1. E; 2. L; 3. O; 4. G; 5. I; 6. N; 7. H; 8. J; 9. K; 10. DFeedback: Reference: Question also found in study guideAACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms: RememberDifficulty: 3 HardLearning Objective: 06-01 Define and explain the differences among several kinds of employee fraud that mightoccur at an audit client.Learning Objective: 06-02 Identify and explain the three conditions (i.e.; the fraud triangle) that often existwhen a fraud occurs.Learning Objective: 06-03 Describe techniques that can be used to prevent employee fraud.Source: OriginalTopic: Fraud Terminology81 | P a g e
Essay Questions98.When you examine canceled checks returned in the bank statement by a client's bank, how could you tell whether the amount on a checkhad been skillfully increased (perhaps from $75.00 to $7,500 in the amount box, and altered in the written line from "Seventy-five dollars" to "Seventy-five hundred dollars") after the check was cleared by the bank? (An employee might do this to "support" a $7,500 cash disbursement journal entry.) The bank imprints the check with the amount paid by the bank (magnetic print in the lower right corner). It will be 00007500, meaning $75.00.AACSB: AnalyticAICPA BB: LegalAICPA FN: ResearchBlooms: ApplyDifficulty: 3 HardLearning Objective: 06-07 Describe some extended procedures for detecting employee fraud schemes involvingcash.Source: OriginalTopic: Extended Fraud Procedures99.After checks are signed for vendor invoices, why should vouchers be marked PAID or otherwise mutilated? To show they have been processed so they cannot be paid again.AACSB: AnalyticAICPA BB: LegalAICPA FN: Risk AnalysisBlooms: ApplyDifficulty: 2 MediumLearning Objective: 06-04 Describe the control activities over the receipt and disbursement of cash.Source: OriginalTopic: Internal Controls82 | P a g e
100.List and briefly describe the three factors that increase the probability of fraud. Motive, opportunity, and lack of integrity are the three factors that increase the probability of fraud. Motiveis a cause that pressures people into action. Economic motives are common in business fraud. Opportunityrefers to a situation that allows someone with motive to carry out fraud. An example would be a lack or lapse of a specific control or controls in an organization. A lack of integritydescribes a person who does not adhere to the social or organizational ethical code. The person may rationalize the actions to defend such a lack ofintegrity. Fraud is most common when these three factors exist together.AACSB: AnalyticAICPA BB: LegalAICPA FN: Risk AnalysisBlooms: RememberDifficulty: 2 MediumLearning Objective: 06-02 Identify and explain the three conditions (i.e.; the fraud triangle) that often existwhen a fraud occurs.Source: OriginalTopic: Fraud Triangle101.What kind of error or fraud could happen if the inventory warehouse manager also had responsibility for making the physical inventory count and reconciling discrepancies to the perpetual inventory records?
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- Fall '11
- Financial audit