Fraud Examination 4th Edition by Albrecht – Test Bank

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Name Chapter 5–Recognizing the Symptoms of Fraud
Description
Instructions Modify
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Question Who in an organization is NOT in a good position to recognize fraud during the theft act?
Answer Other employees
Managers
Auditors
Coworkers
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Question In which stage do auditors have a good chance of detecting fraud, if the audit samples include altered documents and miscounts?
Answer Theft act
Concealment
Conversion
Layering
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Question Implementing a system of independent checks is one of the most effective ways to deter fraud. Which one of the following is NOT a way
of providing independent checks on employees?
Answer Employee transfers
Audits
Mandatory vacations
Single endorsement on checks
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Question Increased scrap, excessive purchases, physical abnormalities, etc. are all examples of:
Answer accounting anomalies.
external control weaknesses.
analytical anomalies.
unusual behavior.
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Question There are three simple procedures that small business owners should do on a timely basis to prevent fraud when they can’t afford
sufficient employees to guarantee effective segregation of duties.. Which of the following is NOT one among them?
Answer Pay everything by check so that there is a record.
Always open the bank statement and reconcile it themselves.
Allow one key employee to operate the bank account personally.
Sign every check themselves and not delegate the signing to anyone else.
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Question Recording an expense to conceal fraud involves making a fictitious journal entry. A faulty journal entry is an example of which fraud
symptom?
Answer Accounting anomaly
Internal control weakness
Unusual behavior
Analytical anomaly
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Question Fraud examiners must be able to recognize signals that a journal entry may have been manufactured to conceal a fraud. Which of the
following is a common journal entry fraud symptom?
Answer Journal entries with documentary support.
Journal entries that balance.
Adjustments to receivables or payables that are clearly explained.
Journal entries made near the end of an accounting period
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Question In most organizations, coworkers and others have knowledge or suspicions that fraud is occurring but do not come forward with their
information. There are several major reasons for this hesitancy. Which of the following is NOT one among them?
Answer It is usually impossible to know for sure that a fraud is taking place.
They are least bothered if whatever is happening is not affecting their work.
They fear reprisal for being a whistle-blower.
They often think that squealing on someone is wrong.
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Question Common accounting anomaly fraud symptom involve problems with various data and books of accounts. Which of the following is NOT
one among them?
Answer Faulty journal entries
Inaccuracies in source documents
Rounding adjustments
Inaccuracies in ledgers
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Question How does a smart embezzler manipulate accounting records to conceal fraud?
Answer By increasing assets.
By manipulating stock accounts.
By manipulating dividends.
By increasing expenses.
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Question Inaccuracies in ledgers represent which type of fraud symptom?
Answer Internal control weaknesses
Analytical anomalies
Accounting anomalies
Unusual behaviors
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Question Which of the following is an example of accounting anomaly fraud symptom?
Answer Missing documents
Excess purchases
Too many debit or credit memos
Inadequate accounting system
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Question Research in psychology indicates that when people commit a crime (especially for the first time), they are initially overwhelmed by ____
and ____.
Answer guilt, fear
anxiety, insomnia
confidence, rationalization
defensiveness, confession
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Question ______ fraud symptoms are procedures or relationships that are unusual or too unrealistic to be believable.
Answer Analytical
Accounting
Internal control
Environmental
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Question Which of the following is NOT an analytical fraud symptom?
Answer Consistent cash shortages
Overriding of existing controls
Excess purchases
Unreasonably high expenses
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Question Which of the following is an analytical fraud symptom?
Answer Increase in past due accounts receivable
Significant increase or decrease in account balances
Lack of independent checks
Excessive voids or credits
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Question Fraud occurs when perceived pressure, perceived opportunity and rationalization combine. Which of the following is related to the
problem of segregation of duties?
Answer Julie writes expense checks and Mark collects cash from customers.
Bob order office supplies and deposits the company’s checks.
Steve records receivables and writes off bad debts.
Rebecca records journal entries and orders lunch.
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Question An auditor noticed that company B had an exorbitant increase in sales and drastic decreases in its inventory and accounts receivables.
The above statement symbolizes which fraud symptom?
Answer Accounting anomaly
Internal control weakness
Analytical anomaly
Unusual behavior
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Question Transactions happening at odd times or places; being performed by people who would not normally participate; or including odd
procedures are typically associated with which type of fraud symptom?
Answer Accounting anomaly
Internal control weakness
Analytical anomaly
Unusual behavior
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Question Document symptoms to some extent can signal out that embezzlement is taking place. Which among the following usually do NOT point
to some problem with the source documents?
Answer Photocopied documents
Different names or addresses of payees or customers
Excessive voids or credits
Increased past-due accounts
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Question A major difference between financial statement auditors and fraud examiners is that most financial statement auditors:
Answer merely match documents to see whether support exists and is adequate.
determine whether the documents are real.
determine whether the expenditures make sense.
check whether all aspects of the documentation are in order.
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Question Which of the following is a highly suspicious financial statement relationship?
Answer Increased revenues with decreased inventory.
Decreased production with decreased scrap.
Increased revenues with increased receivables
Decreased cost per unit with increased level of output
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Question Which of the following is a highly suspicious financial statement relationship?
Answer Increased revenues with increased cash flows
Increased volume with decreased cost per unit
Increased inventory with decreased payables
Increased inventory with increased warehousing costs
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Question Which of the following motivates embezzlers to indulge in a fraudulent activity?
Answer Pursuit of immediate gratification.
Safeguard their future.
Cover expenses required to live.
Protection against uncertainties.
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Question Which of the following fraud symptoms are often the easiest to detect?
Answer Analytical anomalies
Internal control weaknesses
Accounting anomalies
Lifestyle changes
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Question Which of the following scenarios is least conducive to fraud?
Answer Outstanding bills at home
Mandatory vacation time
Economic downturns
Moral decay in upper management
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Question An employee decides to steal cash from his/her employer. What would be the best way to conceal such a fraud?
Answer Record the stolen cash as an expense.
Writing down accounts payable for a supplier.
Increasing accounts receivable from a customer.
Writing down as dividend paid to shareholders.
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Question Which of the following is NOT a “strange” financial statement relationship?
Answer Increased revenues with decreased inventory
Increased revenues with decreased receivables
Decreased inventory with decreased payables
Decreased volume with decreased cost per unit
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Question _____ are relationships in financial or nonfinancial data that do not make sense, such as an unreasonable change in a volume, mix, or
price.
Answer Analytical anomalies
Accounting anomalies
Auditing anomalies
Control weaknesses
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Question After committing fraud, an individual often exhibits unusual and recognizable behavior patterns to cope with the stress. Perpetrators
experience this behavioral signals in a particular sequence. Identify it.
Answer Guilt – Stress – Fear – Behavior changes
Fear – Guilt – Stress – Behavior changes
Fear – Guilt – Behavior changes – Stress
Guilt – Fear – Stress – Behavior changes
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Question What does the following journal entry indicate?
Legal Expense………………2,900
Cash………………………….2,900
Answer $2,900 cash is due to an attorney.
A sum of $2,900 was received from attorney in advance.
$2,900 cash is due from an attorney.
An attorney was paid $2,900 in cash.
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Question All transactions related to specific accounts, such as cash or inventory, are summarized in a:
Answer Journal
Ledger
Trial balance
Balance sheet
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Question Which of the following is not a fraud symptom related to internal control weaknesses?
Answer Lack of segregation of duties
Lack of physical safeguards
Inadequate accounting system
Lack of proper authorization
Excessive turnover of executives
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Question Which name refers to people who commit a fraud or another crime once in a while and does not feel stress?
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Answer Altruists
Utilitarians
Psychopaths
Agnostics
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Question _______ involves the actual taking of cash, inventory, information, or other assets whereas _______ involves selling stolen assets or
transferring them into cash and then spending the cash.
Answer Conversion, coercion
Theft, conversion
Coercion, theft
Theft, coercion
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Question Generally, at the conversion stage, ________ are definitely not in the best position to detect fraud.
Answer co-workers
friends
auditors
managers
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Question Lifestyle changes of fraud perpetrators are related to which of the following fraud elements?
Answer Theft act
Concealment
Conversion
Confession
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Question Which of the following appears to be common to most embezzlers who are caught?
Answer Long-term focus
Investments made in low-risk instruments
Saving what they steal
Spending on lifestyle improvements
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