1. One strategy CPAs utilize to detect financial statement fraud is considering common myths about such fraud. Which of the following is not a common myth about financial statement fraud?

a. Perpetrators are too honest to commit fraud.

b. The company has strong internal controls; thus, fraud will be prevented.

c. Fraud is rare and unlikely to happen at the company in question.

d. Uncovering financial statement fraud is cheap.

1. Shell company schemes are one type of billing fraud. Which of the following statements is correct regarding shell company schemes?

a. Typically, the violator bills for goods rather than services.

b. Shell company invoices typically direct payment to a physical address for the company.

c. Invoices include specific details such as descriptions of items purchased and sales tax charges.

d. Shell companies will often regularly bill for the same or similar amounts, in round figures, typically just under the approval limit of the perpetrator.

1. Check tampering is one type of asset misappropriation fraud. Which of the following is a warning sign that check tampering may be occurring within a company?

a. Authorization, recordkeeping, and custody duties are segregated within the company.

b. There are an excessive number of voided checks.

c. The signatures on the checks match the signatures of authorized signers.

d. Cancelled checks reconcile with the postings in the disbursement journal.

1. Which of the following may be a warning sign that expense reimbursement fraud may be occurring at a company?

a. Travel expenses are on par with the budget and prior year expenses.

b. Supervisors adequately review employee expense reports.

c. Employees often pay for travel and entertainment expenses in cash.

d. Expense reports include appropriate, original documentation.

1. Which of the following statements is correct about the definition of corruption?

a. Corruption is part of asset misappropriation.

b. Corruption can only be committed by someone at the management level.

c. Corruption requires collusion with a third party such as a supplier or customer.

d. Corruption is part of financial statement fraud.