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Fraud_HW_1_-_Chapters_1-3_Answer_Key_Solutions - Homework#1...

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Homework #1 Name: _______________________ Chapters 1 – 3 Section: ___________________ True/False 1. F Telemarketing fraud is an example of employee embezzlement [1] 2. F Unintentional errors in financial statements are a form of fraud [1] 3. T In customer fraud, customers do not pay for goods purchased [1] 4. T The three elements of the fraud triangle are a perceived pressure, a perceived opportunity, and rationalization [2] 5. F Effective fraud fighters usually put most of their time and effort into minimizing the pressures for fraud perpetrators to commit fraud [2] 6. F An individual who owns his or her own business and is the sole employee needs many control procedures. [2] 7. T The elements of the fraud triangle by which the investigative techniques are often classified are 1) the theft act, 2) concealment efforts, and 3) conversion methods [3] 8. T Criminal conviction is much more difficult to achieve than a civil judgment because it requires proof ‘beyond a reasonable doubt” that the perpetrator intentionally stole assets [3] 9. T Legal action taken by an organization can affect the probability of whether fraud will reoccur [3] 10. F Expectations about punishment must be communicated randomly among work groups if fraud is to be prevented [3]
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Short Answers 1. When vendor fraud occurs, who is the perpetrator and who is the victim? [1] With vendor fraud, organizations or individuals that sell goods or services are the perpetrators. Organizations the buy the goods or services are the victim. 2. In what ways did fraudulent mutual funds benefit from committing fraud? [1] Fraudulent mutual funds benefited by taking a windfall of profits made by investors. Illegal market timing alone caused losses of $5 billion a year to long-term mutual fund investors. The chapter discusses the example of Putnam Investments. Putnam was the fifth largest mutual fund firm in the United States with $263 billion in assets. In Putnam’s case, four investment fund managers engaged in market-timing trades and personally made large windfalls. Two other fund managers made market-timing trades in funds they didn’t manage and made huge windfalls as well. 3.
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