11) The three main components of the fraud triangle are:
A) rationalization, opportunity and greed.
B) opportunity, motive and lack of ethics.
C) motive, opportunity and rationalization.
D) none of the above.
12) Fraudulent financial reporting:
A) involves employee overstatement of expense reimbursement requests.
B) involves bribes and kickbacks.
C) involves stealing assets from the company.
D) deceives financial statement users.
13) An employee states that he steals office supplies for his wife and children because "Everyone is doing it." This is an example of:
A) opportunity.
B) motive.
C) rationalization.
D) understanding.
14) Opportunity in the fraud triangle arises from:
A) weak control environment.
B) improper segregation of duties.
C) improper access to assets.
D) all of the above.
15) Examples of a weak control environment are:
A) a CEO who overrides controls.
B) a weak and ineffective Board of Directors.
C) no company-wide code of ethics.
D) all of the above.
16) Which of the following statements about the lapping of Accounts Receivable is TRUE?
A) Lapping is a type of fraud perpetuated by an employee.
B) Lapping is also referred to as a misappropriation of assets.
C) Lapping arises from a weak internal control system.
D) All of the above are true.
17) What is fraud?
A) Fraud is the intentional misrepresentation of facts made for the purpose of persuading another individual to act in a way that causes injury or damage to that individual.
B) Fraud is the misappropriation of assets.
C) Fraud is untruthful financial reporting.
D) all of the above
18) What is lapping accounts receivable?
A) A way to speed up the collection of accounts receivable by calling the debtors every week.
B) A way to speed up the collection of accounts receivable by sending reminder notices to the debtors every week.
C) Transferring accounts receivable to another company to collect the receivables.
D) An embezzlement scheme whereby an employee steals customers' checks and uses devious bookkeeping procedures to conceal the theft.
19) Fraudulent financial reporting is also called:
A) the fraud triangle.
B) a misappropriation of assets.
C) cooking the books.
D) investigative reporting.
20) What are some examples of the misappropriation of assets?
A) An employee overstates an expense reimbursement request after a company trip.
B) An employee steals some money from the petty cash fund.
C) Kickback scheme between a purchasing agent and vendor
D) all of the above
21) What are some examples of fraudulent financial reporting?
A) Enron Corporation
B) WorldCom Corporation
C) A company overstates total assets and net income.
D) all of the above
22) What is the purpose of fraudulent reporting?
A) Net income and total assets are understated so managers can receive their bonuses.
B) Net income and total assets are overstated so managers can receive their bonuses.
C) So the stock price increases and managers benefit from share appreciation of stock held.
D) B and C