Question: Why can it be dangerous to provide

> What are the four different exposure areas that must be examined while detecting financial statement fraud?

> What were some of the most notable abuses that occurred between 2000 and 2002?

> What is a volatile interview?

> What are informational questions?

> What are facilitators of communication?

> What is an inhibitor of communication?

> What are some of the different elements of communication?

> What are the five general types of questions that an interviewer can ask?

> What are the five reactions of interviewees?

> 1. Civil bankruptcy cases are usually investigated by the FBI and other law enforcement agencies. 2. A person acting as an officer in a bankruptcy case is prohibited from purchasing any property of the debtor's estate. 3. Fraudulent transfers can occ

> What are the three types of honesty testing?

> How is money laundering related to other illegal activities or fraud?

> What is money laundering?

> During deposition, what posture should an expert witness display?

> What types of fraud-related things can an expert witness testify about?

> What are some of the dos and don'ts of being an expert witness?

> What is the purpose of having a fraud investigator or another expert witness provide testimony in a trial?

> How are fraud examiners used as expert witnesses?

> What is discovery?

> What steps are involved in the criminal litigation process?

> 1. Once an identity theft victim has reported a fraud to the FTC, the FTC will help a victim contact the FBI, Secret Service, and local police to coordinate an investigation. 2. The National Processing Company was given authority by the FTC to preregis

> Visit the IRS's bankruptcy site at www.irs.gov and answer the following questions: a. What percentage of bankruptcy petitions does the IRS estimate contain some kind of fraud? b. What are the major goals of the Cl division's bankruptcy fraud program?

> Visit the Association of Certified Fraud Examiners Web site and read a short introduction on Joseph T. Wells (www.acfe.com). (Hint: He was not only the founder but is listed as an instructor too.) a. What was Wells's background before becoming chairman

> Enron founder and former Chairman and CEO Kenneth Lay was indicted in July 2004 for his role in the Enron scandals. The SEC's complaint against Lay, ironically, seemed to corroborate Lay's protests that he had nothing to do with the manipulation of Enron

> Horizontal and vertical analyses are effective ways to search for analytical fraud symptoms. Search the Internet for the annual report of a company of your choice. Perform both a horizontal and vertical analysis for the assets portion of the balance shee

> Go to the site www2.fbi.gov/publications/leb/ 1996/ oct964.txt and read the article about statement analysis, which discusses interviewing and how to know whether a person is lying or not. This article examines the case of Susan Smith, who killed her two

> The Internet is a great place to find additional information about financial statement fraud. Using your favorite Internet search engine, try various word combinations to see what you can find about financial statement fraud. For example, type in the sea

> Go to the IBM company's Web site (www.ibm.com) and search for "financial reporting". Find the recent annual report. In the notes to the financial statements, read the significant accounting policies concerning revenue and inventory. Do the policies seem

> Refer back to the beginning of this chapter to the excerpt from a Los Angeles Times article about Reed Slatkin's fraud. The article insinuates that the FBI and IRS's raiding of Slatkin's office marked the beginning of the government's investigation of Sl

> Mikos Frederick, an immigrant from Ukraine, is a hotel owner in Las Vegas. Since his arrival in America during the 1960s, Frederick has built a very successful and popular hotel. Until recently, the hotel averaged $20 million in total revenue per year. L

> In 2002, Bill Eaves worked in the purchasing department of Mavis County. In 2006, Eaves was promoted to assistant county administrative officer for personnel. Five years later, Eaves was promoted to county administrative officer- the county's top executi

> 1. Identity theft is the most frequent type of consumer fraud. 2. Identity theft can result in an individual's loss of credit. 3. The best way to prevent a fraudster from establishing a preapproved credit card in your name is to destroy all credit ca

> How might a fraud investigator benefit by attending the deposition of opposing experts?

> 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

> 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. Usually, for everyone involved-especially victims-the investigation of fraud is very: a. Pleasant and relaxing. b. Educational. c. Exciting. d. Traumatic and difficult. 2. To prevent fraud from recurring. most organizations and other fraud victi

> 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