Problem 1. Which of the following best describes the objective of a fraud examination?
a. Make recommendations to management about how to prevent fraud.
b. Determine whether financial statements are free of misstatements due to fraud.
c. Express an opinion on the guilt or innocence of a suspect.
d. Determine whether a crime has been committed, and if so, who is responsible.
Problem 2: Research in the Hollinger-Clark study suggests that the best way to deter employee theft is by:
a. Increasing sanctions imposed on occupational fraudsters
b. Increasing the perception of detection
c. Strengthening internal controls
d. Communicating the organization's fraud policies to employees
Problem 3: Joel Baker, a customer of ABC Electronics, stole a box containing computer games while the sales associate waited on another customer. Which of the following could Joel be charged with?
a. Larceny
b. Embezzlement
c. Fraud
d. All of the above
Problem 4. While conducting a routine internal audit, Sally Franks overheard one of the company's purchasing agents bragging about receiving a substantial discount on a new SUV from the company's supplier of fleet cars. Is there sufficient predication to initiate a fraud examination?
a. Yes
b. No
Problem 5: Computing the percentage of assigned time to unassigned time for employees is one method to detect an employee skimming scheme.
a. True
b. False
Problem 6: In one of the case studies in the textbook, Brian Lee, a top-notch plastic surgeon, collected payments from his patients without giving a cut to the clinic where he practiced. How was he punished?
a. He was convicted of grand larceny and sentenced to probation.
b. He was sued in civil court for the amount of the loss.
c. He was terminated from the practice and was required to make full restitution in lieu of prosecution.
d. He was allowed to continue to practice at the clinic but was required to make full restitution.
Problem 7: Deposit lapping is considered an off-book scheme.
a. True
b. False
Problem 8: Which of the following antifraud controls can help prevent and detect cash larceny from the deposit?
a. Having two copies of the bank statement delivered to different persons in an organization
b. Comparing the bank authenticated deposit slip with the general ledger posting of the day's receipts
c. Preparing the deposit slip to show each individual check and money order along with currency receipts
d. All of the above
Problem 9: Which of the following computer audit tests would be the least useful in detecting a cash larceny scheme?
a. Summarizing the difference between the cash receipt report and the sales register system by employee
b. Summarizing the top sales producers by employee
c. Summarizing discounts, returns, and cash receipt adjustments by employee
d. Reviewing all unique journal entries in the cash accounts
Problem 10: Which type of check tampering scheme is usually the most difficult to defend against?
a. Authorized maker
b. Forged endorsement
c. Concealed check
d. Altered payee