Deck 13: Corruption and the Human Factor

Question 1

In an underbilling scheme the perpetrator sells goods or services above fair market value to a vendor in which he or she has a hidden interest.

Answer 1

False

Question 2

Illegal gratuities are similar to bribery schemes, except that something of value is given to an employee to reward a decision rather than influence it.

Answer 2

True

Question 3

________ may be defined as the offering, giving, receiving, or soliciting anything of value to influence an official act.

A) Bribery
B) Conflicts of interest
C) Economic extortion
D) Illegal gratuities

Answer 3

A

Question 4

The Treadway Commission specifically commented on the importance of the "tone at the bottom" in respect to the ethics in an organization.

Question 5

Employees who perceive that they will be caught engaging in occupational fraud and abuse are less likely to commit it.

Question 6

Economic extortion schemes are committed when one person demands payment from another.

Question 7

A fraud hotline is considered by most professionals to be the cornerstone of an employee reporting program.

Question 8

Bid-rigging schemes usually occur in the pre-solicitation phase, the solicitation phase, or the submission phase of the bidding process.

Question 9

The threat of surprise audits, especially in businesses that are currency-intensive, is not a powerful deterrent to occupational fraud and abuse.

Question 10

________ schemes are committed when one person demands payment from another.

A) Conflicts of interest
B) Economic extortion
C) Illegal gratuities
D) Bribery

Question 11

In turnaround sales scheme, an employee knows his employer is seeking to purchase a certain asset and takes advantage of the situation by purchasing the asset himself.

Question 12

Most company ethics policies forbid employees from accepting unreported gifts from vendors.

Question 13

Kickbacks are undisclosed payments made by vendors to employees of purchasing companies.

Question 14

Bribery, illegal gratuities, and economic extortion cases all bear a great deal of similarity in that they all involve a legitimate payment from one party to another, either to influence a decision or as a reward for a decision already made.

Question 15

A conflict of interest occurs when an employee, manager, or executive has an economic or personal interest in a transaction that adversely affects the organization.

Question 16

Which of the following is not a typical corruption scheme:

A) Economic extortion
B) Expropriation
C) Bribery
D) Conflicts of interest

Question 17

Management has an obligation to disclose to the shareholders fraud committed by officers, executives, and others in positions of trust.

Question 18

Corruption schemes are broken down into four classifications: bribery, illegal gratuities, economic extortion and larceny.

Question 19

________ are similar to bribery schemes, except that something of value is given to an employee to reward a decision rather than influence it.

A) Conflicts of interest
B) Economic extortion
C) Illegal gratuities
D) Expropriation

Question 20

Perhaps the most common indicator of collusive bidding practices is an unusually low contract price.

Question 21

Describe the features of an effective fraud reporting program within a company.

Question 22

________ is a process by which several bidders conspire to split up contracts and ensure that each gets a certain amount of work.

A) Blind bidding
B) Bid pooling
C) Expropriation
D) Splitting the pot

Question 23

What is a fail safe way to eliminate fraud in the workplace?

A) Pay people competitive salaries
B) Mandate annual financial disclosure for all employees
C) Strong internal controls
D) Eliminate people

Question 24

One proactive computer audit test is to match the employee address file of Company A to the customer address file. This test is commonly used to:

A) Determine if shipments are diverted from the Company A to the employee home address
B) Determine if the vendor is shipping product to the home address of the Company A employee
C) Determine if the employee is a "ghost" employee, by determining if the employee has a valid address
D) Determining if the shipping company is effective in its shipping process

Question 25

As fraud examiners, we concentrate on ________ which can be defined as the modification of behavior through the perception of negative sanctions.

A) fear
B) deterrence
C) prevention
D) avoidance

Question 26

Which of the following would not normally be considered an illegal gratuity to the purchasing manager of Company A?

A) Accepting a trip to Hawaii donated by the vendor
B) Accepting of vendor office calendars
C) World Series baseball tickets donated by the vendor
D) Super Bowl tickets donated by the vendor

Question 27

An ________ is considered by most professionals to be the cornerstone of an employee reporting program.

A) hotline
B) audit
C) conflict of interest policy
D) external review

Question 28

A woman had two sons who were born on the same hour of the same day of the same year, but they were not twins. How could this be?

Question 29

A proactive computer audit test to detect when inventory prices may be higher than normal as part of a fraud scheme would not include:

A) Identify a retail price less than the inventory price
B) Examine the gross margin by inventory item for smaller-than-normal gross margins
C) Examine the competitive bidding process for each inventory item to determine if the low bidder has been awarded contracts consistently
D) Examine accounts receivable turnover by customer

Question 30

The competitive bidding process, in which several suppliers or contractors are vying for contracts in what can be a very cutthroat environment can be subverted by:

A) Blind bidding
B) An abundance of bidders
C) Excessively low bids
D) Bid-rigging schemes

Question 31

In this scheme, an employee started his own business that would compete directly with his employer.

A) Turnaround sale
B) Economic extortion
C) Business diversion
D) Illegal gratuity

Question 32

A proactive computer audit test to detect when a company has a high incidence of invoice payments below an approval limit that may be reviewable by an audit could include:

A) Stratify vendor payments by approval limits directly under the approval limit
B) Conduct an intensive audit of 100 percent of all invoices
C) Stratify vendor payment by approval limits directly over the approval limit.
D) Ask the payables clerk to sign a financial disclosure document

Question 33

In this type of scheme, an employee knows his or her employer is seeking to purchase a certain asset and takes advantage of the situation by purchasing the asset himself or herself usually in the name of an accomplice or shell company.

A) Turnaround sale
B) Illegal gratuity
C) Economic extortion
D) Conflict of interest

Question 34

List the four major corruption schemes.

Question 35

What are the different types of corruption schemes?

Question 36

The threat of ________, especially in businesses that are currency-intensive, may be a powerful deterrent to occupational fraud and abuse.

A) jail time
B) surprise audits
C) conflicts of interest policy
D) external reviews

Question 37

Employers sometimes have ________ their employees that may contribute to occupational fraud and abuse.

A) unreasonable expectations of
B) confidence n
C) hopes in
D) confusion about

Question 38

________ schemes involve the submission of invoices for goods and services that are either overpriced or completely fictitious.

A) Conflicts of interest
B) Economic extortion
C) Kickback
D) Illegal gratuities

Question 39

In order to obtain the funds to make bribery payments, employees usually divert company money into ________, a non-company account from which bribes can be made.

A) Petty cash
B) An overseas account
C) A slush fund
D) An imprest fund

Question 40

A proactive computer audit test to detect when a company has over-purchased inventory, which could be a sign of a purchasing manager who may be receiving illegal gratuities from a supplier would not include:

A) Calculate inventory turnover by individual item
B) Examine individual inventory items for potential obsolescence
C) Calculate receivables turnover by customer
D) Extract all part greater than zero in cost that have had usage in the current year

Question 41

How does the "perception of detection" impact fraud deterrence?

Question 42

How can conflicts of interest be prevented and detected?

Question 43

What is a kickback scheme, and how is it committed?

Question 44

Why is it problematic for an organization to set standards that are too high?

Question 45

What types of abuses may occur at the pre-solicitation stage of the bidding process?

Question 46

What is the defined as "something of value?"

Question 47

How do bribery and illegal gratuities differ?

Question 48

What is the difference between fraud prevention and fraud deterrence?

Question 49

What is meant by a conflict of interest?