Deck 3: Who Commits Fraud and Why: Criminology and Ethics

Question 1

In order to win an award for damages for negligence, the injured party must prove liability and damages.

Answer 1

True

Question 2

In general, increasing the perception of detection may be the best way to deter employee theft, while increasing the sanctions that are imposed on occupational fraudsters will have a limited effect.

Answer 2

True

Question 3

The term white-collar crime captures the essence of the type of perpetrator that one finds at the heart of occupational fraud and abuse.

Answer 3

True

Question 4

The element of proximate cause for negligence means the plaintiff must establish that damages resulted from the defendant's breach of duty.

Question 5

Formal controls can be best described as the way an employee internalizes group norms of the organization.

Question 6

Violations of ascribed obligations have historically proved to be strong motivators of financial crimes.

Question 7

The nonshareable problems, Cressey investigated, threatened the status of the subjects, or threatened to prevent them from achieving a higher status than the one they occupied at the time of their violation.

Question 8

According to Albrecht, personal integrity refers to the personal code of ethical behavior that each person adopts.

Question 9

Cressey's classic fraud triangle helps explain the nature of all occupational offenders.

Question 10

For purposes of defining occupational fraud and abuse, employees include only top or middle managers.

Question 11

Perceived opportunity is necessary so that the perpetrator of a fraud can make his illegal behavior intelligible to him and maintain his concept of himself as a trusted person.

Question 12

Negligence applies when a person acts in a reasonable and prudent manner.

Question 13

White-collar crime is not used interchangeably with occupational fraud and economic crime.

Question 14

According to Albrecht, opportunities to commit fraud may be created by individuals, or by deficient or missing internal controls.

Question 15

Cressey called embezzlers "temptation violators."

Question 16

Without visually representing the crime scene, very different conclusions are reached about who committed a crime.

Question 17

Conspiracy is a means of prosecuting the individuals involved in illegal organized activity.

Question 18

Organizational crimes occur when entities, companies, corporations, not-for-profits, nonprofits, and government bodies, otherwise legitimate and law-abiding organizations, are involved in a criminal offense.

Question 19

Ethics involves questions requiring reflective choice and their consequences to the individual and others decision problems.

Question 20

The amount of damages proven under negligence may be relatively uncertain.

Question 21

RICO typically addresses which of the following activities?

A) environmental issues
B) workplace issues such as lost wages, disability, and wrongful death.
C) costs and lost profits associated with construction delays.
D) money laundering.

Question 22

The pending lawsuits in the notes to the financial statements of 10-Ks of most corporations are most likely all of the following except:

A) anti-trust actions.
B) intellectual property infringements.
C) tax claims.
D) RICO activities.

Question 23

Based on a number of theories, people obey laws for all of the following reasons except:

A) The fear of punishment
B) The desire for rewards
C) In order to act in a just and moral manner according to society's standards.
D) Due to a duty to act

Question 24

Status gaining is most typically associated with which of the following?

A) perceived economic pay inequities.
B) no one to share a problem with.
C) revenge for unfair treatment in the workplace.
D) "keeping up with the Joneses" syndrome.

Question 25

Hollinger and Clark asserted that management must pay attention to all of the following aspects of policy development except::

A) continuous dissemination of positive information reflective of the company's policies.
B) enforcement of sanctions.
C) substantially increasing the internal security presence.
D) publicizing the sanctions.

Question 26

Regarding crimes like fraud, do Federal law allows organizations to be prosecuted in a manner similar to individuals?

A) No.
B) Yes.
C) No, but international law does.
D) Only if they are the party with the deep pockets in the case.

Question 27

The legal standard for negligence has all of the following elements except:

A) wire fraud
B) duty.
C) breach.
D) cause in fact.

Question 28

Hollinger and Clark found that the same kinds of employees who engage in workplace deviance also engage in employee theft. According to their research, which of the following is not a characteristic evidence of the employee-thief?

A) arrives early at work.
B) takes long coffee breaks.
C) abuses sick leave policy.
D) has slow workmanship.

Question 29

Select the most correct statement from those below regarding the legal standards for negligence.

A) Breach-a determination that the defendant failed to use ordinary or reasonable care in the exercise of that duty.
B) Reasonableness-a determination that the defendant failed to use ordinary or reasonable care in the exercise of that duty.
C) Breach-an actual connection between the defendant's breach of duty and the plaintiff's harm can be established
D) Cause in Fact - the defendant must have been the proximate cause or contributed to the injury to the plaintiff.

Question 30

In terms of the definition of occupational fraud and abuse, who is an employee?

A) Any person who receives regular and periodic compensation from an organization for his or her labor.
B) Only rank and file workers.
C) Any trust violator.
D) Respectable business and professional men.

Question 31

Which of the following individuals theorized that the learning of criminal activity usually occurred within intimate personal groups?

A) Donald Cressey
B) Steve Albrecht
C) Edwin Sutherland
D) Richard Hollinger and John Clark

Question 32

Which of the following is not one of the four common elements of occupational fraud and abuse first identified by the Association of Certified Fraud Examiners in 1996?

A) The activity costs the employing organization assets, revenues, or reserves.
B) The activity violates the employee's fiduciary duties to the organization.
C) The activity is clandestine.
D) The activity is restricted to corporate executives.

Question 33

Common violations pertaining to occupational fraud and abuse include all of the following except:

A) asset misappropriation.
B) pilferage.
C) false overtime.
D) All of these are common violations.

Question 34

Which principle of ethical problems was championed by John Stuart Mills?

A) The Generalization Principle.
B) The Utilitarian Principle.
C) The Imperative Principle.
D) The Responsibility Principle.

Question 35

In order to win an award for damages, the injured party under a negligence claim must generally prove

A) reasonableness and prudence.
B) liability and damages.
C) intentional violation beyond a reasonable doubt.
D) a high threshold of historic violations.

Question 36

According to Cressey, a trust violator is best described as

A) fictious collateral.
B) an embezzler.
C) one who is willing to settle for low status.
D) a satisfied employee.

Question 37

All of the following are characteristic of torts except:

A) a private or civil wrong or injury.
B) a breach of contract.
C) remedy is in the form of an action for damages.
D) the party who was injured is entitled to collect damage compensation.

Question 38

All of the following are characteristics of absconders except:

A) low occupational and socioeconomic status
B) typically single or separated from their spouse.
C) few group associations.
D) have strong social ties.

Question 39

Portions of the RICO Act outlaw all of the following except:

A) investing illegal funds in another business.
B) acquisition of a business through illegal acts.
C) a private or civil wrong or injury other than breach of contract.
D) the conduct of business affairs with funds derived from illegal acts.

Question 40

The term "white collar crime" was coined by:

A) Donald Cressey.
B) Steve Albrecht.
C) The Association for Certified Fraud Examiners.
D) Edwin Sutherland.

Question 41

Which of the following is the most likely reason that Cressey believes an employee tries to solve a financial problem in secret?

A) because they are afraid of losing the approval of those around them.
B) because they are afraid of getting arrested.
C) because they worry that someone else will want part of the money they steal.
D) because they are afraid they will have to go back to college.

Question 42

The definition of ethics has certain key elements. What are these four key elements?

Question 43

When independent businessmen in Cressey's study converted deposits that had been entrusted to them, they explained it as:

A) borrowing.
B) the funds were really theirs, so you can't steal from yourself.
C) everyone does it.
D) All of the above.

Question 44

With respect to security controls, Hollinger and Clark discovered that most employees regarded these measures to be

A) targeted toward external security.
B) targeted toward internal security.
C) part of increasing morale.
D) part of organizational trust communication.

Question 45

Rationalizations of long-term violators in Cressey's study included all of the following except:

A) they were embezzling to keep their families from shame, disgrace, or poverty.
B) they were embezzling because theirs was a case of necessity.
C) their co-workers encouraged them to do it.
D) they were embezzling because their employers were dishonest and needed to be fleeced.

Question 46

Which of the following would be classified as a business reversal that leads to the perception of non-shareable financial problems?

A) problems arising from inflation.
B) problems arising from high interest rates.
C) problems arising from economic downturns.
D) problems arising from having no one to turn to.

Question 47

To be successful in any specialized field like forensic accounting or fraud examination, professionals must have characteristics that set them apart as a profession. What are these five characteristics?

Question 48

Large frauds are typically associated with all of the following except:

A) Lack of segregation of duties and responsibilities.
B) Placing undeserved trust in key employees.
C) Operating on a crisis basis
D) Working with management to set realistic goals

Question 49

Regarding theft, Hollinger and Clark were able to confirm a direct relationship between:

A) computerized inventory control and sick leave policy.
B) an employee's position and the level of theft.
C) lower levels of income and higher levels of theft.
D) None of these were confirmed as a direct relationship.

Question 50

Which is considered the lowest threshold for ethical decision making?

A) A professional code of ethics of an accounting organization.
B) Codes of conduct or directives about what is best for society.
C) The law.
D) Codes of conduct guided by trust in the underlying values that guide society.

Question 51

Can a law permit an action that is prohibited by a profession's code of ethics? Discuss and give an example.

Question 52

What is the five-step approach to fraud prevention, deterrence, and detection?

Question 53

Which of the following is a significant conclusion based on the research of Hollinger and Clark?

A) substantially increasing the internal security presence may reduce employee theft.
B) tightening controls over property deviance may create less detrimental acts affecting the productivity of the organization.
C) special attention should be afforded to older employees, since they have lower levels of financial authority and are more likely to steal for their retirement.
D) increased management sensitivity to its employees would reduce all forms of workplace deviance.

Question 54

According to Hollinger and Clark's research, which of the following are least likely to engage in illegal behavior in the workplace?

A) younger workers.
B) older workers.
C) employees that feel they are exploited.
D) dissatisfied workers.

Question 55

Three ethical principles provide a framework for ethical decision making. What are they? Briefly summarize their assumptions.

Question 56

Cressey's conjuncture of events basically says that all three elements must be present for the trust violation to occur. These events are:

A) no fraud prevention program is available, the offender lacks a conscience, employees are friends with customers.
B) perceived non-shareable financial problem, perceived opportunity, and the ability to rationalize.
C) the perpetrator is not married, is a male, and needs to buy a car or other large asset.
D) there are no witnesses to the crime, the individual has a strong challenge to beat the system, and the individual has a gambling problem.

Question 57

According to Cressey, the embezzlers that he studied generally rationalized their crimes by viewing them as all of the following except:

A) They viewed them as essentially noncriminal.
B) They viewed them as justified.
C) They viewed them as part of a general irresponsibility for which they were not completely accountable.
D) They viewed them as part of skills set.

Question 58

Albrecht developed the fraud scale which includes the following components:

A) situational pressures, perceived opportunity, and personal integrity.
B) high personal debt, living beyond one's means, drug or alcohol problems.
C) situational pressures, personal integrity, and criminal record.
D) None of the above are the components for the fraud scale.

Question 59

Large fraud perpetrators are more likely to use the money for all of the following except:

A) to purchase new homes.
B) to pay for expensive vacations.
C) to support extramarital affairs.
D) to pay taxes.

Question 60

Variables from Albrecht's study of "red flag" variables pertaining to occupational fraud fell into which of the following two categories?

A) perpetrator characteristics and organizational environment.
B) socioeconomic group and education.
C) motivation characteristics and education.
D) attitudes and habits.

Question 61

Identify ethical issues, conflicts of interest, and noncompliance with corporate policies and procedures in the Enron case.

Question 62

Describe occupational fraud and abuse.

Question 63

Three people check into a hotel. They pay $30 to the manager and go to their room. The manager suddenly remembers that the room rate is $25 and gives $5 to the bellboy to return to the people. On the way to the room, the bellboy reasons that $5 would be difficult to share among three people so he pockets $2 and gives $1 to each person. Now each person paid $10 and got back $1. So they paid $9 each, totaling $27. The bellboy has $2, totaling $29. Where is the missing $1?"

Question 64

Discuss the essence of organizational crime.

Question 65

Explain the relationship between an employee's position and the level of theft according to Hollinger and Clark's research.

Question 66

Discuss alternative courses of action in the Enron case within the framework of appropriate ethical conduct.

Question 67

Analyze the role of corporate governance mechanisms in fraud prevention.

Question 68

Describe corporate governance breakdowns in the facilitation of Enron's fraudulent acts.

Question 69

Give examples of behavioral indications of fraud.

Question 70

Identify from Cressey's research the six situational categories that cause non-shareable problems.

Question 71

Compare and contrast Cressey's and Albrecht's theories of crime causation.