Questions and Answers of Fraud Examination

An organization’s relationship with other organizations and individuals is of no interest to a fraud examiner. (True/False)
In searching for financial statement fraud, the three aspects of directors and members of management that should be known are (1) their backgrounds, (2) their motivations, and (3) their influence in
Financial statement fraud is usually committed by entry-level accountants against an organization. (True/False)
In identifying management fraud exposures, it is useful to think of the fraud exposure triangle, which includes (1) management and directors, (2) organizations and industry, and (3) relationships
Michael “Mickey” Monus and Patrick Finn of Phar-Mor used three methods of income statement fraud: account manipulation, overstatement of inventory, and accounting rules manipulations. (True/False)
According to the 1999 COSO study, most companies that committed financial statement fraud had no audit committee or had an audit committee that met less than twice a year. (True/False)
According to the 1999 and 2010 COSO studies of fraudulent financial reporting, the most common method used to perpetrate financial statement fraud includes overstating liabilities. (True/False)
Without a confession, forged documents, or repeated fraudulent acts that establish a pattern of dishonesty, convicting someone of fraud is often difficult. (True/False)
Fraud indicators, or red flags, can be caused by fraud or by legitimate, non-fraud, factors. (True/False)
Unlike other types of fraud, financial statement fraud is usually not concealed and is therefore relatively easy to spot. (True/False)
Nonverbal cues of deception include all of the following except:a. Repetition of the question.b. Dilated pupils.c. Raised chin.d. Decreased foot and leg movements.
A signed statement should include all of the following except:a. A statement that the fraudster knew the conduct was wrong and intended to commit the act.b. The date the fraudster was hired by the
Which of the following is not a good thing to do during an interview?a. Conduct the interview in private.b. Establish the purpose of the interview.c. Interview more than one person at once.d. Do not
Which of the following is something that an interviewee might do or feel while in the denial phase?a. Insult, harm, or slander.b. Attempt to justify the act.c. Become sad, withdraw, or lose
Each of the following is a clue that an interviewee is dishonest except:a. Upon repeated accusations, a dishonest person’s denials become more vehement.b. In order to add credibility to false
Which of the following is a characteristic of a good interview?a. Make the interview as concise as possible.b. The interviewer should announce his or her bias at the outset, because the interviewee
Which of the following reactions frequently involves appearing temporarily stunned, insisting there is some mistake, or not comprehending what has been said?a. Anger.b. Denial.c. Rationalization.d.
Which of the following is the typical sequence of reactions to a crisis?a. Anger, denial, rationalization, depression, acceptance.b. Rationalization, denial, anger, depression, acceptance.c. Denial,
Interviewing is:a. The systematic questioning of individuals who have knowledge of events, people, and evidence involved in a case under investigation.b. The process of answering questions from an
Which of the following traits do polygraphs not measure when testing for stress?a. Pulse rate.b. Blood pressure.c. Galvanic skin response.d. Respiration.e. All of the above are traits measured during
Which of the following honesty testing techniques deals with the study of handwriting for the purpose of character analysis?a. Polygraph.b. Graphology.c. Pencil-and-paper test.d. Voice stress.e. None
Which of the following is not an inquiry technique that should be used by interviewers?a. Use short questions, confined to one topic.b. Maintain full control of the interview.c. Point out some, but
Confrontational interviews should usually be conducted when:a. Police decide that the suspect is guilty.b. The examiner is starting the investigation.c. All other investigative procedures have been
Planning for interviews should not involve:a. Judging the guilt of the suspect based on available documents.b. Establishing a location and time for the interview.c. Ascertaining in advance as many
People in the rationalization stage of reaction to a fraud:a. Make great interviewees because they want to punish the suspect.b. Want to give the suspect one more chance.c. Believe without a doubt
Interviews should not be conducted with:a. Suspects.b. Coworkers.c. Clients.d. Interviews can be conducted with all of the above.
Which of the following is not a method of honesty testing?a. Graphology.b. Voice stress analysis.c. Body language test.d. Pencil-and-paper test.
You and another fraud examiner are debating whether it is ethical to “lie” during an admissions-seeking interview (such as claiming to have compelling evidence of guilt when you don’t) to get a
Many Internet sites contain honesty tests for screening applicants or existing employees. Most of these sites charge a fee for their services, but they do provide an easy, quick way to test
Many universities and private companies offer courses in interviewing techniques. Find an online advertisement for one of these courses. What primary techniques does the course teach?
Using a search engine, find four Web sites that identify different techniques for interviewing. What characteristics or elements are the most recognizable or most distinctive? What are the most
The first reaction to crisis is denial. (True/False)
Fraud reports should only list findings that do not negatively impact the company. (True/False)
The interview should always take place at the interviewee’s place of work. (True/False)
The fraud report should include recommendations for disciplinary action. (True/False)
If a suspect continually repeats phrases, words, or your questions, it could be a verbal cue that he or she is lying. (True/False)
Telling a significant lie and getting away with it during an interview is usually very difficult if the interviewer is well trained. (True/False)
Confrontational interviews should always be conducted even if there is no evidence that can be obtained from the suspect. (True/False)
An interviewer should always be sympathetic and respectful during an interview. (True/False)
The general tone of a fraud report should be neither accusatory nor conclusive as to guilt, even if the suspect has confessed his or her involvement in the crime. (True/False)
Interviews during the rationalization stage are often not objective and can be harmful to the potential prosecution efforts. (True/False)
Failure to pass a polygraph test means certain guilt. (True/False)
Paper-and-pencil honesty tests are most frequently used to determine whether someone has committed a crime. (True/False)
Most conversion investigations involve searching public records and other sources to trace:a. Purchases of assets.b. Payments of liabilities.c. Changes in lifestyle.d. Net worth.e. All of the above.
Which of the following is a possible use of conversion-based investigation techniques?a. Searching public records to trace purchases of assets and payments of liabilities.b. Attempting to locate
Conversion investigations focus on how suspects:a. Had opportunities to steal.b. Had motives to commit fraud.c. Spent stolen money.d. Committed the actual theft.
The net worth method is effective:a. As evidence in court.b. To help obtain a confession.c. To conduct an interview of suspects.d. All of the above.
Which of the following laws regulates activities of credit, insurance, and employment investigations?a. Fair Investigation Act of 1980.b. Fair Credit Reporting Act of 1971 and Fair and Accurate
How useful are local and county records in fraud investigations?a. Very useful.b. Not useful.c. Somewhat useful.d. Aren’t allowed in the investigation of fraud.
Which of the following organizations maintain public information that can be accessed in record searches?a. Local agencies.b. State agencies.c. Federal agencies.d. All of the above.
The net worth method of analyzing financial information can help to determine:a. The suspect’s feelings about the organization.b. Possible perpetrators of the fraud.c. The suspect’s personality
Evidence gathered from public records can be useful in:a. Identifying with the suspect.b. Obtaining a confession.c. Making the suspect feel at ease.d. None of the above.
Although most perpetrators begin their thefts because of a perceived critical need, they usually continue to embezzle in order to:a. Beat the system.b. Fulfill an inner desire to commit fraud.c.
An increase in a person’s net worth plus living expenses equals the person’s total income. (True/False)
The net worth method cannot help in determining the extent of stolen funds. (True/False)
Private financial institutions can usually sell confidential customer information. (True/False)
When people convert stolen cash by entering into financial transactions, such as buying assets, they usually leave tracks that investigators can follow. (True/False)
Federal agencies provide better records than state or county agencies for conversion investigations. (True/False)
Before financial institutions can sell or disclose confidential customer information, they must provide customers with the opportunity to “opt out” from information sharing. (True/False)
The Gramm-Leach-Bliley Act of 1999 made it more difficult for officials and private citizens to access information from financial institutions. (True/False)
Conversion is the third element of the fraud investigation triangle. (True/False)
For various reasons, the net worth method tends to be a conservative estimate of amounts stolen. (True/False)
The net worth method is rarely, if ever, helpful in actual fraud investigations. (True/False)
Several publicly available databases provide information that can be helpful in investigations. (True/False)
Private credit records are maintained on both individuals and organizations by various credit-reporting companies. (True/False)
Counties and other local agencies that contain records are usually not very useful in fraud investigation. (True/False)
The secretary of state maintains many types of records relating to business and Uniform Commercial Code (UCC) filings. (True/False)
It is always necessary to involve a federal law enforcement agent when accessing federal databases. (True/False)
Investigations of perpetrators’ net worth and lifestyles help investigators know what class of society the perpetrators are from..(True/False)
One common investigation procedure determines how perpetrators convert or spend their time.(True/False)
Perpetrators usually save what they steal. (True/False)
Programs like CaseMap, CaseCentral, ZANTAZ, Ringtail, and DatiCon are examples of:a. Software that implements discovery sampling techniques.b. Link analysis software.c. Software packages used to
Which of the following is usually the best way to obtain documentary evidence?a. Computer-based queries of full-population accounting and other databases.b. A statistically sound sampling approach
How are most frauds concealed?a. By shredding source documents.b. By converting to a paperless office without paper transactions.c. By creating fictitious documents or altering source documents.d. By
What can a fraud examiner conclude if his or her tests confirm that no instances of fraud are present in a sample taken from a population?a. There is virtually no risk that fraud exists in the
What can a fraud examiner conclude if one or more instances of fraud are found in a sample taken from a population?a. There is a slight risk that fraud exists in the population.b. The population
Which of the following is true of graphologists?a. They can only perform their work in laboratory settings.b. They perform the same type of work as forensic document experts.c. They study handwriting
Which of the following methods of gathering documents is based primarily on luck?a. Documents discovered during audits.b. Hard-to-get private documents that are subpoenaed.c. Documents discovered
Which of the following is not a benefit of statistical sampling?a. It allows auditors to be certain that fraud does not exist in a population.b. It is helpful when populations are large.c. It allows
Which of the following is not true regarding document experts?a. They can usually determine whether a document was written by the person whose signature the document bears.b. They can usually
Documentary evidence such as private tax returns can usually be obtained only by:a. Subpoena.b. Search warrant.c. Voluntary consent.d. All of the above.
Discovery sampling:a. Is a type of variables sampling.b. Is one of the more difficult statistical sampling methods to understand.c. Is never used in conducting a fraud examination.d. Deals with the
Marking documentary evidence is important to ensure that:a. Documents are legal.b. Databases can be created with valuable information.c. Documents can be identified later.d. Marking documentary
Chain of custody refers to:a. Marking on a document so it can be identified later.b. A record of when a document is received and what has happened to it since its receipt.c. Databases used in trials
In a fraud investigation, documents:a. Usually contain extremely valuable information.b. Are rarely used in court.c. Are not reliable sources of information.d. Are only valuable in obtaining a
The best way to obtain documentary evidence in a computer database is to use discovery sampling to find the appropriate records. (True/False)
Programs like i2’s Analyst’s Notebook and Xanalys Link Explorer perform link analysis. (True/False)
Bates numbers are identifying numbers used by attorneys involved in litigation to track all documents. (True/False)
Using a computer to access records (data mining) can be a very effective approach for determining if fraud exists because the auditor can look at entire populations. (True/False)
Random number tables are ineffective and should not be used when selecting random samples from a population. (True/False)
A canceled check typically shows the account number of the person who presented the check, the teller who processed the check, and the sequence number of the transaction. (True/False)
Even if photocopies of original documents are allowed to be introduced as evidence in a court of law, they are still considered secondary evidence. (True/False)
As long as a sample is selected randomly, it will always be representative of the population as a whole. (True/False)
Discovery sampling is probably the most difficult of all statistical sampling variations to understand. (True/False)
Concealment investigative methods sometimes involve the study of documents that have been manipulated. (True/False)
Evidence should be uniquely marked so it can be easily identified later. (True/False)
There is no difference between forensic document experts and graphologists. (True/False)
Photocopies are always preferable to original documents as evidence. (True/False)
Traditional chain of custody evidence procedures are not appropriate when used with electronic evidence. (True/False)
Checks are excellent sources of physical evidence. (True/False)

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