lies with an employer other than a company.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 22
A special scheme in which employees know their employer is seeking to purchase a certain asset and take advantage of the situation by purchasing the asset themselves is:
A. Conflictofinterestinsale
B. Turnaroundsaleorflip
C. Unauthorized sale
D. Written sale of unique assets
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 23
__________ is required if and when officers, executives or other persons in trusted positions become subjects of a criminal indictment. A. Conflictofinterest
B. Turnaroundsaleorflip C. Disclosure
D. Resource diversion
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 24
Which of the following method is NOT used to detect conflicts of interest?
A. Tips&Complaints
B. Reviewofvendorownershipfiles
C. Underbillings of assets
D. Interviews with purchasing personnel
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 25
Conflict of interest cases are more easily prevented than detected.
A. True B. False
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 26
Which are check tempering frauds in which an employee prepares a fraudulent check and submits it usually along with legitimate checks to an authorized maker who signs it without a proper review?
A. Endorsecheckscheme B. Legitimatecheckscheme C. Payable check scheme D. Concealed check scheme
Correct Answer: D
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 27
Multiple cashiers operate from a single cash drawer without separate access codes is a red flag for:
A. Fraudulentscheme
B. Disbursementscheme C. Register scheme
D. Forceinventoryscheme
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 28
Maintain the presence of a manager or supervisor near the area of the cash register as a deterrent to theft is a prevention for:
A. Fraudulentstatementscheme B. Assetmisappropriationscheme C. Larcenyscheme
D. Register disbursement scheme
Correct Answer: D
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 29
The scheme which reduces victim companies to issue fraudulent payments for goods or services that they have not received is called:
A. Bogusclaims
B. Billingscheme
C. Reliance billing
D. Misappropriate claims
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 30
The most common method for billing scheme is:
A. Register
B. Tips
C. Accident
D. None of the above
Correct Answer: B
Section: Fraud Prevention and Deterrence
Explanation Explanation/Reference:
QUESTION 31
Which of the following is NOT the type of billing scheme?
A. Invoicingviashellcompanies
B. Invoicingvianon-accomplicecompanies C. Invoicing via accomplice companies
D. Personal purchases with company funds
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 32
In ___________ scheme, an employee creates false vouchers or submits false invoices to the employer.
A. Salerequisition
B. Purchaserequisition C. Voucher handling
D. Cash generating
Correct Answer: D
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 33
A voucher is:
A. afilethatincludesthepurchaseorderthatwassendtothevendor,thevendorinvoicelistingthecostandquantityofitemspurchased,andtheinternalreceiving
reports that verify the purchased items have been delivered.
B. afigurethatincludesthesaleorderthatwassendtothedealer,thevendorinvoicelistingthecostandquantityofitemssold,andtheinternalreceivingreports that verify the purchased items have been delivered.
C. a report that includes the purchase order that was send to the vendor, the vendor invoice listing the quality and quantity of items purchased, and the external receiving reports that verify the items have been sold.
D. a mammogram that includes the purchase order that was send to the purchaser, the purchaser invoice listing the benefits and quantity of items purchased, and the internal receiving reports that verify the purchased items have been sold.
Correct Answer: A
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 34
A fabricated name and the post office box that an employee uses to collect disbursements from false billings is called:
A. Accompliceresidence B. Shellcompany
C. Perpetrator check
D. Cash generator
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 35
One reason employees might be hesitant to use PO boxes in shell company schemes is that some businesses are specially vary of sending checks to vendors that have street addresses only.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence
Explanation Explanation/Reference:
QUESTION 36
What is sometimes used to overcome well-designed internal controls of a victim company?
A. Shellcompany
B. Fraudulentinvoices
C. Collusion
D. Rubber stamp supervisors
Correct Answer: C
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 37
Most of the shell company schemes involve the purchase of goods rather than services.
A. True B. False
Correct Answer: B
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference: QUESTION 38
A shell company scheme in which actual goods or services are sold to the victim company is known as:
A. Maintenancescheme B. Allocationscheme
C. Distribution scheme D. Pass-through scheme
Correct Answer: D
Section: Fraud Prevention and Deterrence Explanation
Explanation/Reference:
QUESTION 39
A person is said to be in ________ act, when the business which he transacts, or the money or property which he handles, is not for his own benefit, but for another person:
A. FiduciaryCapacity B. Embezzlement
C. Conversion
D. None of the above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 40
The essential elements of a ________ are an actual or constructive taking away of the goods or property of another with the without the consent and against the will of the owner and with a felonious intent.
A. Larceny
B. Abuse
C. Fiduciary
D. None of the above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 41
Larceny by Fraud or deception means that:
A. Createsorreinforceafalseimpression
B. Failstocorrectafalseimpression
C. Fails to disclose a known lien, adverse claim or other legal impediment D. All of the above
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 42
The seller’s price to the buyer is not fixed or determinable when:
A. Whenthepriceisnotcontingentonsomefutureevents
B. Thetransactionincludesanoptiontoexchangetheproductforothers.
C. A service or membership fee is not subject predictable cancellation during the contract period. D. Payment terms are not extended for a substantial period.
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 43
Which of the following are not of Basic types of non-sharable problems?
A. Violationofascribedobligations B. Businessreversals
C. Physical Isolation
D. LarcenybyFraud
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 44
_____________ involves purposeful misreporting of financial information about the organization that is intended to mislead those who read it.
A. Fraudulentstatement
B. Corruption
C. Asset misappropriations D. None of above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 45
Asset misappropriation schemes were the “middle children” of the study; they were more common than fraudulent statements and more costly than corruption.
A. True B. False
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 46
According to Marshall, ______ are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.
A. Assets
B. Liabilities
C. Credentials
D. None of above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 47
Assets that are long-lived and that differ from property, plant and equipment hat has been purchased outright or acquired under a capital lease are:
A. Tangible Assets B. Intangible Assets C. Forced Assets D. None of above
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 48
A tangible asset is one which is:
A. capableofbeingperceived B. capableofbeingappraised C. BothA&B
D. Neither A nor B
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 49
_________ normally are carried on an organization’s books as expenses because they tend to be consumed by the organization within a year of purchase.
A. Supplies B. Expenses C. Assets
D. Equity
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 50
__________ are the amounts which are owned to other entities:
A. Supplies B. Expenses C. Assets
D. Liabilities
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 51
Depreciation is especially applicable when companies try to overvalue their assets and net worth; the lower their depreciation expense, the higher the company’s profits.
A. True B. False
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 52
Any expenses that are incurred but not paid by the end of the year are counted in our records of profit and loss, are called:
A. Accruals
B. Depreciations C. Expenses
D. Financial record
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 53
The heart of book keeping system is the ___________. A. Asset
B. Liability
C. Checkbook D. Journal
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 54
____________ is a summary of the account balances carried in a ledger.
A. Balancesheet
B. Incomestatement C. Financial statement D. General journal
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 55
____________ is a process by which a bookkeeper records all transactions and can adjust the books.
A. JournalEntries
B. AccountingCycle C. Financial statement D. None of all
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 56
________ increase assets and expenses and/or decrease liabilities and/or equity
A. JournalEntries B. Debit
C. Credit
D. None of all
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 57
________ decrease assets and expenses and/or increase liabilities and/or equity
A. JournalEntries B. Debit
C. Credit
D. None of all
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 58
The excess credits (or debits) on the income statement are used to decrease (or increase) the equity account.
A. True B. False
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 59
Delivery has not occurred or services have not been rendered when:
A. Untilinstallationandcustomertestingandacceptancehasoccurred. B. Awrittenorderexistsbutcontainsarightofreturn.
C. BothA&B
D. Neither A nor B
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 60
___________ and __________ are used to increase (or decrease) the equity account.
A. JournalEntries&Debit
B. JournalEntries&transactions C. Journal Entries & Credit
D. None of all
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 61
By removing a tangible asset from the business (a debit), the books will be ___________ by the exact amount of the tangible asset misappropriated.
A. JournalEntries B. Out-of-balance C. False debits D. None of all
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 62
Once the expense account is closed, it becomes a historical item and probably will never be reviewed again.
A. True B. False
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 63
When an incorrect total is carried from the journal to the ledger or from ledger to the financial statements, this method is called:
A. ForcedBalance B. Out-of-balance C. False balance D. None of all
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 64
Skimming is:
A. Theremovalofcashfromavictimentitypriortoitsentryinanaccountingsystem. B. Theadditionofcashfromavictimentitypriortoitsentryinanaccountingsystem. C. The removal of cash from a victim entity after its entry in an accounting system. D. None of above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 65
Which of the following is not the skimming scheme?
A. Unrecordedsales
B. Fraud&Cost
C. Theft of checks through the mail D. Understand sales and receivables
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 66
According to fraud tree, cash has three following schemes:
A. Skimming,cashlarcenyandfraudulentdisbursements
B. Fraudanalysis,skimmingandcashmisappropriations
C. Cash larceny, cash distribution and fraudulent disbursements D. Cash distribution, skimming and fraud analysis
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 67
Skimming cases can more likely to be detected by:
A. Internalaudits
B. Accidents
C. Internal controls
D. occupational frauds
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 68
Theft of incoming checks usually occurs when ________ is (are) in charge of opening the mail and recording the receipt of payments.
A. Singleemployee
B. Twoemployees
C. More than two employees D. None of the above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes
Explanation Explanation/Reference:
QUESTION 69
Which of the following are used in a short-term skimming scheme?
A. Unrecordedsales,understatedsalesandtheftofincomingchecks
B. Unrecordedsales,understatedsalesanddualendorsements
C. False company accounts, understated sales and theft of incoming checks
D. Understated sales, theft of incoming checks and check-for-currency substitutions
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 70
Employees steal an incoming payment and then place the incoming funds in an interest bearing account for:
A. Convertingstolenchecks B. Concealingthefraud
C. Short-term skimming
D. All of the above
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 71
Financial statement fraud is committed by: A. Organizedcriminals
B. Midandlowerlevelemployees C. Senior Management
D. All of the above
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 72
Fraudsters use the accounting system as a tool to generate the results they want in ___________ approach:
A. Organizedaccounting B. Playingtheaccounting C. beating accounting
D. All of the above
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 73
In which approach, fraudsters produce whatever financial statements they wish, perhaps using just a typewriter or a personal computer.
A. Organizedaccounting
B. Playingtheaccounting
C. Beating accounting
D. Outside accounting system
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 74
Which of the following is NOT standard of generally accepted accounting principles?
A. Conservatism B. Cost
C. Full disclosure D. Qualitycontrol
Correct Answer: D
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 75
A typical issue involving material and fraud would be:
A. Fraudulentstatement B. Misappropriations
C. Civil lawsuit
D. Qualitycontrol
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 76
By what accountant means that the financial figures presented by the company are at least as much as reflected in the statements, if not more.
A. Fraudulentstatement B. Misappropriations
C. Conservatism
D. Matching
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 77
“Anticipate possible losses and omit potential profits”, this results in:
A. Asymmetricalaccounting B. Symmetricalaccounting C. Playing accounting
D. Bearing accounting
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 78
_________ assumes the business will go on indefinitely in the future.
A. Materiality
B. Goingconcern C. Cost
D. Fair value
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 79
The price of an asset on which the asset is selling at on the open market in a transaction between a willing buyer and a wiling seller is called:
A. Absolutevalue B. Fairvalue
C. Cost value
D. material value
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 80
Accounting records are designed to be kept on subjective rather than objective evidence.
A. True B. False
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 81
Which of the following is the amount of money that would be realized upon the sale of the asset at some point in the future, less the costs associated with owing, operating and selling it?
A. Netrealizablevalue
B. Goingconcern C. Cost
D. Fair value
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 82
Which of the following factors is NOT included in most financial statement schemes?
A. Fictitiousrevenues
B. PersuasiveEvidence
C. Concealed liabilities and expenses D. Improper asset valuations
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 83
How many accounts are affected in fraudulent accounting entries and therefore same number of categories on the financial statement?
A. One
B. Atleasttwo
C. More than two D. None of above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 84
_________ revenues involve the recording sales of goods or services hat did not occur.
A. Fictitiousorfabricatedrevenues B. Financialrevenues
C. Red flag revenues
D. Concealed revenues
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 85
Revenue is recognized when it is:
A. RealizedandEarned
B. FictitiousandEarned
C. Realized and Evidenced D. All of the above
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 86
According to SAB 104, for the revenue to be typically considered realized or realizable and earned, which of the following criteria is NOT met:
A. Persuasiveevidenceofanarrangementexists B. Serviceshasbeenrendered
C. Timings have been met
D. Collectabilityisreasonablyassured
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 87
Which of the following is true for Red flags associated with fictitious revenues?
A. Slowgrowthorusualprofitability,whennotcomparedtoothercompaniesinthesameindustry.
B. Usualgrowthinthenumberofdayspurchaseinreceivables
C. A significant volume of sales to entries whose substance and ownership is not known.
D. Ausualsurgeinpurchasebyamajorityofunitswithinacompany,orofpurchaserecordedbycorporateheadquarters.
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 88
According to accounting principles, ________ and ________ should be recorded or atched in the same accounting period; failing to do so violates the matching principle of AAP.
A. Revenueandcorrespondingexpenses
B. RevenueandIncomestatement
C. Income statement and Long-term contracts D. Capitalized expenses and Liabilities
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 89
Physical assets including _________ and ________ are the most commonly misappropriated noncash asset in our study.
A. Interest&Collusion
B. Inventory&Equipment C. Inventory&Purchase D. Sales & Equipment
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 90
If the assets are intentionally purchased by the company but simply misappropriated by the fraudster, this is referring to as:
A. Inventorylarcenyscheme B. Assetreceivingscheme C. Fraudulent purchase
D. Falsifyshipping
Correct Answer: A
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 91
____________ corrupt employees can cause inventory to be fraudulently delivered to themselves or accomplices.
A. Falseshippingslip
B. Falsepackingslip
C. Fraudulentinventoryslip D. False credit slip
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 92
A variation between the physical inventory and the perpetual inventory totals is called:
A. Alteredinventory B. Accountreceivable C. Shrinkage
D. Write-offs
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 93
Inventory shrinkage is the unaccounted-for reduction in the company’s inventory that does not results from theft.
A. True B. False
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference:
QUESTION 94
A running count that records how much inventory should be on hand is referred to:
A. Alteredinventory B. Perpetualinventory C. Shrinking inventory D. Fictitious inventory
Correct Answer: B
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 95
Forced reconciliation of the account says:
A. toconcealshrinkageistoalterinventoryrecordsothatitmatchesthephysicalinventorycount.
B. toconcealinventoryistoaltershrinkagerecordsothatitmatchesthephysicalinventorycount.
C. to conceal shrinkage is to change the perpetual inventory record so that it matches the physical inventory count. D. to conceal write-offs is to change the perpetual inventory record so that it matches the physical inventory count.
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 96
__________ inventory and other assets is relatively common way for fraudsters to remove assets from the books before or after they are stolen.
A. Altered
B. Perpetual
C. False shipping slip D. Write-offs
Correct Answer: C
Section: Financial Transactions and Fraud Schemes Explanation
Explanation/Reference: QUESTION 97
According to Hollinger and Clark for Policy development, management must pay attention to:
A. Aclearunderstandingregardingtheftbehavior B. Enforcementofsanctions
C. BothA&B
D. Neither A nor B
Correct Answer: C Section: Investigation Explanation
Explanation/Reference: