Select the best answer for each of the following questions.

1. Predication is a technical term that refers to:

a. The ability of internal auditors to predict fraud successfully.

b. The ability of a fraud examiner to commence an investigation if a

form of evidence exists that fraud has occurred.

c. The activities of fraud perpetrators in concealing their tracks so

that fraud is covered up and may not be discovered.

d. Managements analysis of fraud risks so they can put in place

effective anti-fraud programs and controls.

2. What fraud schemes were reported to be most common in the

ACFEs 2016 Report to the Nations?

a. Corruption.

b. Fraudulent billing.

c. Misappropriation of assets by employees.

d. Inappropriately reporting revenues in published financial results.

3. Which of the following is not a typical rationalization of a fraud

perpetrator?

a. Its in the organizations best interest.

b. The company owes me because Im underpaid.

c. I want to get back at my boss (revenge).

d. Im smarter than the rest of them.

4. Which of the following is not something all levels of employees

should do?

a. Understand their role within the internal control framework.

b. Have a basic understanding of fraud and be aware of the red flags.

c. Report suspicions of incidences of fraud.

d. Investigate suspicious activities that they believe may be

fraudulent.

5. An organization that manufactures and sells computers is trying to

boost sales between now and the end of the year. It decides to offer

its sales representatives a bonus based on the number of units they

deliver to customers before the end of the year. The price of all

computers is determined by the vice president of sales and cannot be

changed by sales representatives. Which of the following presents

the greatest reason a sales representative may commit fraud with

this incentive program?

a. Sales representative may sell units that have a lower margin than

other units.

b. Customers have the right to return a laptop for up to 90 days after

purchase.

c. The units delivered may be defective.

d. The customers may not pay for the computers timely.

6. How should an organization handle an anonymous accusation from

an employee that a supervisor in the organization has manipulated

time reports?

a. Assign a staff internal auditor to review all time reports for the

past six months in the supervisors area.

b. Make a record of the accusation but do nothing, as anonymous

accusations are typically not true.

c. Assess the facts provided by the anonymous party against preestablished

criteria to determine whether a formal investigation is

warranted.

d. Turn the issue over to the HR department because this type of

anonymous accusation is usually just a human resource issue.

7. Which of the following is an example of misappropriation of assets?

a. A small amount of petty cash is stolen.

b. A journal entry is modified to improve reported financial results.

c. A foreign official is bribed by the chief operating officer (COO) to

facilitate approval of a new product.

d. A duplicate bill is sent to a customer in hopes that they will pay it

twice.

8. Which of the following is not an example of a fraud prevention

program element?

a. Background investigations of new employees.

b. Exit interviews of departing employees.

c. Establishing authority limits related to purchasing commitments.

d. Analyzing cash disbursements to determine whether any duplicate

payments have been made.

9. Which of the following types of companies would most likely need

the strongest anti-fraud controls?

a. A manufacturer of popular athletic shoes.

b. A grocery store.

c. A bank.

d. An internet-based electronics retailer.

10.A payroll clerk increased the hourly pay rate of a friend and shared

the resulting overpayment with the friend. Which of the following

controls would have best served to prevent this fraud?

a. Requiring that all changes to pay records be recorded on a

standard form.

b. Limiting the ability to make changes in payroll system personnel

information to authorized HR department supervisors.

c. Periodically reconciling pay rates per personnel records with those

of the payroll system.

d. Monitoring payroll costs by department supervisors monthly.

11. The internal audit functions responsibilities with respect to fraud are

limited to:

a. The organizations operational and compliance activities only

because financial reporting matters are the responsibility of the

independent outside auditor.

b. Monitoring any calls received through the organizations

whistleblower hotline but not necessarily conducting a follow-up

investigation.

c. Being aware of fraud indicators, including those relating to

financial reporting fraud, but not necessarily possessing the

expertise of a fraud investigation specialist.

d. Ensuring that all employees have received adequate fraud

awareness training.

12. From an organizations standpoint, because internal auditors are seen

to be internal control experts, they also are:

a. Fraud risk management process owners, and hence, the first and

most important line of defense against fraudulent financial

reporting or asset misappropriation.

b. The best resource for audit committees, management, and others

to consult in-house when setting up anti-fraud programs and

controls, even if they may not have any fraud investigation

experience.

c. The best candidates to lead an investigation of a fraud incident

involving the potential violation of laws and regulations.

d. The primary decision-maker in terms of determining punishment

or other consequences for fraud perpetrators.

13. According to research in personality psychology, the three dark

triad personalities do not mention:

a. Sociopaths.

b. Psychopaths.

c. Narcissists.

d. Machiavellians.

14. The 17 principles in the updated COSO 2013 Internal Control

Integrated Framework include one devoted specifically to addressing

fraud risk:

a. True.

b. False.

15. The Cressey Fraud Triangle does not include, as one of its vertices:

a. Pressure.

b. Opportunity.

c. Rationalization.

d. Fraudster personality.