1. Which of the following is not a fraud risk unique to e-business transactions? a. Innovative technologies where security lags process development. b. Selling new products. c. Complex information systems. d. Removal of personal contact. 2. E-business transactions make it easier to commit which of the following types of frauds? a. Kickbacks. b. Customer impersonation. c. Setting up dummy companies. d. Stealing petty cash. 3. Which of the following is not an element of a company's control environment? a. Audit committee participation. b. Management's philosophy. c. Hiring policies. d. Independent checks. 4. Which of the following is not an internal control activity or procedure? a. Physical safeguards. b. Segregation of duties. c. Internal auditors. d. Documents and records. 5. Which of the following fraud risks involves changing IP addresses? a. Spoofing, b. Sniffing. c. False Web sites. d. Customer impersonation. 6. Which of the following fraud risks involves viewing information as it passes along network channels? a. Sniffing. b. Spoofing. c. False Web sites. d. Web hijacking.
> Your father-in-law owns a medium-sized air conditioning company in Meza, Arizona. Because of the heat in Arizona, the company has done rather well and the business is continually growing. Your father-in-law has received tips from other employees that one
> After graduating from college with your MBA, you decide to take your grandma's secret cinnamon roll recipe and open up a bakery. You grew up devouring your grandma's rolls. and you have convinced her to give you the secret. You are confident that your ba
> Paying for information is one type of extrinsic reward. Some professionals may require that you pay them for their interview time or information. What concerns does this raise? How might it jeopardize your case? When might it be appropriate or not approp
> During the audit of a major client, you notice that revenues have increased dramatically from the third to the fourth quarter and especially over the same periods of last year. You've received tips alleging that the company is overstating its revenues. W
> 1. Ghost employee schemes usually generate the largest losses among the payroll disbursement fraud schemes. 2. Corruption is divided into four fraud scheme types: (1) bribery, (2) conflict of interest, (3) economic extortion, and (4) illegal services.
> Most illegal transactions such as drug deals and terrorist activities are conducted in cash. Why is it important for criminals to get their cash deposited into financial institutions?
> Why do you think the hiding of assets is so common in bankruptcy and divorce fraud cases?
> How could a fraudster use your SSN only to perpetrate a fraud against you?
> Do you think it is possible to completely eliminate identity fraud risks from your life?
> The federal government gives huge rewards for taking action to expose fraud against itself. Under federal law, if you have personal knowledge that an individual, business, city, county, or town has provided false information to obtain money from the fede
> Besides the frauds introduced in the above paragraphs, what other types of frauds against corporations can individuals perpetrate?
> How often do investors review the nonfinancial section of annual reports? Why is it important to read the nonfinancial sections of annual reports or the footnotes to the financial statements?
> Why would so many people invest in a company like AFCO? What could investors have done to have prevented themselves from falling into investment schemes such as this?
> What are some potentially legitimate reasons a company may have high inventory balances?
> What are some potential problems with using anonymous whistle-blowing systems?
> As a result of the system audit performed by one of the Big 4 accounting firms at Deming Medical's corporate offices, it was discovered that Paula, one of the payroll supervisors, had system access rights to transaction codes used by the HR staff. Conseq
> If auditors and investigators modified their typical procedures and regularly used a few unexpected procedures to look for fraud, how would this affect a potential perpetrator’s opportunity to conceal a fraud?
> Had Finn not complied with Monus’s expense manipulation requests early on, would the Phar-Mor fraud have progressed to the extent it did? Also, how would Finn’s career have been different?
> Why is it important to disclose only a portion of the circumstantial evidence you have collected?
> What are the differences between the three types of interviewees: friendly, neutral, and hostile?
> How do you choose between traditional tests, graphology, voice stress analysis, and polygraphs? When is each method best used?
> Skills are required to detect and investigate e-business fraud? What other classes might help you learn these skills?
> During the discovery stage in the legal process, why would opposing sides be cooperative in providing information about evidence they intend to introduce during the trial?
> Why is it good for a witness to be “defensive” in depositions and “offensive” in court?
> Mike Trujillo has been involved in a serious relationship with his high school sweetheart, Bonny, for five years; they have even discussed marriage. One day, Bonny told Mike that she was seeing another man. Obviously, this was very difficult for Mike. Ov
> An accountant for a small business is suspected of writing checks to "dummy" vendors and collecting the money himself. After a thorough investigation of the company, you determine that the company does not require authorization for vendor payments. In an
> You have been talking with your best friend, John, for the past couple of weeks about a crisis in his company. He has just learned that his boss has been embezzling money for the past six months. The day he learns about the alleged fraud, he calls to tel
> Adam Jones, the purchasing manager for ACME Corporation, is under suspicion for committing fraud. His superiors believe he is accepting kickbacks and bribes from various vendors. As the company's fraud expert, you are investigating this possible fraud an
> While auditing the accounts payable of a large clothing manufacturer, you discover that four of the company's vendors have checks sent to a post office (PO) box. After further investigation, you discover that one box is registered under the same name as
> An electronics company that produced circuit boards for personal computers was formed in a small southern town. The three founders had previously worked together for another electronics company and decided to start this new company. They ended up as seni
> It is usually the case that depositions for expert witnesses are much more difficult than the actual trial. Why do you think this is the case?
> You have recently been asked to be a damages expert witness in a large Ponzi scheme. The lawyers have asked you to calculate actual damages, what-if damages, and pre-judgment interest damages. How would you go about preparing to testify?
> To help you understand the material discussed in the chapter, do the following: 1. Give at least three characteristics of a grand jury. 2. Without looking at the list in the chapter, list at least three dos and don'ts that an expert witness should keep
> Your friend recently attended a local mail fraud trial. In your conversation about the case, she described the cross-examination of the expert witness as follows: After his counsel's questioning was done, expert witness Matthew Little was composed and ga
> Mr. Oaks has worked as the CEO of Turley Bank for the last three years. This past year, the outside auditor discovered some fraudulent Joan activity in which Mr. Oaks was circumventing internal controls to lend money to friends and family. After a thorou
> The FBI is on the trail of a drug supplier in Pineville, USA. The Feds believe that the supplier works at OHS Manufacturing, the employer of 75 percent of Pineville's citizens. The FBI asks OHS Manufacturing to assist in the investigation of one of its e
> John was recently convicted by a jury of committing fraud against his employer. After the trial, it was revealed that some key evidence against John used in trial was obtained through his employer's records and John's workstation computer. Before searchi
> You are an internal auditor at Dunder Company. An employee of Dunder has phoned in an anonymous tip that a fellow worker, Jane, might be embezzling money. Jane has been a trusted employee of the company for 13 years; she quickly moved through the ranks o
> Bobby Jones, an accountant for ABC Corporation, has been suspected of committing fraud. Some information already gathered about the fraud points to Bobby Jones as the most likely perpetrator. In his scheme, Bobby supposedly stole more than 55 million ove
> You are involved as an expert witness in a case of alleged fraud by top management against the corporation. Supposedly, working in collusion, top management defrauded the company of $5 million over two years. The allegations suggest that the fraud involv
> Answer the following two questions: 1. After being named as a defendant in a corporate fraud case, the XYZ accounting firm was found guilty of negligence and fined $25 billion. As a partner for the firm, what would you recommend as the next course of ac
> You are a manager for a large department store. It has recently come to light that a receiving clerk has been stealing merchandise. About 55,000 has been stolen. The clerk has stopped stealing, and the faulty internal control weaknesses that were determi
> When O. J. Simpson was tried for the murder of his wife, Nicole Simpson, he was ruled not guilty in the criminal court hearings. However, when Nicole Simpson's family sued Simpson civilly, he was ordered to compensate Nicole's family several millions of
> Briefly research a recent publicized fraud to become familiar with the major facts involved. Identify ways that a fraud investigator could add value in the 1. investigation, 2. legal follow-up, and 3. implementation of controls to prevent similar prob
> In June 2000, the SEC brought civil charges against seven top executives of Cendant Company. The SEC alleged that these officials had, among other things, inflated income by more than $100 million through improper use of company reserves. These proceedin
> A Wall Street bond trader turned on the television one day and saw a news report accusing him of committing a large securities scam. This trader learned that his employer had accused him of creating $300 million of phony profits and, as a result, getting
> Mr. Bill is the sole proprietor of a small play-dough production company. Over the last few months, he noticed revenues dropping and started wondering what is going on. After giving it much thought, he realizes that his accountant, Mr. Pringles, has been
> 1. Using a subtly different Internet host name to mimic another business is known as: a. Spoofing. b. Sniffing. c. Web-visit hijacking. d. Falsified identity. 2. Passwords and biometrics are both: a. Authorization controls. b. Independent check co
> Jim has been a faithful employee of Daddy's Denture, Inc. (DO) for four years. He has held various positions where he handles receipts, credit memos, and other accounting records. Along with recently added responsibilities, Jim has discovered more opport
> 1. The retention of a fraud investigator in a bankruptcy proceeding must be approved by the bankruptcy judge unless: a. The debtor's estate pays the investigator. b. The trustee pays the investigator. c. The creditors' committee pays the investigator.
> 1. Which of the following is not a type of tax fraud? a. Using a false SSN. b. Overstating income. c. Keeping two sets of financial books. d. Claiming a dependent when you do not have one. 2. Which of the following describes a Chapter 13 bankruptcy
> 1. Consumers should provide credit card numbers or bank account information over the telephone only when: a. They initiated the call and are purchasing a legitimate product. b. They are asked to give the information. c. The entity receiving this infor
> 1. Phishing is the method of: a. Using e-mail or other Internet applications to deceive people into disclosing valuable personal information. b. Convincing a person to divulge personal information over the telephone. c. Hacking into another's computer
> 1. Which of the following types of disbursement fraud occurs least frequently? a. Expense tampering. b. Payroll schemes. c. Register disbursement schemes. d. Billing schemes. 2. Which of the following results in the highest loss per case? a. Expens
> 1. Most frauds against organizations are perpetrated by: a. Employees. b. Owners. c. Vendors. d. A collusion of two of the above. 2. What are the three major classes of asset misappropriation? a. Stealing receipts, purchasing fraud, and disbursemen
> 1. When focusing on changes, you should consider changes from period to period in: a. Recorded balances. b. Relationships between balances. c. Balances of other nonsimilar companies. d. Both a and b. e. All of the above. 2. Overstating cash is usu
> 1. Which of the following is a primary type of transaction that can create liabilities for a company? a. Purchasing inventory. b. Borrowing money. c. Selling purchased goods. d. Leasing assets. e. All of the above. 2. When accounts payable-related
> 1. The asset turnover ratio measures: a. The average time an asset is used by the company. b. The average useful life of capital assets. c. Sales that are generated with each dollar of the assets. d. Assets that are purchased with each dollar of sale
> For each of the following red flags, identify which fraud exposure the risk falls under: management and directors, relationships with others, organization and industry, or financial results and operating characteristics. 1. The personal worth of directo
> 1. Which of the following is not an inventory-related documentary symptom? a. Duplicate purchase orders. b. Missing inventory during inventory counts. c. Unsupported inventory sales transactions. d. All of the above are inventory-related documentary
> 1. The most common account(s) manipulated when perpetrating financial statement fraud are: a. Expenses. b. Inventory. c. Revenues. d. Accounts Payable. 2. Why might a company want to understate net income? a. To increase profits. b. To increase s
> 1. Which of the following is not a method of honesty testing? a. Graphology. b. Voice stress analysis. c. Body language test. d. Pencil-and-paper test. 2. Interviews should not be conducted with: a. Suspects. b. Co-workers. c. Clients. d. Interv
> 1. Most financial statement frauds occur in smaller organizations with simple management structures, rather than in large, historically profitable organizations. This is because: a. It is easier to implement good internal controls in a small organizatio
> 1. Financial statement fraud is usually committed by: a. Executives. b. Managers. c. Stockholders. d. Outsiders. e. Both a and b. 2. Which officer in a company is most likely to be the perpetrator of financial statement fraud? a. Chief financial o
> 1.Which of the following is the typical sequence of reactions to a crisis? a. Anger, denial, rationalization, depression, acceptance. b. Rationalization, denial, anger, depression, acceptance. c. Denial, anger, rationalization, depression, acceptance.
> 1. A form 1099 with missing withholdings (where they should be reported) may be a fraud symptom for which liability account? a. Accounts Payable. b. Unearned Revenues. c. Contingent Liabilities. d. Accrued Liabilities. 2. In liability fraud, liabil
> 1. When deposing an expert witness, the opposing attorneys try to achieve all of the following goals except: a. Understanding the expert's opinion. b. Understanding the expert's credentials. c. Seeking admission of guilt. d. Obtaining an assessment of
> 1. To be convicted in a criminal case, the standard of evidence is: a. Beyond a shadow of a doubt. b. Beyond a reasonable doubt. c. Preponderance of evidence. d. All of the above. 2. Most court cases are decided in state courts, except when: a. Fed
> What is an affidavit of proposed investigator?
> Compare and contrast financial statement fraud with embezzlement and misappropriation, especially with respect to who usually commits the fraud. Also contrast the different kinds of fraud with respect to who benefits from the fraud.
> What is a court-appointed or panel trustee?
> Why is fraud so prevalent in bankruptcy and divorce cases?
> Why are the elderly and/or uneducated so susceptible to fraud?
> How does consumer fraud affect the economies of entire countries?
> What is the difference between a fraudulent multilevel marketing organization and a legitimate multilevel marketing organization?
> What is a Nigerian money offer?
> What are some examples of foreign advance-fee scams?
> What are some proactive steps that consumers can take to minimize their risk to identity theft?
> What are some methods perpetrators use to steal a person's identity?
> What is identity theft?
> ABC Company manufactures and sells software packages to small businesses. The company has enjoyed great success since it began business in 1998. Last year, the firm doubled its revenues, and its management is now looking closely at going public by making
> Why are theft of cash through larceny schemes easier to detect than skimming schemes?
> What are the four types of corruption?
> What are the six kinds of fraudulent disbursements?
> When does a conflict of interest occur? Give an example.
> After working out at the gym, you notice that your car has been broken into and your wallet has been stolen. What should you do?
> While consumer fraud often affects individual people directly, in what ways does consumer fraud affect everyone?
> How does the expression "If it sounds too good to be true, it probably is" relate to consumer fraud?
> What are investment scams?
> Why is it important to study consumer fraud?
> How do executives illegally loot their companies to receive large financial benefits?
> After Enron, WorldCom, and other major corporate scandals that rocked America in the recent past, it seemed that nothing would surprise investors or regulators. However, almost everyone was shocked by revelations that as many as 20 percent of all public
> What are expense fraud schemes?
> What is meant by a billing scheme?
> What is a register disbursement scheme?
> What is meant by check tampering?
> How does the ACFE categorize fraudulent disbursements?
> Describe what is meant by theft of cash through skimming.
> Describe what is meant by an organization's theft of cash through larceny.
> Briefly describe how the use of databases could help in detecting kickback fraud schemes.
