Question: The single most critical element for a

> Because fraud prevention programs are so costly, despite being ethically superior, they almost always result in higher costs and thus lower net income than using only a strong system of fraud detection.

> Because complete fraud prevention is impossible because it requires changing actual human behavior, successful companies should forgo fraud prevention and instead focus on strong fraud detection programs

> In order to create a culture of honesty and confidentiality, persons aware of fraudulent activity should be encouraged to tell only the CEO.

> Criminal conviction is much more difficult to achieve than a civil judgment because there must be proof “beyond a reasonable doubt" that the perpetrator intentionally stole assets.

> Studies show that a positive and honest work culture in a company does little to prevent fraud

> Organizations often want to avoid embarrassment and expense, so they terminate fraudulent employees without having them prosecuted further.

> The three 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.

> Fraud is difficult to detect because some fraud symptoms often cannot be differentiated from non-fraud factors that appear to be symptoms.

> Frauds typically start large and get smaller as the perpetrator tries to conceal his dishonest acts.

> The net worth method is rarely, if ever, helpful in actual fraud investigations.

> Expectations about punishment must be communicated randomly among work groups if fraud is to be prevented.

> Effective hiring policies that discriminate between marginal and highly ethical individuals contribute to an organization's success in preventing fraud.

> Creating an expectation of punishment causes firm morale to deteriorate and often results in lower productivity.

> Not all possible controls should be implemented; rather, one must assess a control's cost and benefits before implementation.

> The major role of employee assistance programs is to help employees recover from the damaging psychological effects of fraud.

> Tips and complaints are the most common way fraud is detected.

> Even with the right opportunity or significant pressure, most people would probably not steal or embezzle.

> Most investigators rely heavily on interviews to obtain the truth.

> Once predication is present, an investigation is usually undertaken to determine whether or not fraud is actually occurring.

> If a perpetrator is not caught, his confidence in the scheme will decrease, and he will become less and less greedy.

> Several publicly available databases provide information that can be helpful in investigations.

> Organizations that want to prevent fraud must make it easy for employees and others to report suspicious activities.

> Research has shown that it is employees and managers, not auditors, who detect most frauds.

> No matter how well an organization has developed a culture of honesty and high ethics, most organizations will still have some fraud.

> Developing a positive work environment is of little importance when creating a culture of honesty.

> 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 opportunities for fraud.

> Fraud prevention includes taking steps to create and maintain a culture of honesty and high ethics.

> Investigating fraud is the most cost-effective way to reduce losses from fraud.

> Legal action taken by an organization can affect the probability of whether fraud will recur.

> Physical evidence includes evidence gathered from paper, computers, and other written documents.

> Once fraud has been committed, there are no winners.

> Private credit records are maintained on both individuals and organizations by various credit-reporting companies.

> Many organizations merely dismiss dishonest employees because of the expense and time involved in prosecuting them.

> Fraud perpetrators who are prosecuted, incarcerated, or severely punished usually commit fraud again.

> Fraud can be perpetrated to benefit oneself or to benefit one's organization.

> The greater the perceived opportunity or more intense the pressure, the less rationalization it takes for someone to commit fraud.

> Effective fraud-fighters usually put most of their time and effort into minimizing the pressures for fraud perpetrators to commit fraud.

> Good internal controls will often increase opportunities for individuals to commit fraud within an organization.

> Management's example or modeling is of little importance to the control environment.

> When fraud is committed, criminal prosecution usually proceeds before civil litigation.

> A negative outcome in a civil lawsuit usually results in jail time for the perpetrator.

> In vendor fraud, customers don't pay for goods purchased.

> Counties and other local agencies that contain records are usually not very useful in fraud investigation.

> Indirect fraud occurs when a company's assets go directly into the perpetrator's pockets without the involvement of third parties.

> Companies that commit financial statement fraud are often experiencing net losses or have profits that are significantly lower than expectations.

> The three elements of the fraud triangle are a perceived pressure, a perceived opportunity, and rationalization.

> Occupational fraud is fraud committed on behalf of an organization.

> Unintentional errors in financial statements are a form of fraud.

> Fraud perpetrators are often those who are least suspected and most trusted.

> Power is rarely used to influence another person to participate in an already existing fraud scheme.

> Some frauds are allowed to be perpetrated because victims don't have access to information possessed by the perpetrators.

> Good documents and records are some of the best preventive controls.

> The secretary of state maintains many types of records relating to business and Uniform Commercial Code (UCC) filings.

> A proper system of authorization will help ensure good internal controls.

> An individual who owns his or her own business and is the sole employee needs many internal control activities.

> Appropriate hiring will not decrease an organization's risk of fraud.

> How many different Web sites can you find dealing with fraud auditing and detection? Try a few different search strings in Google, YouTube, the ACFE or another search engine and see what sites are available.

> Go to www.insurancefraud.org and read the information about insurance fraud for consumers. Insurance fraud is a problem that has become increasingly costly for the insurance industry. The Coalition Against Insurance Fraud estimates that insurance losses

> As mentioned in the chapter, the Committee of Sponsoring Organizations produced several reports on internal control One of these relates to internal controls over financial reporting for smaller companies. Visit the website www.coso.org and read how the

> Go to www.fraud.org and learn about the National Fraud Information Center (NFIC). What does it do, and specifically, how does it make it easy for people to report fraud?

> When hiring, it is usually difficult to know which employees are capable of committing fraud, especially without performing thorough background checks.

> Visit the Web site of the National White Collar Crime Center at www.nw3c.org. This site is funded through a grant from the Department of Justice. Its purpose is to assist federal law enforcement agencies in the investigation and prevention of white-colla

> Return to www.IJOwtoinvestigate.com. Read the section entitled "Business Background Checks." a. What does a complete business investigation include? b. Suppose you hire someone to perform some work on your house. Who do you call to find out if the cont

> Go to www.howtoinvestigate.com. a. Identify the different kinds of background checks that investigative professionals provide. b. What information does a basic background investigation provide? c. Credit bureaus gather credit data about individuals fr

> An increasingly common way to commit fraud is to use the Internet. The Department of Justice now devotes an entire page on its Web site to Internet fraud. Visit its site at www.justice.gov/criminal/ fraud/ and identify three types of Internet fraud.

> The Postal Service site contains a great deal of information on the detection of mail fraud and the investigation efforts of the Postal Service. a. Access the U.S. Postal Service Web site at www.usps.gov. Enter into the search box the words "postal inspe

> What are the benefits and drawbacks of the Soundex and n-gram methods of fuzzy matching text?

> What is ODBC? How does it compare with text file import?

> What is "trashing"? In what ways can it (and the electronic form of it) help an investigation?

> What is the Gramm-Leach-Bliley Act? How does it apply to investigators?

> When searching public records, what are the four different types of information sources available to investigators?

> A Ponzi scheme is considered to be a type of investment scam.

> How do these advanced techniques aid in the information-gathering process?

> What are some of the advanced techniques available when searching for information on Google (or other search engines)?

> Why are net worth calculations so valuable?

> How does the Internet assist in determining the net worth of suspected perpetrators?

> How do state, federal, and local public records assist fraud investigations?

> What are the differences between public and private sources of information?

> Why is it important to know how perpetrators convert and spend their stolen funds?

> What are "financial footprints"?

> What are common ways to investigate conversion of stolen assets?

> You serve on the board of directors of a multinational manufacturing company. You have just received a whistle-blower complaint that one of the managers in another country, where a large production facility is located, has been understating manufacturing

> Management fraud is deception perpetrated by an organization's top management.

> Several years ago, Prudential Securities was charged with fraud for late trading. This was the first major brokerage house to be charged with the illegal practice of buying mutual funds after hours. The regulators who accused Prudential Securities charge

> A recent newspaper contained the following story: Publishers Clearing House agreed to pay $34 million in a deal with 26 states to settle allegations the sweepstakes company employed deceptive marketing practices. The $34 million will cover customer refun

> You are the audit committee chair for a large construction company. A year ago you purchased a development company in Europe for approximately $100 million. This company has already lined up a number of large projects in Italy, Germany, and other Europea

> You have received a tip that the manager over the purchasing department of your company is taking kickbacks from one of your vendors. What fraud symptoms might you look for to determine if the manager is actually accepting bribes?

> Homegrown Gardens, LLP, is a $10 million nursery and garden retailer in Florida. Homegrown employs about 20 full-time and seasonal employees. The majority of the plants and nursery stock that Homegrown sells comes from Monromio Nurseries, a wholesaler ba

> Steve (Slick) Willy, 45, just got out of jail. As a reformed citizen on parole, Slick decides to go into business for himself. He starts a collections company to help companies collect debts. The terms of his parole stipulate that he pay restitution paym

> Use the following financial data to prepare a comparative net worth assessment: YEAR I YEAR 2 YEAR 3 Assets: Residence $50,000 $50,000 $200,000 Stocks and bonds 10,000 10,000 10,000 Automobiles 15,000 15,000 40,000 Cash 5,000 8,000 20,000 Liabilities

> Mark is a young business student at the XYZ University, who works part time as a financial adviser at a local credit union. Mark has been married a little over two years. Mark's wife is currently taking care of their newborn son, while Mark finishes up s

> A number of years ago, General Motors experienced a $436 million fraud committed by a Long Island automobile dealer. The dealer was borrowing money from General Motors' financing division and using the money to buy vans that didn't exist. Supposedly, he

> The city of Dallas, Texas, is missing 12 city-owned iPads and doesn't know where they went. Answer the following questions: 1. If you were investigating the missing iPads, what kind of theft act evidence might you gather? 2. Who do you think would be in

> When perpetrators are criminally convicted of fraud, they often serve jail sentences and/or pay fines.

> You landed a summer internship with a company that processes dental insurance claims for insurance companies. The company receives the insurance claims from dental offices, achieves authorization from the correct insurance company, and sends payment chec

> John Doe, a fraud examiner, has been hired by ABC Corporation to investigate a shortage of cash, which management thinks is being caused by fraudulent behavior. John Doe could spend his time and money pursuing witnesses to the crime or collecting documen

> The following surveillance log was taken during two fixed point surveillances of an employee suspected of stealing cash from the company while making nightly bank deposits. Required: 1. What is wrong with this surveillance log? 2. Why is it important t

> The balance sheet and income statement for ABC Company for the years 2019 and 2020 are as follows: Required: 1. Perform vertical and/or horizontal analysis of the statements and identify two things that appear to be unusual and could be possible sympto

> Using the financial information in the following tables, compute the required ratios list on the ratio analysis sheet and then complete the horizontal and vertical analyses worksheets. АВС СОМРANY BALANCE SHEET AS OF DECEMBER 31, 2018 ASSETS 201

> In June of a recent year, allegations of fraud regarding repair contracts for work on board U.S. Naval Ships (USNS) were reported to law enforcement agents. The allegations indicated that fraud was rampant and could possibly impact the seaworthiness of t