1. Which of the following is NOT a primary control procedure to minimize the occurrence of fraud?

• Which of the following is NOT a primary control procedure to minimize the occurrence of fraud?
• Dual custody
• Systems of authorization
• Internal audit department
• Documents and records

ANSWER: c

FEEDBACK: a. Incorrect. Dual custody, or segregation of duties, is a control activity.

• Incorrect. Systems of authorization are a control activity.
• Correct.
• Incorrect. Documents and records are control activities--they produce an audit trail.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: LO: 2-6

NATIONAL STANDARDS: United States - BUSPROG: - Technology KEYWORDS: Bloom's: Understanding

• Which of the following is NOT a common rationalization of fraud perpetrators?
• The organization owes me
• I'm only borrowing the money
• No one will get hurt
• No one will care

ANSWER: d

FEEDBACK: a. Incorrect. This is a common rationalization for committing fraud.

• Incorrect. This is a common rationalization for committing fraud.
• Incorrect. This is a common rationalization for committing fraud.
• Correct. Fraud perpetrators usually rationalize their actions by thinking “I deserve more.”

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: LO: 2-7

NATIONAL STANDARDS: United States - BUSPROG: - Technology KEYWORDS: Bloom's: Remembering CengageLearningTesting,Poweredby CogneroPage 1Chapter 02 Fraud Examination 5th Edition Albrecht Test Bank Visit TestBankDeal.com to get complete for all chapters

• Each of the following is an example of an abuse of a control environment EXCEPT:
• The HR department failed to check an applicant's background and hired someone who had committed fraud in

the past.

• A manager instructs employees not to share passwords, and then shares her passwords with her immediate

assistant.

• A company has established codes of conduct and conducts training meetings to teach employees to distinguish

between acceptable and unacceptable behavior. Attendance is voluntary.

• The employees know who has responsibility for each business activity. Procedures to follow are in place.

ANSWER: d

FEEDBACK: a. Incorrect.

• Incorrect.
• Incorrect.
• Correct. A clear organizational structure is an important fraud-deterring element. It is easier to track

missing assets and money when all employees know exactly who is responsible for each business activity.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: LO: 2-6

NATIONAL STANDARDS: United States - BUSPROG: - Technology KEYWORDS: Bloom's: Understanding

• A fraud perpetrator uses the float time between banks to give the impression that he had money in his accounts.

Which crime is he committing?

• Floating
• Strip
• Spinning
• Kiting

ANSWER: d

FEEDBACK: a. Incorrect.

• Incorrect.
• Incorrect.
• Correct.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: LO: 2-5

NATIONAL STANDARDS: United States - BUSPROG: - Technology KEYWORDS: Bloom's: Remembering CengageLearningTesting,Poweredby CogneroPage 2Chapter 02

• Which is following observations is TRUE?
• Research shows that only people with a criminal mind set commit fraud.
• Fraud perpetrators usually can be distinguished from others on the basis of psychological characteristics.
• Most fraud perpetrators have profiles that are similar to those of other people.
• When fraud does occur, the most common initial reaction by those involved in the fraud is confession.

ANSWER: c

FEEDBACK: a. Incorrect. Research shows that anyone can commit fraud.

• Incorrect. Fraud perpetrators usually can’t be distinguished from other people on the basis of

demographic or psychological characteristics.

• Correct.
• Incorrect. When fraud does occur, the most common reaction by those around the fraud is denial.

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: LO: 2-1,6 - LO: 2-1

NATIONAL STANDARDS: United States - BUSPROG: - Technology KEYWORDS: Bloom's: Remembering

6. When management fraud occurs, companies usually:

• overstate assets and net income.
• understate assets and net income.
• overstate assets and understate net income.
• understate assets and overstate net income.

ANSWER: a

FEEDBACK: a. Correct.

• Incorrect. Usually, when management fraud occurs, companies overstate assets on the balance sheet

and net income on the income statement.

• Incorrect. Usually, when management fraud occurs, companies overstate assets on the balance sheet

and net income on the income statement.

• Incorrect. Usually, when management fraud occurs, companies overstate assets on the balance sheet

and net income on the income statement.

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: LO: 2-2

NATIONAL STANDARDS: United States - BUSPROG: - Technology KEYWORDS: Bloom's: Remembering CengageLearningTesting,Poweredby CogneroPage 3Chapter 02

• Which of the following is NOT one of the key elements common to all frauds?
• Perceived pressure
• Perceived inequality
• Perceived opportunity
• Rationalization

ANSWER: b

FEEDBACK: a. Incorrect. This is a key element common to all frauds.

• Correct.
• Incorrect. This is a key element common to all frauds.
• Incorrect. This is a key element common to all frauds.

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: LO: 2-3

NATIONAL STANDARDS: United States - BUSPROG: - Technology KEYWORDS: Bloom's: Remembering

• What is the most important element in a control environment?
• Management's communication
• Management's role and example
• The hiring process
• The internal audit department

ANSWER: b

FEEDBACK: a. Incorrect. Although management communication is critical, it is not the most important element in the control environment. Management's role and example are the most important elements because employees will follow what management does more than what management communicates.

• Correct.
• Incorrect. The hiring process, although critical, cannot eliminate all fraud. Hiring only those with

integrity can still lead to fraud if the example and role of management pushes employees into believing that fraud is okay. Also, the hiring process cannot screen out all dishonest employees.

• Incorrect. Internal auditors only detect about 20% of employee fraud. The internal auditors do add a

deterrent effect; however, the internal auditors are not the most critical element in the control environment.

POINTS: 1

DIFFICULTY: Challenging

LEARNING OBJECTIVES: LO: 2-6

NATIONAL STANDARDS: United States - BUSPROG: - Technology KEYWORDS: Bloom's: Applying CengageLearningTesting,Poweredby CogneroPage 4Chapter 02