Deck 12: Business Ethics, Fraud, and Fraud Detection

Question 1

Cash larceny involves stealing cash from an organization before it is recorded on the organization's books and records.

Answer 1

False

Question 2

Copyright laws and computer industry standards have been developed jointly and rarely conflict.

Answer 2

False

Question 3

Skimming involves stealing cash from an organization after it is recorded on the organization's books and records

Answer 3

False

Question 4

Business bankruptcy cases always involve fraudulent behavior.

Question 5

Defalcation is another word for financial fraud.

Question 6

Situational pressure includes personal or job related stresses that could coerce an individual to act dishonestly.

Question 7

Employees should be made aware of the firm's commitment to ethics.

Question 8

The ethical principle of informed consent suggests that the decision should be implemented so as to minimize all of the risks and to avoid any unnecessary risks.

Question 9

Collusion among employees in the commission of a fraud is difficult to prevent but easy to detect.

Question 10

Computer programs are intellectual property.

Question 11

Opportunity involves direct access to assets and/or access to information that controls assets.

Question 12

Database management fraud includes altering,updating,and deleting an organization's data.

Question 13

Ethical issues and legal issues are essentially the same.

Question 14

The ethical principle of justice asserts that the benefits of the decision should be distributed fairly to those who share the risks.

Question 15

Para computer ethics is the exposure to stories and reports found in the popular media regarding the good or bad ramifications of computer technology.

Question 16

The fraud triangle represents a geographic area in Southeast Asia where international fraud is prevalent.

Question 17

The trend toward distributed data processing increases the exposure to fraud from remote locations.

Question 18

Of the three fraud factors (situational pressure,ethics,and opportunity),situational pressure is the factor that actually facilitates the act.

Question 19

Internal control systems are recommended but not required to prevent fraud.

Question 20

Business ethics is the analysis of the nature and social impact of computer technology,and the corresponding formulation and justification of policies for the ethical use of such technology.

Question 21

Which characteristic is not associated with software as intellectual property?

A) uniqueness of the product
B) possibility of exact replication
C) automated monitoring to detect intruders
D) ease of dissemination

Question 22

What fraud scheme is similar to the "borrowing from Peter to pay Paul" scheme?

A)expense account fraud
B)kiting
C)lapping
D)transaction fraud

Question 23

Which of the following controls would best prevent the lapping of accounts receivable?

A)Segregate duties so that the clerk responsible for recording in the accounts receivable subsidiary ledger has no access to the general ledger.
B)Request that customers review their monthly statements and report any unrecorded cash payments.
C)Require customers to send payments directly to the company's bank.
D)Request that customers make the check payable to the company.

Question 24

One characteristic of employee fraud is that the fraud

A) is perpetrated at a level to which internal controls do not apply
B) involves misstating financial statements
C) involves the direct conversion of cash or other assets to the employee's personal benefit
D) involves misappropriating assets in a series of complex transactions involving third parties

Question 25

Changing the Hours Worked field in an otherwise legitimate payroll transaction to increase the amount of the paycheck is an example of data collection fraud.

Question 26

Individuals who acquire some level of skill and knowledge in the field of computer ethics are involved in which level of computer ethics?

A) para computer ethics
B) pop computer ethics
C) theoretical computer ethics
D) practical computer ethics

Question 27

All of the following are factors in the fraud triangle except

A) Ethical behavior of an individual
B) Pressure exerted on an individual at home and job related
C) Materiality of the assets
D) Opportunity to gain access to assets

Question 28

Scavenging is a form of fraud in which the perpetrator uses a computer program to search for key terms in a database and then steal the data.

Question 29

When certain customers made cash payments to reduce their accounts receivable,the bookkeeper embezzled the cash and wrote off the accounts as uncollectible.Which control procedure would most likely prevent this irregularity?

A) segregation of duties
B) accounting records
C) accounting system
D) access controls

Question 30

The most common access point for perpetrating computer fraud is at the data collection stage.

Question 31

A shell company fraud involves

A) stealing cash from an organization before it is recorded
B) Stealing cash from an organization after it has been recorded
C) manufacturing false purchase orders, receiving reports, and invoices
D) A clerk pays a vendor twice for the same products and cashes the reimbursement check issued by the vendor.

Question 32

Cash larceny involves

A) stealing cash from an organization before it is recorded
B) Stealing cash from an organization after it has been recorded
C) manufacturing false purchase orders, receiving reports, and invoices
D) A clerk pays a vendor twice for the same products and cashes the reimbursement check issued by the vendor.

Question 33

For an action to be called fraudulent,all of the following conditions are required except

A) poor judgment
B) false representation
C) intent to deceive
D) injury or loss

Question 34

Which of the following best describes lapping?

A) applying cash receipts to a different customer's account in an attempt to conceal previous thefts of funds
B) inflating bank balances by transferring money among different bank accounts
C) expensing an asset that has been stolen
D) creating a false transaction

Question 35

Employee fraud involves three steps.Of the following,which is not involved?

A) concealing the crime to avoid detection
B) stealing something of value
C) misstating financial statements
D) converting the asset to a usable form

Question 36

The objective of SAS 99 is to seamlessly blend the auditor's consideration of fraud into all phases of the audit process.

Question 37

Which ethical principle states that the benefit from a decision must outweigh the risks,and that there is no alternative decision that provides the same or greater benefit with less risk?

A) minimize risk
B) justice
C) informed consent
D) proportionality

Question 38

Skimming involves

A) stealing cash from an organization before it is recorded
B) Stealing cash from an organization after it has been recorded
C) manufacturing false purchase orders, receiving reports, and invoices
D) A clerk pays a vendor twice for the same products and cashes the reimbursement check issued by the vendor.

Question 39

In balancing the risks and benefits that are part of every ethical decision,managers receive guidance from each of the following except

A) justice
B) self interest
C) risk minimization
D) proportionality

Question 40

Forces which may permit fraud to occur do not include

A) a gambling addiction
B) lack of segregation of duties
C) centralized decision making environment
D) questionable integrity of employees

Question 41

What is check tampering?

Question 42

The text discusses many questions about personal traits of executives which might help uncover fraudulent activity.What are three?

Question 43

Which of the following is not an issue to be addressed in a business code of ethics required by the SEC?

A) Conflicts of interest
B) Full and Fair Disclosures
C) Legal Compliance
D) Internal Reporting of Code Violations
E) All of the above are issues to be addressed

Question 44

All of the following are conditions for fraud except

A) false representation
B) injury or loss
C) intent
D) material reliance

Question 45

What does the underlying assumption of reasonable assurance regarding implementation of internal control mean?

A)Auditor's are reasonably assured that fraud has not occurred in the period.
B)Auditor's are reasonably assured that employee carelessness can weaken an internal control structure.
C)Implementation of the control procedure should not have a significant adverse effect on efficiency or profitability.
D)Management assertions about control effectiveness should provide auditors with reasonable assurance.

Question 46

What are the main issues to be addressed in a business code of ethics required by the SEC?

Question 47

What are the five conditions necessary for an act to be considered fraudulent?

Question 48

Explain the characteristics of management fraud.

Question 49

The importance to the accounting profession of the Sarbanes-Oxley Act of 2002 is that
a.bribery will be eliminated.
b.management will not be able to override the company's internal controls.
c.firms are required to have an effective internal control system.
d.firms will not be exposed to lawsuits.

Question 50

Operations fraud includes

A) altering program logic to cause the application to process data incorrectly
B) misusing the firm's computer resources
C) destroying or corrupting a program's logic using a computer virus
D) creating illegal programs that can access data files to alter, delete, or insert values

Question 51

What are the six broad classes of physical control activities defined by SAS 78?

Question 52

Computer fraud can take on many forms,including each of the following except

A) theft or illegal use of computer-readable information
B) theft, misuse, or misappropriation of computer equipment
C) theft, misuse, or misappropriation of assets by altering computer-readable records and files
D) theft, misuse, or misappropriation of printer supplies

Question 53

Business ethics involves

A) how managers decide on what is right in conducting business
B) how managers achieve what they decide is right for the business
C) both a and b
D) none of the above

Question 54

__________________________ are intentional mistakes while __________________________ are unintentional mistakes.

Question 55

Distinguish between exposure and risk.

Question 56

What is the objective of SAS 99?

Question 57

Give two examples of employee fraud and explain how the theft might occur.

Question 58

The four principal types of fraud include all of the following except

A) bribery
B) gratuities
C) conflict of interest
D) economic extortion

Question 59

Explain the Pay and Return scheme.

Question 60

Explain the pass through fraud.

Question 61

As a form of computer fraud,what is eavesdropping?

Question 62

Four principal types of corruption are discussed.Name all four and explain at least two.

Question 63

Why are the computer ethics issues of privacy,security,and property ownership of interest to accountants?

Question 64

Distinguish between skimming and cash larceny.Give an example of each

Question 65

Contrast management fraud with employee fraud.

Question 66

Name three types of program fraud.

Question 67

Since all fraud involves some form of financial misstatement,how is Fraudulent Statement fraud different?

Question 68

Explain why collusion between employees and management in the commission of a fraud is difficult to both prevent and detect.

Question 69

What fraud detection responsibilities (if any)are imposed on auditors by the Sarbanes-Oxley Act?

Question 70

Define database management fraud.

Question 71

Define operational fraud.

Question 72

Explain the problems associated with lack of director independence

Question 73

Management fraud is regarded as more serious than employee fraud.Three special characteristics have been discussed for management fraud.What are they? Explain.

Question 74

What is program fraud?

Question 75

What is scavenging?

Question 76

Explain the shell company fraud.

Question 77

According to common law,there are five conditions that must be present for an act to be deemed fraudulent.Name and explain each.

Question 78

Explain the problems associated with lack of auditor independence.

Question 79

Misappropriation of assets can involve various schemes: expense reimbursement fraud,lapping,and payroll fraud.Explain each and give an example.

Question 80

Name three forms of computer fraud.