Chapter 1

Why does fraud seem to be increasing at such an alarming rate?

- Computers, the Internet, and technology make fraud easier to commit

Which of the following is not an important element of fraud?

- Intelligence

Fraud is considered to be:

- A serious problem that continues to grow

People who commit fraud are usually:

- Trusted individuals

The use of one's occupation for personal enrichment through the deliberate misuse or
misapplication of the employing organization's resources or assets is the definition of which type
of fraud?
- Employee embezzlement or occupational fraud

Corporate employee fraud fighters:

- Prevent, detect, and investigate fraud within a company

Investment scams most often include:

- Worthless investments or assets sold to unsuspecting investors

Which of the following is not true of civil litigation?

- It must be heard by 12 jurors

Future careers in fraud will most likely be:

- In high demand and financially rewarding

Studying fraud will help you:

- All of the above
(learn evidence-gathering skills, avoid high risk and fraudulent activities, and learn
valuable interviewing skills)

Which of the following is not a reliable resource for fraud statistics?

- Fraud perpetrators

Which of the following statements is true?

- Fraud is often labeled as the fastest-growing type of crime

Which of the following is not an element of fraud?

- Accidental behavior
What is the best way to minimize fraud expense within an organization?
- Effective prevention of fraud.

What is the most important element in successful fraud schemes?

- Confidence in the perpetrator

Which of the following characters is least likely to be involved in a fraud?

- A long-haired teenager wearing leather pants

Which of the following is not a common type of fraud?

- Executives embezzling from petty cash.

Which of the following is not a form of vendor fraud?

- Not paying for goods purchased

Civil law performs which of the following functions?

- Remedy for violation of private rights

Fraud fighting includes what type(s) of careers?

- All of the above: professors, lawyers, CPA firms

Which of the following is not an example of employee embezzlement?

- Angry employees vandalizing the building with spray paint

Which of the following is not an example of vendor fraud?

- A vendor has much higher prices than its competitors

International manipulation of financial statements describes which kind of fraud?

- Management Fraud

Which of the following is required to become a CFE?

- All of the above
(must commit to abide by a strict code of professional conduct and ethics
be an associate member, in good standing, of the ACFE
be of high moral character)

Which of the following is not true regarding the ACFE?

- It has roughly 12,000 members throughout the world
Chapter 2

Fraud perpetrators:
- Have profiles that look like most honest people.

Which of the following is not one of the three elements of the fraud triangle?
- Intelligence

Which of the following is a common perceived pressure?

- A financial need

If pressures and opportunities are high and personal integrity is low, the chance of fraud is:
- High

Which of the following is probably the least a common type of fraud pressure?
- Pressure to outsmart peers

Fraud opportunity involves:

- All of the above (Opportunity to: conceal fraud, avoid being punished for fraud, commit
fraud)

Which of the following is not one of the three elements of the control system of an organization?
- Management

Which of the following non-control factors provides opportunities for fraud?

- All of the above
-inability to judge the quality of performance
-lack of access to information
-failure to discipline fraud perpetrators
-lack of an audit trail

Who generally has the highest risk of becoming a fraud victim?

- Older, less educated people

How frequently do most people rationalize?

- Often

Which of the following kinds of pressure is most often associated with fraud?
- Financial pressure

Which of the following is not a primary control activity?

- Decreasing work-related pressure
It is the ___ and ___ of existing controls, not the ___ of controls, that allows most frauds to be
perpetrated.
- Overriding, ignoring, lack

On what element of the fraud triangle do most fraud fighters usually focus all or most of their
preventative efforts?
- Perceived opportunity

Which of the following is not an internal control activity (procedure)?

- Appropriate hiring procedures

Which of the following is not a common vice that motivates people to commit fraud?
- All of the above (Gambling, drugs, expensive extramarital relationships, alcohol)

Which of the following is not a way that management can establish a good internal control
environment?
- All of the above
(Having a clear organizational structure
Proper training
Communicating openly
Appropriate hiring procedures)

Which of the following is not an element of most frauds?

- Breaking and Entering

Which of the following is an example of legitimate power?

- Your boss tells you to do something

Which of the following is an example of referent power?

- Your friend asks you to do a special favor for him or her

Chapter 3

The most effective way to reduce losses from fraud is:

- Preventing fraud from occurring

To successfully prevent fraud, an organization must:

- All of the above
Identify internal control weaknesses
Explicitly consider fraud risks
Take proactive steps to create the right kind of environment

The best way for management to model appropriate behavior is to:

- Set an example of appropriate behavior
Which of the following is not a proactive way for a company to eliminate fraud opportunities?
- Severely punishing fraud perpetrators

Most frauds start small and:

- If not detected, continue to get larger

Because of the ability to override internal controls, It is most difficult to prevent which type of
fraud?
- Fraud committed by a company president

Which of the following refers to the circumstances, taken as a whole, that would lead a
reasonable prudent professional to believe fraud has occurred, is occurring, or will occur?
- Predication

An investigative approach that includes testimonial evidence, documentary evidence, physical

evidence, and personal observations if referred to as the:
- Evidence Square

Usually, for everyone involved- especially victims- the investigation of fraud is very:
- Traumatic and difficult

To prevent fraud from reoccurring, most organizations and other fraud victims should:
- Pursue either civil or criminal action, depending on the circumstances, or both.

All of the following are ways to create a culture of honesty and high ethics except:
- Eliminating opportunities for fraud

The tone at the top when related to fraud usually refers to management's attitude about:
- How management models appropriate behavior

Research shows that fraud occurs less frequently when employees feel:
- Ownership in the organization

Opportunities to commit fraud can be eliminating by identifying sources of fraud, by

implementing controls, and through independent checks. One other effective way of eliminating
opportunities is:
- teaching employees to monitor and report fraud

Drawbacks to establishing a hotline for employees to report fraud include all of the following
except:
- This method for finding fraud is outdated
Predication of fraud is defined as:
- Reasonable belief that fraud has occurred, or is occurring

Which of the four types of evidence includes interrogation and honesty testings?
- Testimonial

The three elements presented in most cases of fraud are:

- Theft act, concealment, and conversion

Most often, victims of fraud do not take legal action against perpetrators. This is because legal
action can be:
- All of the above (Unproductive, Embarrassing, Expensive)

The best argument for taking legal action of fraud perpetrators is:
- Prosecution of perpetrators discourages future occurrences of fraud.

Factors that are usually associated with high levels of employee fraud include all of the
following except:
- Long and difficult hours shared equally by everyone in the organization

Which of the following is true regarding the Sarbanes-Oxley Act of 2002?

- Public companies must have a whistle-blower system in place

Chapter 4

People will often become dishonest if they are placed in an environment of:
- All of the above (Poor controls, High pressure, Low integrity, Loose accountability)

Which of the following factors contribute to creating a corporate culture of honesty and
openness?
- Both A&D (Hiring honest people & Having a well-understood and respected code of
ethics)

Which of the following personnel and operating policies contribute to a high-fraud environment?
- All of the above (Management by crisis, Rigid rules, High employee lifestyle
expectations, Poor promotion opportunities)
The single most effective tool in preventing and detecting fraud is usually:
- Having a good system of internal controls

A company's control environment includes:

- All of the above:
-the tone that management established toward what is honest and acceptable behavior
-corporate hiring practices
-Having an internal audit department

Which of the following factors generally results in a high-fraud environment?

- Autocratic management

Which of the following aspects of fraud usually results in the largest savings?
- Fraud prevention

Which of the following is usually the most effective tool in preventing and detecting fraud?
- Having a good system of internal controls

Which of the following is the typical fraud model that describes most firms?
- Fraud incident, investigation, action, resolution

The "tone at the top" is an important element in fighting fraud which involves:
- Setting a proper example or modeling appropriate management behavior

Which of the following is not a recognized method of eliminating fraud opportunities?

- Engendering employee goodwill by having lax rules

Which of the following is not a reason identified by Deloitte why whistle-blowing systems fail?
- Pressure to comply

Alerting vendors and contractors to company policies often results in:

- Discovery of current frauds and the prevention of future frauds

Chapter 5

Which of the following is true regarding fraud?

- It is seldom observed

Which of the following is not a fraud symptom related to source documents?

- A tip from an employee
Which of the following is a fraud symptom related to an internal control weakness?
- All of the above
-Lack of proper authorization
-Lack of independent checks
-Inadequate accounting system
-Lack of physical safeguards

In the three elements of fraud (theft act, concealment, conversion) who is usually in the best
position to detect the fraud?
- Coworkers and managers

When a person commits a crime:

- He or she usually becomes engulfed by emotions of fear and guilt

Most people who commit fraud:

- Use the embezzled funds to improve their lifestyle

Which of the following is not a reason people are hesitant to come forward with knowledge or
suspicions of fraud?
- People who report fraud are not rewarded monetarily

Which of the following is not one of the categories of employee fraud symptoms?
- Firm Structure

Embezzlement of assets reduced the left side of the accounting equation. To conceal the theft,
the embezzler must find a way to reduce the right side of the accounting equation. A perpetrator
would most likely reduce the right side of the equation by:
- increase expenses

Which of the following is NOT a fraud symptom related to journal entries?

- journal entries made near the beginning of accounting periods

Which of the following is NOT a common internal fraud symptom or problem?

- unexplained adjustments to receivables, payables, revenues, or expenses

Once in a while, someone commits fraud or another crime and does not feel stress. Such people
are referred to as:
- psychopathic
Fraud is usually detected by recognizing and pursuing:
- symptoms

A letter is most likely to be fraudulent if:

- it is a photocopy of an original letter

If a perpetrator has stolen assets, which of the following is the easiest method for concealing the
theft?
- increase expenses

Which of the following is a common fraud symptom relating to ledgers?

- A&C
-A ledger that does not balance
-Master account balances that do not equal the sum of the individual customer or vendor
balances

Which element is not a common element of fraud?

- Coercion

Chapter 6

When detecting fraud, it is important that fraud investigators:

- remain objective and neutral

Data-driven fraud detection:

- looks for errors in databases

Once a buyer starts accepting kickbacks from a supplier:

- All of the above

The most obvious disadvantage of the data-driven approach is:

- High cost

Benford's law
- predicts that the first digit of random number sets will begin with a 1 more often than a 2,
and a 2 more often than a 3 and so on

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:
- data-driven fraud detection
When deciding which detection method to use, it is important to:
- all of the above

Fraud is best detected through the financial statements by focusing on

- unexplained changes in financial statement balances

The most effective way to convert balance sheets and income statements from position and
period statements to change statements is to
- Perform horizontal and vertical analyses

Profit, margin, return on assets, and return on equity are all examples of:
- Key financial statement ratios

When vertical analysis is performed:

- Financial statement balances are converted to percentages

Horizontal analysis is different from vertical analysis in that:

- Horizontal analysis calculates the percentage change in balance sheet and income
statement numbers from one period to the next, while vertical analysis converts balances
in a single period to percentages

Which of the following is an advantage of using data analysis software to detect fraud
- Data analysis software can analyze entire populations rather than just samples

Benford's law is
- An effective way to identify anomalies in data sets

If a search reveals that an employee and a vendor have the same telephone number, this result
may indicate that
- Employees may be establishing dummy vendors

When conducting financial statement analysis, which ratio will be the most useful in determining
whether a company has erroneously inflated accounts receivable
- accounts receivable turnover

When trying to identify outliers, what is one of the best statistical approaches
- z-score calculation

An advantage of using ODBC to import data into a data warehouse is that:

- ODBC automatically retrieves column names and types from the database

The soundex algorithm

- All of the above
Chapter 7

Which of the following is NOT a category used in the fraud triangle plus inquiry paradigm?
- action investigative techniques

When beginning an investigation, it is important that fraud examiners use techniques that will:
- not arouse suspicion

When conducting interviews during an investigation, which of the following words should
usually be avoided?
- investigation

When beginning a fraud investigation, which of the following methods is most useful in
identifying possible suspects?
- preparing a vulnerability chart

Invigilation:
- provides evidence to help determine whether fraud is occurring

Which of the following is NOT a theft act of investigation method?

- honesty testing

When deciding whether or not to investigate, which of the following factors should an
organization NOT consider?
- all of the above should be considered

Surveillance, when properly performed, is done:

- without the perpetrator's knowledge

Which of the following is NOT included in a vulnerability chart?

- internal controls that a company plans to institute in the future

A vulnerability chart:
- forces investigators to explicitly consider all aspects of a fraud

Fixed-point, or stationary, observations can be conducted by:

- anyone, if conducted properly

Surveillance logs should include all of the following except:

- cost of the surveillance equipment used
Wiretapping, a form of electronic surveillance, can be used by:
- none of the above

Which of the following investigation methods often raise concerns about employees' privacy at
work?
- electronic surveillance

Who should be consulted before any form of surveillance takes place?

- legal counsel and human resources

When seizing computers, a calculation (also called a hash) that ensures you have an exact clone
and have not changed data is called a(n):
- CRC checksum number

A snapshot of active memory should be done:

- after seizure of the computer but before turning off the computer

Chapter 8

In fraud investigation documents:

- Usually contain extremely valuable information.

Chain of custody refers to:

- A record of when document is received and what has happened to its receipt

Marking documentary evidence is important to ensure that:

- Documents can be identified later.

Discovery Sampling:
- Deals with the probability of discovering at least one error in a given sample size if the
population error is a certain percentage.

Documentary evidence such as private tax returns can usually be obtained only by
- All of the above ( Subpoena, Search Warrant, Voluntary Consent)

Which of the following is NOT true regarding document experts?

- All of the above are true statements

Which of the following is NOT a benefit of statistical sampling?

- It allows auditors to be certain that fraud does not exist in a population.

Which of the following methods of gathering documents is base primarily luck?

- Documents provided by tipsters.
Which of the following is true of graphologists?
- They study handwriting as a way to interpret and identify personalities.

What can a fraud examiner conclude if one or more instances of fraud are found in a sample take
from a population?
- The population contains fraud.

What can a fraud examiner conclude if his or her tests confirm that non instances of fraud are
present in a sample taken from a population?
- Only that no fraud is present in that particular sample.

How are most frauds concealed?

- By creating fictitious documents or alerting source documents.

Which of the following is usually the best way to obtain documentary evidence?
- Computer-based queries of full-population accounting and other databases.

Programs like CaseMap, CaseCentral, Zantaz, Ringtail, and DaticCon are examples of:
- Software packages used to index and store evidence.

Chapter 9

Although most perpetrators begin their thefts because of a perceived critical need, they usually
continue to embezzle in order to:
- Improve their lifestyle

Evidence gathered from public records can be useful in:

- Obtaining a confession.

The net worth method of analyzing financial information can help to determine:
- The amount of embezzled funds.

Which of the following organizations maintain public information that can be accessed in record
searches?
- All of the above- Local, state and federal agencies

How useful are local and country records in fraud investigations?

- Very useful

Which of the following laws regulates activities of credit, insurance, and employment
investigations?
- Fair Credit Reporting Act of 1971 and Fair and Accurate Credit Transactions Act of 2003
The net worth method is effective:
- All of the above -- Evidence in court, to help obtain confession, conduct an interview of
suspects.

Conversion investigations focus on how suspects:

- Spend stolen money

Which of the following is a possible use of conversion-based investigation techniques?

- All of the above

Most conversion investigations involve searching public records and other sources to trace:
- All of the above---- purchase of assets, payment of liabilities, change in lifestyle, net
worth

A database of criminal records maintained by the FBI is:

- Both B and C --- The III and The NCIC

Who among the following are usually some of the best and most helpful federal fraud
investigators?
- Postal inspectors

Which source could be uses to access valuable financial information in a fraud investigation?
- ALL OF THE ABOVE

The net worth method is a calculation based on a person's:

- Assets, liabilities, income, and living expenses

The formula to calculate funds from unknown sources is:

- Assets-Liabilities-Prior Year's Net Worth + Living Expenses - Funds from Known
Sources.

The Gramm-Leach-Bliley Act Allows

- ALL OF THE ABOVE

Each of these agencies is correctly matched with the type of information the agency provides
except:
- State Attorney General: Maintains birth records and information about people's SSNs.

Each of these statements is true about the net worth method for determining embezzled amounts
except:
- Courts are generally suspicious of dollar amounts determined by the net worth method
because courts realize that the net worth method can only provide approximations of the
amount stolen.
Under the net worth method, a person who has an increase in net worth of $100,000, known
expenses of $80,000, and a salary of $60,000 would have an unknown income of:
- $120,000

Known income subtracted from total income gives a reasonable estimate of

- Unknown income