Question: 1. Usually, for everyone involved-especially

> Why are depositions a powerful tool in obtaining information?

> What is a deposition?

> What is an interrogatory?

> What steps are involved in the civil litigation process?

> What is the difference between civil and criminal fraud trials?

> How are federal courts organized?

> How are state courts organized?

> One of the most controversial topics to affect the accounting profession has been that of earnings management. Companies have been trying to manage their earnings to match analysts' projections. While the accounting literature doesn't give accounting pro

> Look at the various fraud statistics earlier in this chapter. Determine the characteristics of the person most likely to perpetrate a large fraud. Then, debate your decision over a person with these characteristics and give the reasons why such a person

> 1. Bribery is one of the four types of corruption. 2. Commercial bribery is different from traditional bribery in that the offer made in commercial bribery is to influence an official act of government and traditional briberies never involve government

> The following discussion is found in the U.S. Bankruptcy Report on Lehman Bros. Holdings dated March 22, 2010: Lehman employed off-balance sheet devices, known within Lehman as "Repo 105" and "Repo 108" transactions, to temporarily remove securities inve

> Mendoza is considering investing in IBM. However, he is captivated by IBM's growth. IBM had made a remarkable change from a struggling company to a leading company in the personal computer market. Mendoza has asked for your advice as to whether or not th

> Some people believe that the audit industry has fallen out of touch with the realities of business. They believe that accounting standards were developed for a manufacturing environment and are not fitted for our modern needs. As a result, they contend t

> The Employee Polygraph Protection Act passed by Congress made it difficult to use polygraphs in fraud investigations. Currently, 11 conditions must be met in order for polygraph tests to be used. Assume you are a member of Congress debating the use of po

> The defendants have retained Daren as an expert witness in a recent fraud case. He will be providing information concerning the defendant's activities, explaining why the defendant's activities are in accordance with generally accepted accounting princip

> Sam's Electronics Universe has discovered and investigated a kickback fraud perpetrated by its purchasing agent. The fraud lasted eight months and cost the company $2 million in excess inventory purchases. The perpetrator personally benefited by receivin

> Why can it be dangerous to provide credit card information over the Internet? Does it stop the risk if you only use credit cards at local businesses?

> How is the data-driven, six-step detection approach relevant to e-business fraud detection?

> Why does biometrics offer significant promises as a way to authenticate e-business transactions?

> What principles are important in password use and training?

> 1. At the present time, approximately 25,000 members make up the Association of Certified Fraud Examiners. 2. Employee frauds constitute a greater percentage of all frauds and have greater median losses than do management and owner frauds combined. 3

> Why is spoofing a significant risk in e-business?

> What is sniffing?

> How can the authenticity of a party in an e-business transaction be verified?

> What are some common ways e-business fraud is perpetrated?

> Is it necessary to report illegal income (such as embezzled money) on income tax returns?

> What is the CI division of the IRS?

> Why should fraud investigators involved in bankruptcy or divorce cases be careful about what they put in their report?

> What advantages do third-party providers like application service providers offer?

> What methods of security through obscurity does your school employ? How do these methods increase security? How do they decrease security?

> Can e-business fraud risks ever be completely eliminated?

> 1. Paper-and-pencil honesty tests are most frequently used to determine whether someone has committed a crime. 2. Failure to pass a polygraph test means certain guilt. 3. Interviews during the rationalization stage are often not objective and can be ha

> In what ways do e-business transactions pose heightened fraud risks?

> What are some of the most common ways that fraud perpetrators conceal and transfer assets or income during bankruptcy and divorces?

> What are some of the most common tax fraud schemes?

> What are some of the most common divorce fraud schemes?

> What are some of the most common bankruptcy fraud schemes?

> When a bankruptcy takes place, who are the major participants involved?

> What is tax fraud?

> What are some of the more relevant sections of the Bankruptcy Code related to fraud?

> What is bankruptcy? What are the most common types of bankruptcy?

> Who usually initiates the filing of an application for retention of an investigator?

> 1. Assets most often improperly capitalized are fixed assets such as property or equipment. 2. Financial statement fraud involving footnote disclosures can be either frauds of omission or frauds of commission. 3. A company that claims to be something

> 1. Most fraud cases are tried in federal courts. 2. State courts hear bankruptcy cases. 3. Civil cases must consist of a jury of at least six jurors. 4. The prosecution usually prefers to present evidence at a grand jury because the accused does not h

> 1. For various reasons, the net worth method tends to be a conservative estimate of amounts stolen. 2. Conversion is the third element of the fraud investigation triangle. 3. The Gramm-Leach-Bliley Act of 1999 made it more difficult for officials and

> 1. Perpetrators usually save what they steal. 2. One common investigation procedure determines how perpetrators convert or spend their time. 3. Investigations of perpetrators' net worth and lifestyles help investigators know what class of society the

> 1. Which of the following is true regarding fraud? a. It is easily identified. b. It is seldom observed. c. When a fraud occurs, there is no question whether or not a crime has been committed. d. Many witnesses are usually available when fraud occurs

> 1. Once fraud has been committed, there are no winners. 2. Fraud prevention involves two fundamental activities: (1) a hotline for tips and (2) assessing the risk of fraud and developing concrete responses to mitigate the risks and eliminate opportunit

> 1. Which of the four types of evidence includes interrogation and honesty testing? a. Testimonial. b. Documentary. c. Physical. d. Personal observation. 2. The three elements present in most cases of fraud are: a. Theft act, rationalization, and o

> 1. In a fraud investigation, documents: a. Usually contain extremely valuable information. b. Are rarely used in court. c. Are not reliable sources of information. d. Are only valuable in obtaining a confession. 2. Chain of custody refers to: a. Ma

> 1. Data-driven fraud detection can pay large dividends and is an effective way to reduce the cost of fraud in any organization. 2. Unexplained changes are common in financial statements. 3. Balance sheets must be converted to change statements before

> 1. Unusual patterns always indicate the existence of fraud. 2. ODBC is the best approach to import because it achieves a direct, rich connection to the source database. 3. Data-driven analysis uses the company's database to search for normal relation

> 1. Even a good system of internal controls will often not be completely effective because of fallibilities of the people applying and enforcing the controls. 2. The increasingly complex nature of business helps to decrease the number of collusive fraud

> 1. Even with the right opportunity or significant pressure, most people would probably not steal or embezzle. 2. Studies show that a positive and honest work culture in a company does little to prevent fraud. 3. An important factor in creating a cult

> 17. Most people who commit fraud feel a perceived financial pressure. 18. Studies have found that the most common internal control problem when frauds occur is having a lack of proper authorizations. 19. Fraud perpetrators who manipulate accounting re

> 1. The most effective way to reduce losses from fraud is: a. Detecting fraud early. b. Implementing proactive fraud detection programs. c. Preventing fraud from occurring. d. Severely punishing fraud perpetrators. 2. To successfully prevent fraud,

> 9. First-time offenders usually exhibit no psychological changes. 10. Psychopaths feel no guilt because they have no conscience. 11. It is safe to assume that fraud has not occurred if one or more elements of the fraud triangle cannot be observed.

> 1. Analytical anomalies are present in every fraud. 2. Recording an expense is a possible way to conceal the theft of cash. 3. A check is an example of a source document. 4. Internal control weaknesses give employees opportunities to commit fraud.

> 1. As long as a sample is selected randomly, it will always be representative of the population as a whole. 2. Even if photocopies of original documents are allowed to be introduced as evidence in a court of law, they are still considered secondary evi

> 1. Concealment is the covering of tracks, obscuring of evidence, and removal of red nags to hide a perpetrator's fraud. 2. Checks are excellent sources of physical evidence. 3. Traditional chain of custody evidence procedures are not appropriate when

> 1. When hiring, it is usually difficult to know which employees are capable of committing fraud, especially without performing thorough background checks. 2. The three elements of the fraud triangle are a perceived pressure, a perceived opportunity, an

> 1. Which of the following kinds of pressure is most often associated with fraud? a. Work-related pressures. b. Financial pressures. c. Vice pressures. d. None of the above. 2. Which of the following is not a primary control activity? a. Use of doc

> 1. A vulnerability chart: a. Forces investigators to explicitly consider all aspects of a fraud. b. Shows the history of fraud in a company. c. Identifies weaknesses in every aspect of a company's internal control. d. Gives a detailed record of all t

> 1. Which of the following is not a category used in the fraud triangle plus inquiry paradigm? a. Theft investigative techniques. b. Concealment investigative techniques. c. Action investigative techniques. d. Conversion investigative techniques. 2.

> 1. Fraud perpetrators: a. Look like other criminals. b. Have profiles that look like most honest people. c. Are usually very young. d. Are none of the above. 2. Which of the following is not one of the three elements of the fraud triangle? a. Perc

> 1. Which of the following is usually the most effective tool in preventing and detecting fraud? a. Discouraging collusion between employees and customers or vendors. b. Effective investigations of fraud symptoms. c. Having a good system of internal co

> 1. Many organizations merely dismiss dishonest employees because of the expense and time involved in prosecuting them. 2. Appropriate hiring will not decrease an organization's risk of fraud. 3. An individual who owns his or her own business and is t

> 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. 2. Which of the following factors contribute to creating a corporate cul

> 1. A database of criminal records maintained by the FBI is: a. The CIA. b. The III. c. The NCIC. d. Both a and c. e. Both b and c. 2. Who among the following are usually some of the best and most helpful federal fraud investigators? a. Officers o

> 1. Although most perpetrators begin their thefts because of a perceived critical need, they usually continue to embezzle in order to: a. Beat the system. b. Fulfill an inner desire to commit fraud. c. Improve their lifestyle. d. Achieve a higher self

> 1. Fraud is difficult to detect because some fraud symptoms often cannot be differentiated from non-fraud factors that appear to be symptoms. 2. The three elements of the fraud triangle by which the investigative techniques are often classified are (1)

> 1. Most investigators rely heavily on interviews to obtain the truth. 2. Physical evidence includes evidence gathered from paper, computers, and other written documents. 3. Legal action taken by an organization can affect the probability of whether f

> 1. When vertical analysis is performed: a. Ratios are used to detect fraud. b. Changes in significant balance totals are examined. c. Financial statement balances are converted to percentages. d. Total revenues are compared to total expenses. 2. Ho

> 1. When detecting fraud, it is important that fraud investigators: a. Remain objective and neutral b. Assume guilt. c. Assume innocence. d. None of the above. 2. Data-driven fraud detection: a. Determines the cost of fraud. b. Identifies possible

> 1. Tailing includes the use of video, e-mail, wiretapping. and access to PCs. 2. Invigilation is a theft act investigative technique that involves close supervision of suspects during an examination period. 3. To get an accurate reading. it is genera

> 1. The fraud triangle plus inquiry paradigm is an effective way to understand the various types of fraud investigation methods. 2. One advantage of using a vulnerability chart is that it forces investigators to consider all aspects of a fraud 3. Elec

> 9. Embezzlement of assets reduces the left side of the accounting equation. To conceal the theft, the embezzler must find a way to reduce the right side of the accounting equation. A perpetrator would most likely reduce the right side of the equation by:

> 1. Which of the following methods of gathering documents is based primarily on luck? a. Documents discovered during audits. b. Hard-to-get private documents that are subpoenaed. c. Documents discovered through searching public sources. d. Documents p

> Television shows with large amounts of sex or violence tend to attract more viewers. Advertisers want large audiences, but they also want viewers to remember the brand names of their products. A study was undertaken to determine the effect that shows wit

> Refer to Exercise A17.9. Weight is a major factor that determines whether a person will need a hip or knee replacement and at what age. To learn more about the topic, a medical researcher randomly sampled individuals who had hip replacement 1code = 12 an

> Over one decade (1995–2005), the number of hip and knee replacement surgeries increased by 87%. Because the costs of hip and knee replacements are so expensive, private health-insurance and government-operated health-care plans have become more concerned

> Refer to Exercise A15.7. The financial analyst undertook another project wherein respondents were also asked the age of the head of the household. The choices are 1. Younger than 25 2. 25 to 34 3. 35 to 44 4. 45 to 54 5. 55 to 64 6. 65 and older The resp

> Mouth-to-mouth resuscitation has long been considered better than chest compression for people who have suffered a heart attack. To determine if this indeed is the better way, Japanese researchers analyzed 4, 068 adult patients who had cardiac arrest wit

> The U.S. National Endowment for the Arts conducts surveys of American adults to determine, among other things, their participation in various arts activities. A recent survey asked a random sample of American adults whether they participate in photograph

> Refer to Exercise 13.35. The executive did a further analysis by taking another random sample. This time she tracked the number of customers who have had an accident in the last 5 years. For each she recorded the total amount of repairs and the credit sc

> It is generally assumed that alcohol consumption tends to make drinkers more impulsive. However, a recent study in the journal Alcohol and Alcoholism may contradict this assumption. The study took a random sample of 76 male undergraduate students and div

> In an effort to explain the results of Exercise A15.9, a researcher recorded the distances for the random sample of British and American golf courses. Can we infer that British courses are shorter than American courses?

> Organizations that sponsor various leisure activities need to know the number of people who wish to participate. Bureaucrats need to know the number because many organizations apply for government grants to pay the costs. The U.S. National Endowment for

> Because shelf space is a limited resource for a retail store, product selection, shelf-space allocation, and shelf-space placement decisions must be made according to a careful analysis of profitability and inventory turnover. The manager of a chain of v

> Garlic has long been considered a remedy to ward off the common cold. A British researcher organized an experiment to see if this generally held belief is true. A random sample of 146 volunteers was recruited. Half the sample took one capsule of an allic

> One of the arguments put forth by advocates of lower tuition fees is that children of low or moderate income families will not be able to pay for a child’s university education. To examine this issue, a random sample of families whose children were at le

> How many golfers are there in the United States? A survey of American adults (age 18 and above) asked whether they had played golf at least once a month during the summer. The responses are 2 = yes and 1 = no. The survey also asked respondents to indicat

> What should be the priority of paramedics who respond to accidents? Should they treat the patients with their limited facilities or should they rush the victims to the nearest hospital (an approach known as “scoop and run”)? A research project begun in 1

> The high cost of medical care makes it imperative that hospitals operate efficiently and effectively. As part of a larger study, patients leaving a hospital were surveyed. They were asked how satisfied they were with the treatment they received. The resp

> Winter is the influenza season in North America. Each winter, thousands of elderly and sick people die from the flu and its attendant complications. Consequently, many elderly people receive flu shots in the fall. It has generally been accepted that youn

> Under the rules of Canada’s Employment Insurance (EI) plan, some workers can use EI repeatedly after working only a short time. The amount of time needed to qualify for EI varies by region and by occupation. In a study undertaken by researchers, regular

> Ever since the discovery of germs, parents have been telling their children to wash their hands. Common sense tells us that this should help minimize the spread of infectious diseases and lead to better health. A study reported in the University of Calif

> Scrabble is one of the oldest and most popular board games. It is played all over the world, and there is even an annual world championship competition. The game is played by forming words and placing them on the board to obtain the maximum number of poi

> In an attempt to learn more about traffic congestion in a large North American city, the number of cars passing through intersections was determined (National Post, October 18, 2006). The number of cars was counted in 5-minute samples throughout several

> A small but important part of a university library’s budget is the amount collected in fines on overdue books. Last year, a library collected $75,652.75 in fine payments; however, the head librarian suspects that some employees are not bothering to colle