(Multiple choice)
1. When detecting fraud, it is important that fraud investigators:
a. Remain objective and neutral.
b. Assume guilt.
c. Assume innocence.
d. None of the above.

2. Data-driven fraud detection:
a. Determines the cost of fraud.
b. Identifies possible fraud suspects.
c. Looks for anomalies in databases.
d. All of the above.

3. Once a buyer starts accepting kickbacks from a supplier:
a. Prices often increase.
b. Purchases from other vendors often decrease.
c. The supplier usually takes control of the purchasing relationship.
d. All of the above.

4. The most obvious disadvantage of the data- driven approach is:
a. Databases are very large and often cannot be analyzed using analysis packages like ACL, IDEA, or Picalo.
b. High cost.
c. The decrease in employee morale.
d. None of the above.

5. Benford’s Law:
a. Is usually unsuccessful as a fraud detection tool.
b. Predicts that the first digit of random number sets will begin with a 1 more often than a 2, a 2 more often than a 3, and so on.
c. Applies to personal ID numbers.
d. All of the above.

6. A detection method that focuses on the kinds of frauds that can occur and then uses technology to determine whether those frauds actually exist is called:
a. Fishing fraud detection.
b. Data mining.
c. Data-driven fraud detection.
d. Benford’s Law.

7. When deciding which detection method to use, it is important to:
a. Determine the advantages and disadvantages of each approach.
b. Identify the costs involved.
c. Determine which method will meet the client’s objectives.
d. All of the above.

8. Fraud is best detected through financial statements by focusing on:
a. Unexplained changes in financial statement balances.
b. Consistencies.
c. Intuition.
d. Management’s behavior when financial statements are released.

9. The most effective way to convert balance sheets and income statements from position and period statements to change statements is to:
a. Compare balances in the statements from one period to the next.
b. Calculate key ratios and compare them from period to period.
c. Perform horizontal and vertical analyses.
d. All of the above.

10. Profit margin, return on assets, and return on equity are all examples of:
a. Vertical analysis.
b. Key financial statement ratios.
c. Horizontal analysis.
d. None of the above.