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All Textbook Solutions for Fraud Examination

1DQ 2DQ 3DQ 4DQ 5DQ 6DQ 7DQ 8DQ 9DQ 10DQ 11DQ 12DQ 13DQ 14DQ 15DQ 1TF 2TF 3TF 4. Manufacturing companies with a profit margin of 10 percent must usually generate about 10 times as much revenue as the dollar amount of the fraud in order to restore net income to its pre-fraud level. 5TF 6TF 7. When perpetrators are criminally convicted of fraud, they often serve jail sentences and/or pay fines. 8TF 9. A Ponzi scheme is considered to be a type of investment scam. 10TF 11TF 12TF 13TF 14TF 15TF 16TF 17TF 18TF 19TF 20TF 21TF 22. In vendor fraud, customers don’t pay for goods purchased. 23TF 24TF 25TF 26TF 27TF 28TF 29TF 30TF 1MCQ 2MCQ 3MCQ 4MCQ 5MCQ 6MCQ 7MCQ 8MCQ 9MCQ 10MCQ 11MCQ 12MCQ 13MCQ 14MCQ 15MCQ 16MCQ 17MCQ 18MCQ 19MCQ 20MCQ Which of the following is not an example of employee embezzlement? Land conservation employees stealing equipment. Cashiers stealing money from the cash register. Angry employees vandalizing the building with spray paint. Salespeople overcharging for products and pocketing the excess cash.22MCQ 23MCQ 24MCQ 25MCQ 1SC 2SC 3SC 4SC 5SC 6SC 7SC 8SC 9SC 10SC 11SC 12SC 13SC 14SC 15SC 16SC 1.1CS 1.2CS 1.3CS 2.1CS 2.2CS 3.1CS 3.2CS 4.1CS 4.2CS 4.3CS 1D 1IA 1DQ 2DQ 3DQ 4DQ What are some different types of pressures?6DQ 7DQ 8DQ 9DQ 10DQ 11DQ 12DQ 1TF 2TF Management's example or modeling is of little importance to the control environment.4TF 5TF 6TF 7TF 8TF 9TF 10TF 11TF 12TF 13TF 14TF 15TF 1MCQ 2MCQ 3MCQ 4MCQ 5MCQ 6MCQ 7MCQ 8MCQ 9MCQ 10MCQ 11MCQ 12MCQ 13MCQ 14MCQ 15MCQ 16MCQ 17MCQ 18MCQ 19MCQ 20MCQ 1SC Case 2 A few years ago, there was a large oil refining company (based in New York) whose top executive was convicted of financial statement fraud. One of the issues in the case involved the way the company accounted for its oil inventories. In particular, the company would purchase crude oil from exploration companies and then process the oil into finished oil products, such as jet fuel, diesel fuel, and so forth. Because there was a ready market for these finished products, as soon as the company would purchase the crude oil, it would record its oil inventory at the selling prices of the finished products less the cost to refine the oil (instead of at cost). Although there was fraud in the case, this type of accounting was also questioned because it allowed the company to recognize profit before the actual sale (and even refining) of the oil. This method was even attested to by a large CPA firm. If you were the judge in this case, would you be critical of this accounting practice? Do you believe this "aggressive" accounting was a warning signal that fraud might be occurring? 3SC 4SC 5SC 6SC 7SC 8SC 9SC 10SC Case 11 As a new staff member in a large national company, you are excited about your career opportunities. You hope senior employees in the company will perceive you as being one of the "rising stars." During your first week of training, you are assigned a mentor. The mentor's role is to help you learn your way around the company and to answer questions you may have about the work you are expected to complete. As it turns out, your mentor is another "rising star" whom you respect. One day, she takes you out to lunch. While you are eating, you begin discussing company policies. She explains to you the expense reimbursement policy. Company policy dictates that expenses such as lunch are the responsibility of the employee and are not reimbursable. The exception to this policy is for lunches with clients and potential recruits or for other work-related circumstances. She tells you "off the record" that nobody really follows this policy and that you can always find a "business purpose" to justify your lunch expenses with fellow employees, as long as you don't do it every day. Besides, your supervisor won't really scrutinize any expense reimbursement requests that are below $25, so why worry about it? 1. Is it a fraud to charge the company for personal lunches that you submit as business expenses? 2. What elements of fraud, if any, are present in this situation? 3. How would you respond to your mentor or to other employees that may encourage you to pick up the tab for lunch with the understanding that you will charge the company for the lunch? 12SC 13SC 14SC Case 15 But I intended to pay it all back, I really did, Joseph Swankie said as he talked to his manager. How did I ever get into this situation, he thought? Two years ago, Joe received the promotion for which he had been working so hard for. In addition, Joes new manager told him that Joe had a very promising future at the company. Joe and his wife Janae quickly purchased a new home. Not long after, Joe and Janae had their fourth child, and life was great. After having their fourth child, Janae quit work to spend more time with her kids. Suddenly, things started to turn upside down. The economy took a downturn and had a negative impact on Joes company. His pay, which was based on commission, was reduced nearly 50 percent. Joe still worked hard but thought he should be paid more. Unable to find another job, Joe resentfully decided he would stay with the company even with the lower pay. Not long after he started receiving lower commissions, Joe noticed that the internal controls over the petty cash fund werent very strong. The records were not reviewed very often, and small shortages were usually written off. One week, Joe took $50. When questioned by his wife, Joe said he had found a few odd jobs after work. Joe continued this habit of taking small amounts for a couple of weeks. After realizing that no one had noticed the shortage, he started to take up to $100 a week. One day, another employee noticed Joe taking some cash from the fund and putting it in his wallet. When questioned, he simply stated that it was a reimbursement the company owed him for supplies. An investigation began, and Joes fraud was discovered. Identify the opportunities, pressures, and rationalizations that led Joe to commit this fraud. What simple procedures could the company have implemented to prevent the fraud from occurring?1.1CS 1.2CS 1.3CS 2.1CS 2.2CS 2.3CS 1. What factors in Johnson’s control environment have led to and facilitated the manager’s manipulation of inventory? 3.2CS 3.3CS How did trust contribute to Mr. Armstrongs fraud?4.2CS 5.1CS 5.2CS 5.3CS 5.4CS 1IA 1D 1DQ 2DQ 3DQ 4DQ 5DQ 6DQ 7DQ 8DQ 9DQ 10DQ 11DQ 1TF 2TF 3. Developing a positive work environment is of little importance when creating a culture of honesty. 4TF 5TF 6TF 7. If a perpetrator is not caught, his confidence in the scheme will decrease, and he will become less and less greedy. 8TF 9TF 10TF 11TF 12TF 13TF 14TF 15TF 16TF 17TF 18TF 19TF 20TF In order to create a culture of honesty and confidentiality, persons aware of fraudulent activity should be encouraged to tell only the CEO.22TF 23TF 24TF 1MCQ 2MCQ The best way for management to model appropriate behavior is to: Enforce a strict code of ethics. Set an example of appropriate behavior. Train employees about appropriate behavior. Make employees read and sign a code of conduct.4MCQ Most frauds start small and: If not detected, continue to get larger. Usually decrease in amount. Remain steady and consistent. None of the above.6MCQ 7MCQ 8MCQ 9MCQ 10MCQ 11MCQ 12MCQ 13MCQ 14MCQ 15MCQ 16MCQ 17MCQ 18MCQ 19MCQ 20MCQ 21MCQ 22MCQ 1SC 2SC 3SC 4SC 5SC 6SC 7SC 8SC 9SC 10SC 11SC 12SC 13SC 14SC 1.1CS 1.2CS 1.3CS 2.1CS 2.2CS 2.3CS 3.1CS 3.2CS 3.3CS 4CS 1IA 2IA 1D 1DQ 2DQ 3DQ 4DQ 5DQ Why is it important to inform outside vendors of company policies concerning payments to buyers?7DQ 8DQ 9DQ 10DQ 11DQ 12DQ 1TF 2TF 3TF 4TF 5TF 6TF 7TF 8TF 9TF 10TF 11TF 12TF Creating an expectation of punishment causes firm morale to deteriorate and often results in lower productivity.1. People will often be dishonest if they are placed in an environment of: a. Poor controls. b. High pressure. c. Low integrity. d. Loose accountability. e. All of the above. 2MCQ 3MCQ 4MCQ 5MCQ 6MCQ 7MCQ 8MCQ 9MCQ 10MCQ 11MCQ 12MCQ 13MCQ 1SC

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