04 - Chapter 4 Preventing Fraud MULTIPLE CHOICE 1 The...

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Chapter 4 Preventing Fraud MULTIPLE CHOICE 1. The default model that deals with fraud has which of the following stages a. Fraud incident b. Action c. Resolution d. All of the above ANS: D D: Correct- all of them are in the default model of fraud 2. The following are (is a) good control(s) for preventing fraud a. Physical control/proper authorization b. Segregation of Duties c. Independent checks d. Documents and records e. Both A and B ANS: E A: B is also correct B: A is also correct 3. The responsibility for preventing fraud is often seen as belonging to: a. The internal auditors b. Corporate security c. The external auditors d. Managers e. Someone else ANS: E A: A is incorrect because the internal auditors argue that their function is to evaluate controls and to improve operational efficiency. They will support a fraud investigation, but it isn't their primary re- sponsibility. B: B is incorrect because corporate security believes that theirs is an investigative role and that they are responsible for pursuing reported frauds, not deterring them. They don't focus on prevention or de- tection. C: C is incorrect because the external auditors maintain that they can't detect fraud because it isn't their responsibility and because their materiality levels are too high. D: D is incorrect because managers view their primary responsibility as "running the business" and seldom acknowledge the possibility that fraud can occur in their organization. E: E is the correct answer. 4. The majority of frauds are committed by: a. Someone acting alone. b. Two or more people acting together. c. Teenagers with long hair. d. Investment scams. ANS: A A: Correct - It is estimated that about 71 percent of frauds are committed by sole perpetrators. B: Incorrect - Conversely, only about 29 percent of frauds involve collusion.
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C: Incorrect - This is a simple stereotype with no proven evidence. D: Incorrect - This is a possible fraud type, but the majority of frauds are not committed by this meth- od. 5. Most frauds are committed by a. Individuals b. Groups ANS: A A: A is correct B: B is incorrect, only 29% of frauds involve collusion-therefore we must focus on the individual 6. Having a manager watch over employee's shoulders is a good example of: a. Discouraging collusion b. Monitoring employees c. Creating an expectation of punishment d. None of the above ANS: D B: Correct: Watching over shoulders doesn't work as well as other methods of internal controls (A), video cameras (B), and punishing fraudulent activities (C). 7. The following elements are crucial in creating a culture of honesty except: a. Hiring qualified individuals b. Implementing employee assistance programs c. Developing an organizational code of conduct d. Promoting an open-door policy ANS: A A: Hiring qualified individuals does not mean the individuals are honest. Effectively screening applic- ants by obtaining credit histories, fingerprinting new employees or hiring private investigators are all ways to screen new employees. B: Implementing EAPs helps employees deal with pressures and helps to create a culture of honesty.
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This note was uploaded on 01/31/2011 for the course ACCT 345 taught by Professor N/a during the Spring '10 term at Mountain State.

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04 - Chapter 4 Preventing Fraud MULTIPLE CHOICE 1 The...

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