D inadequate internal control because of a lack of

D. Inadequate internal control because of a lack of separation of duties.
26. Which of the following should be performed by the persons opening the mail and
recording payments?
A. Restrictive endorsement on all checks.
27. At the end of each business day, Safe Company sends its bank a listing of all
checks written during the day including the check number, payee, and amount. When
a check is sent to the bank for payment the bank compares the payee and the
amount with the listing provided by Safe Company. This system is called
C. Positive Pay
28. The mail which includes payments should be opened by two people. This control
is called
B. Joint custody
29. Most fraud investigators utilize the fraud triangle theory. A new theory called the
fraud diamond has been proposed. Which of the following is an element of the fraud
diamond and is not an element of the fraud triangle?
C. Capability
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Chapter 06 - Employee Fraud and the Audit of Cash
30. When auditing with "fraud awareness," auditors should especially notice and
follow up employee activities under which of these conditions?
A. The company always estimates the inventory but never takes a complete physical
count.
31. The best way to enact a broad fraud-prevention program is to
D. Practice management "of the people and for the people" to help them share
personal and professional problems.
32. A good fraud prevention program should address employees' motivation to steal
from the company. The best method for doing this is to
A. Establish employee assistance programs.
33. A code of ethics is an important element of a fraud prevention program. Which of
the following would diminish the effectiveness of a company's code of conduct?
C. The violation of the code of ethics by senior management.
34. Which of the following is least indicative of fraudulent activity?
C. Bank reconciliation has no outstanding checks or deposits older than 15 days.
35. Which of the following combinations is a good means of concealing employee
fraud but an ineffective means of perpetrating management (financial reporting)
fraud?
B. Overstating sales revenue and overstating bad debt expense.
36. Allison, an employee in accounts payable, believes she can run a fictitious
invoice through the accounts payable system and collect the money. She knows
payments are subject to an audit. Which account would be the best place to hide the
fraud?
C. Consulting service expense.
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Chapter 06 - Employee Fraud and the Audit of Cash
37. Which of these arrangements of duties could most likely lead to an
embezzlement or theft?
A. Inventory warehouse manager has responsibility for making the physical inventory
observation and reconciling discrepancies to the perpetual inventory records.
38. Which of the following would the auditor consider to be an incompatible operation
if the cashier receives remittances?