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fraud examination
Forensic Accounting And Fraud Examination 2nd Edition Mary Jo Kranacher, Richard Riley - Solutions
Which of the following red flags is commonly associated with fictitious expense reimbursement schemes?1. Patterns when expense reimbursements are for the same amount2. Ghost employees receiving expense reimbursements3. Cash disbursements where the canceled checks have been altered4. Billing errors
Which of the following red flags is seldom associated with cash register disbursement frauds?1. Excessive voids2. Uncashed personal checks in the cash drawer received from employees3. Excessive customer refunds4. Higher than expected uncollectible receivables
A woman had two sons, who were born on the same hour of the same day of the same year, but they were not twins. How could this be?
Which of the following is a key attribute of corruption schemes?1. Corruption schemes usually involve an elected official.2. Corruption schemes usually involve an official operating in an official capacity.3. Corruption is a special case of asset misappropriation.4. Corruption schemes other than
In what year was the oil-for-food program established?
Jackson Enterprises does business in the United States and Venezuela. The Venezuela facility is located in Mariara and the Mayor of the city is Diego Ledezma. Assume that your data analytics examination related to the A/P vendor disbursements resulted in the following summary table for vendors with
What made monitoring the oil-for-food program so difficult?
Assume that the deadline for the “Project X” bid solicitation is no later than 12 midnight on December 1, 20x5. The following is a data analytics summary of bid details for 20x4 and “Project X”:Case discussion: Are there any red flags with this fact pattern that might be consistent with a
The following is the “inventory” of items received to continue the examination at Johnson Real Estate. In this chapter, the goal is to focus on the missing deposits: who, what, when, where, and how.Documents subpoenaed from Internal Revenue Service:Individual Income Tax Return Form 1040 Year I:
A woman came home with a bag of groceries, got the mail, and walked into the house. On the way to the kitchen, she went through the living room and looked at her husband, who had blown his brains out. She then continued to the kitchen, put away the groceries, and made dinner.
How do bribery and illegal gratuities differ?
Which of the following is most consistent with illegal gratuities?1. An illegal gratuity is not received as a result of an agreement to facilitate an action in advance of that action.2. An illegal gratuity occurs when a person agrees to accept an amount for participating in an illegal act.3. An
How much money was devoted to the oil-for-food program?
Why has winning convictions related to oil-for-food been so difficult?
What is meant by a conflict of interest?
Which of the following most accurately indicates why conflicts of interest create concern?1. In a conflict of interest, a person accepts illegal payments as a direct result of their actions.2. A person who creates a fake company and bills his company for goods and services never received is a
How many persons associated with the oil-for-food program have been indicted?
Describe the moral concerns associated with diverting money supposedly used to humanitarian needs to the pockets of a few individuals?
When did the oil-for-food program end?
What is the best way to prevent and detect conflicts of interest?1. An effective control environment, including an ethical “tone at the top”2. Segregation of duties3. Bank reconciliations4. Transparent and full disclosure
What event triggered the end of the oil-for-food program?
Which of the following best describes a key attribute of kickback schemes?1. Kickback schemes have no similarities to billing schemes.2. Kickback schemes usually involve at least one person inside the organization and one person outside the organization.3. Kickback schemes inherently involve
What was the name of the former U.N. Secretary General Boutros Boutros-Ghali’s brother-in-law who was indicted related to the oil-for-food scandal?
Which of the following is not correct regarding bid-rigging schemes?1. Bidding processes create an opportunity for bribery.2. Bid-rigging schemes can occur in the presolicitation phase.3. Lost bids are always part of a bid-rigging scheme.4. Bid-rigging schemes involve something of value.
Explain what is meant by the human factor?1. The human factor means that all persons suffer from fits of bad judgment, which leads to fraud.2. Greed is the defining human factor.3. Human failings have led trusted people to violate that trust.4. Human failings are derived from unreasonable
Which of the following most accurately identifies the significance of the “perception of detection”?1. Fear of getting caught is a critical aspect of effective deterrence.2. Proactive fraud policies are more effective than employee education in creating a perception of detection.3. Unreasonable
Which of the following is most accurate with regard to fraud prevention and deterrence?1. Fraud can always be prevented but not deterred.2. Fraud deterrence is about creating an environment where fraud is less likely to occur.3. Fraud deterrence prevents employees, customers, and vendors from
A woman shoots her husband. Then she holds him underwater for over five minutes. Finally, she hangs him. But five minutes later, they both go out together and enjoy a wonderful dinner. How can this be?
In June of 1990, how large was the capital infusion to facilitate Phar-Mor growth?
In a fraud case, why does each party (e.g., management, board, audit committee, auditors, lawyers, etc.) usually blame another party for the fraud?
The following is the “inventory” of items received to continue the examination at Johnson Real Estate. The goal is to focus on the missing deposits: who, what, when, where, and how.Documents subpoenaed from Internal Revenue Service:Memo—Additional facts, circumstances, and evidence Private
Can you create a graphic that highlights the employee who payroll was processed on Saturday and the dates of the process?
A married couple goes to a movie. During the movie the husband strangles the wife. He is able to get her body home without attracting attention. How?
Which of the following is not a common reason why senior management might overstate or understate business performance?1. Pressures to boost revenues or expenses2. Improperly designed incentive (e.g., bonus) packages3. High levels of personal debt leading to a need for the executive to generate
Discuss the reasons for this phenomenon and explain the probable reasons why no one who knew about the fraud came forward to stop it?
Which of the following is not a methodology by which financial statement fraud is committed?1. Manipulation of revenue2. Manipulation of asset valuations3. Manipulation of disclosures4. Manipulation of accounting regulations
Who was Phar-Mor’s Chief Financial Officer?
Consider your role as a junior accountant within a company or new staff member within an audit/tax professional services firm. How should you protect yourself from becoming an unwitting participant in a fraud?
What are the five classifications of financial statement fraud?
Which of the following is not one of the five major classifications of financial statement fraud?1. Fictitious revenues2. Improper disclosures3. Concealed liabilities4. Channel stuffing
On what date did Phar-Mor announce that David Shapiro would assume the duties of President and Mickey Monus Vice-Chairman?
Which of the following is not a fictitious revenue scheme?1. Matching expenses to revenues2. Premature revenue recognition3. Conditional sales4. Channel stuffing
How long was Mickey Monus’s prison sentence?
Is Mickey Monus now out of jail?
Of the following, choose the one that depicts a situation where liabilities and expenses are manipulated to make a company appear more profitable?1. Liabilities are capitalized to increase revenues 2. Adelphia Communications fraud 3. Failure to record employee payroll earned but not paid as of
Related to financial reporting disclosures, even when reported, which of the following still requires careful examination by the antifraud professional?1. Omitted liability disclosures2. Related party transactions3. Accounting changes4. Management fraud
How may improper asset valuation inflate the current ratio?
Which improper asset valuation may inflate the current ratio?1. Valuing inventory at current retail prices2. Accounting for declines in fair market value of inventory3. Failing to record valuation impairment to property, plant, and equipment4. Capitalizing expenses as property, plant, and equipment
Which of the following is not likely to deter financial statement fraud?1. Reducing the amount of inventory on hand2. Establishing Board of Directors and Audit Committee oversight in line with antifraud best practices3. Segregation of duties for acquisition, payment, recordation, stewardship, and
Given the four criteria necessary for a sale to be complete, which of the following is not one of those conditions?1. Delivery has occurred or services rendered.2. Cash has been collected.3. The sales price is fixed or determinable.4. Documentation exists that can serve as evidence of a sale.
In what year was the original company formed?
Discuss why collusive frauds, especially when perpetrated among related parties, is particularly difficult to detect?
Is Fairmont in compliance with company policy that requires explicit approval of all hours of eighty hours or more.
Answer the following questions:1. Name at least five industries that might be affected by weather.2. Is it appropriate for the forensic accountant/fraud examiner to examine the effect of weather? Why? Why not?3. What if contractual provisions state that the contractor should consider, evaluate, and
d that Fairmont is not in complianThe forensic audit has determinece with Federal withholding requirements for FICA and Medicare because FICA and Medicare were not withheld from employee paychecks (November 19–23, 2018).Question: Can you present this result in a manner that is easy for the CEO,
What is meant by inventory “shrinkage”?
Which of the following is not a technique to conceal inventory shrinkage?1. Counting and valuing the physical inventory at the end of each year 2. Writing off inventory after physical inventory counts 3. Understating the value of physical inventory counts 4. Altering the yearly physical inventory
Which of the following is generally least effective in detecting noncash misappropriations?1. Physical inventory counts and inspections 2. Investigation of inventory shortages 3. Summarizing inventory items valued at less than the retail price 4. Summarizing inventory receiving shortages by
For how much did Tyco settle their shareholder lawsuits?
In what prison system were the Tyco executives prosecuted?
Mr. Kozlowski forgave relocation loans given to 51 employees and paid their corresponding income taxes at a cost to Tyco shareholders of $96 million. How would you hypothesize that this act impacted the fraud, if at all, and why?
Analyze how the fraud triangle would be adjusted for collusive fraud teams.
List Cynthia Cooper’s two colleagues who assisted her with uncovering the WorldCom fraud.
Under what circumstances would a Miranda Warning be required?
Which of the following is not a means to a negotiated remedy?1. Arbitration 2. Mediation 3. Remediation 4. Out-of-court settlements
What was the name of Enron’s Internet trading venture?
Can the graphic highlight both the employee lacking the approval and the number of hours for each incident?
Assume that you have been asked to perform an examination and report on your findings, conclusions, and opinions. Assume the following:1. The industry is oil production (at a well-head), transportation, and refinement.2. The transporter and refiner are one company.3. The transporter refused to
Consider the following questions:1. Is it appropriate to examine whether the oil producer’s actions were justified?Why or why not?2. If oil quality is subjective, is it appropriate to examine oil quality? Why or why not?3. If oil quality is subject to machine testing and objective metrics, is it
Is Fairmont in compliance with Federal withholding requirements for FICA and Medicare?
What is the difference between skimming and cash larceny?
Which of the following best describes skimming?1. Skimming involves the theft of cash after the cash is recorded in the company’s accounting system.2. Skimming involves the theft of cash prior to the cash entering the company’s bank account and accounting system.3. Skimming involves the theft
Which of the following is not a method for committing and concealing a sales skimming scheme?1. Conducting sales during nonbusiness hours 2. Voiding sales transactions 3. Lapping 4. Cash register manipulation
Which of the following is not a methodology for the skimming of receivables and its related concealment?1. Voiding a sale after the customer leaves the premises 2. Accounts receivable write-offs 3. Customer accounts receivable discounts 4. Destroying or altering accounts receivable transactions
Which of the following is generally the least effective methodology to detect sales or accounts receivable skimming?1. Count and summarize accounts receivable write-offs by employee.2. Periodically review the back-up documentation, including approval for accounts receivable write-offs.3. Examine
Which of the following best describes the difference between skimming and cash larceny?1. Cash larceny is an “off-the-books” scheme, whereas skimming is an “on-the-books” scheme.2. Skimming and cash larceny both involve the act, the concealment, and the conversion.3. Skimming involves the
Which of the following is the least effective methodology to detect cash larceny?1. Correlate cash shortage details to voids and customer discounts by employees to identify unusual activity.2. Visit the store and interview customers concerning their shopping experience.3. Summarize the use of cash
Which of the following is a noncash asset misappropriation scheme?1. Skimming 2. Lapping 3. Kiting 4. Using a company computer to operate an Internet commerce site after business hours
Which of the following is not typically a methodology to conceal the misuse of noncash assets?1. Voiding sales at the warehouse liquidation location 2. Marking receiving documents as “short”3. Writing off property plant and equipment as scrap 4. Falsifying incoming shipments paperwork
What event sparked the drop in the value of Tyco stock in 2002?
Who was the Tyco Chief Executive Officer at the time of the investigation?
How many shares of stock did Kozlowski and Swartz sell without proper disclosure?
What corporate governance body was criticized for failing to set appropriate standards of ethics, integrity, accounting, and corporate governance?
What kind of noncash asset misappropriation scheme was perpetrated by Mr. Kozlowski?
Why does the venue for the criminal prosecution matter? Given that Mr. Kozlowski was prosecuted in state court, how does he likely benefit and how is he likely to suffer in contrast to being prosecuted in the Federal system?
Assume that your data analytics examination related to voids and voided sales at a large retail location for the period of December 1 through 30 resulted in the following summary table. Also assume that location square footages available for retail sales are reasonably comparable across these
Explain the relationship between an employee’s position and the level of theft.
Analyze how the fraud triangle would be adjusted for predator fraudsters.
Using the M.I.C.E. acronym, examine whether ideology, coercion, and ego/entitlement constitute frauds, given that the monetary benefit of the fraud to the perpetrator might be relatively small or nonexistent.
Explain the benefits of the triangle of fraud action in comparison to the fraud triangle in courtroom testimonial situations.
In the Albrecht Fraud Scale, which of the following is true?1. The fraud scale adds the characteristic of capability to the fraud triangle. 2. The fraud scale adds the characteristic of integrity to the fraud triangle. 3. The fraud scale adds the characteristic of rationalization to the fraud
Which of the following is not a behavioral indicator of fraud?1. Buying new luxury cars or wearing expensive jewelry 2. Acting irritable, defensive, or in a belligerent manner 3. Not taking vacations of more than two or three days 4.Failing to retain adequate financial records
Which of the following best describes the relationship between an employee’s position and theft (according to Hollinger and Clark’s research)?1.The more expensive thefts are observed in jobs with greater access to the assets of value in the organization.2. The higher the level of employee in
In terms of the definition of occupational fraud and abuse, who is an employee?1. Any person who receives regular and periodic compensation from an organization for his or her labor 2. Only rank and file workers 3. Any trust violator 4. Respectable business and professional individuals
The difference between fraud and errors is:1.The materiality of the value involved 2. Intent of those involved 3. Whether it affects owners’ equity or not 4. All of the choices are correct
One of the most important contributions of criminology to the study of fraud is:1. The M.I.C.E. concept 2. The fraud triangle 3. The relationship of punishment to remediation 4. None of the above
Financial statement fraud is often attributed to pressures.These pressures include all of the following except:1. Investment losses by managers 2. Meeting analysts’ expectations 3. Deadlines and cutoffs 4 .Qualifying for bonuses
Which two adjustments are made to the fraud triangle to accommodate predators?1. The fraud triangle is not meant to differentiate between accidental and predator raudsters.2. Criminal mindset and arrogance substitute for pressure and rationalization.3. Predators have less pressure because they
One major difference between fraud and a mistake is:1. Concealment 2. Cover-up 3. The act 4. Conversion (benefit to the perpetrator)
One way of demonstrating that an act was fraud and not a mistake is by:1. Demonstrating that the employee concealed the act 2. Showing that there were multiple incidents of the same act 3. The destruction of evidentiary documents that describe the act 4. All of the above
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