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Name Chapter 1--The Nature of Fraud
Descri ption
Instructions
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Question One way that criminal law differs from civil law is that it:
Answer
provides remedies for violations of private rights.
must yield a unanimous verdict.
can have a jury of fewer than 12 persons.
allows for various claims in one action.
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Question Which of the following is NOT an element of a Ponzi scheme?
Answer
Gaining other's confidence.
Promising abnormally high returns.
Collected money is invested in government bonds.
Investment principle is partially used to make payments to previous investors.
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Question The following are all elements of Title 26, U.S. Code Section 7201 EXCEPT:
Answer
not reporting bribe income may be grounds for being charged with tax evasion.
filing income tax that excludes income from fraud may be considered an improper tax filing.
bribes may be deducted as legitimate business expenses.
failure to report income from fraud may be grounds for being charged with tax evasion.
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Question Which one of the following is NOT a characteristic of a criminal proceeding?
Answer
Deals with offenses against society.
Consequences include restitution and damage payments.
J ury of 12 individuals.
Only one claim may be heard at a time.
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Question Management fraud is often referred to as:
Answer
stockholder fraud.
financial statement fraud.
affinity fraud.
investment fraud.
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Question What is required to prove fraud, as opposed to negligence?
Answer
Gross error
Intent
Preponderance of the evidence
Confession from the perpetrator
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Question Which of the following is the most common type of occupational fraud?
Answer
Financial statement fraud
Mail fraud
Investment fraud
Employee embezzlement
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Question Which of the following is NOT a characteristic of management fraud?
Answer
Top management deception.
Manipulation of financial statements.
Kickbacks or bribes.
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Pressure to earn year-end bonuses.
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Question Customer fraud includes all of the following EXCEPT:
Answer
Get something for nothing.
Do not pay for goods purchased.
Fraud perpetrated through collusion between buyers and vendors.
Deceive organization into giving them something they should not.
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Question Which of the following is a common example of vendor fraud?
Answer
Fraud perpetrated through collusion between buyers and vendors.
Fraud perpetrated by buyers acting alone.
The perpetrator physically removes the inventory from the business premises.
A fraud perpetrated through an unintentional mistake.
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Question Government agencies such as the FBI, FDIC, IRS, or various health agencies publish fraud statistics from time to time. Which of the
following observations concerning such statistics is true?
Answer
Generally, their statistics are complete.
Such information is rarely used.
They provide only those statistics related to their jurisdiction.
They usually provide a total picture in the areas for which they have responsibility.
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Question Which legal code makes the bribing of public officials illegal?
Answer
Title 18, U.S. Code Section 201
Title 41, U.S. Code Section 51 to 58
Title 18, U.S. Code Section 1341
Title 18, U.S. Code Section 1344
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Question Fraud has a direct dollar for dollar impact on a company's:
Answer
Revenues.
Net income.
Profit margin.
Stock price.
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Question Which of the following is NOT a primary reason for increased size and number of frauds?
Answer
The advent of computers
Complex accounting systems
Increased centralization of businesses
The Internet
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Question Which among the following frauds is most likely to be a civil charge?
Answer
Racketeering
Mail fraud
Defamation
Perjury
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Question The elements of fraud include all of the following EXCEPT:
Answer
a material point is misrepresented.
the misrepresentation is intentional.
the misrepresentation is known to the victim.
the victim must sustain damages.
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Question The burden of proof in a criminal case must:
Answer
be beyond a reasonable doubt.
be the preponderance of knowledge and power.
be preponderance of evidence.
lie with the defendant.
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Question Which of the following statements about criminal and civil cases is correct?
Answer
The purpose of a criminal case is "to right a wrong", the purpose of civil case is to obtain a remedy.
J ury must have 12 people in civil cases but in criminal cases may consist of fewer than 12 persons.
Both criminal cases and civil cases require a fraud perpetrator to go to jail.
Only one claim at a time in civil cases however in criminal cases, various claims may be joined in one action.
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Question How is the confidence element established in a Ponzi scheme?
Answer
By investing in prime bonds.
By issuing notarized certificates.
By paying returns to initial investors.
By returning money to all investors.
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Question The most common fraud committed on behalf of an organization is:
Answer
Vendor fraud
Employee embezzlement
Fraudulent financial reporting
Customer fraud
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Question A company is a victim of a $414 million fraud. At that time its profit margin is 10%. How much additional revenue should the company
generate in order to recover the effect on net income?
Answer
$41.4 million
$414 million
$4.14 billion
$41.4 billion
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Question Scammers often use their victims ethnic identity to gain their trust and then steal their life savings. This is an example of:
Answer
vendor fraud.
affinity fraud.
embezzlement.
occupational fraud.
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Question The Anti-Kickback Act of 1986 intends to prevent:
Answer
bribery, by punishing perpetrators with up to 15 years in prison.
any scheme to defraud federally insured financial institutions.
the giving or receiving of any thing of value by a subcontractor to a prime contractor.
individuals from using insider information to purchase or sell a company's securities.
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Question Perpetrators of some fraud schemes often target conspiracy theorists, promising access to the secretinvestments used by the
Rothschilds or Saudi royalty and offer triple-digit returns. Such schemes are best described as:
Answer
Affinity frauds.
Ponzi schemes.
Franchise frauds.
Prime bank schemes.
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Question Who are the primary victims of financial statement fraud?
Answer
Middle management
Organizations that buy goods or services
Analysts
Stockholders
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Question Generally applicants for CFE certification should have a minimum of a bachelors degree or equivalent from an institution of higher
learning. Alternatively if applicants do not have a bachelors degree, they may substitute ______ months of fraud-related professional experience for
each year of academic study.
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Answer
24
18
15
12
9
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Question The ACFE includes three major categories of occupational fraud EXCEPT:
Answer
asset misappropriations.
corruption.
fraudulent statements.
pension fraud.
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Question What is the most cost-effective way to minimize the cost of fraud?
Answer
Prevention
Detection
Investigation
Prosecution
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Question Fraud in companies such as WorldCom, Enron, Waste Management, Sunbeam, Rite-Aid, Phar-Mor, Parmalat, and ZZZZBest are
examples of:
Answer
Customer fraud.
Investment scams.
Vendor fraud.
Management fraud.
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Question Which of the following statements is true?
Answer
Fraud usually results from unintentional errors.
Fraud is more violent and traumatic than robbery.
Fraud always involves deception, confidence and trickery.
Losses from fraud are less than losses from robbery.
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Question To be successful, plaintiffs in civil cases must prove their case by which of the following?
Answer
Preponderance of evidence.
Beyond a reasonable doubt.
To a degree of reasonable mitigation.
To the standard of prima facie.
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Question Which of the following is NOT an example of a fraud-fighting career?
Answer
Working for the criminal investigation division of the IRS.
Serving as an expert witness.
Maintaining the security of public records.
Defending an organization being sued in a civil case.
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Question Which of the following observations concerning occupational fraud is NOT true?
Answer
It is clandestine.
It is committed for the purpose of direct or indirect financial benefit to the employee.
It always involves two or more employees.
It costs the employing organization assets, revenues, or reserves.
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Question Which of the following is NOT one of the major types of fraud classification schemes?
Answer
Employee embezzlement
Government fraud
Investment scams
Customer fraud
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Question Which of the following frauds is usually the most expensive?
Answer
Vendor fraud
Customer fraud
Occupational fraud
Financial statement fraud
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Question Civil claims begin when one party files a complaint against another, usually for the purpose of:
Answer
penalty.
imprisonment.
proving the other party wrong.
financial restitution.
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Question Employee embezzlement can be direct or indirect. Indirect fraud occurs when:
Answer
an employee uses company assets to run his/her private business.
employees establish dummy companies and have their employers pay for goods that are not actually delivered.
an employee receives a kickback from a vendor.
an employee steals company cash, inventory, tools, or other assets.
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Question Telemarketing fraud usually falls into this category.
Answer
Investment scams
Management fraud
Vendor fraud
Embezzlement
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Question The word "con," which means to deceive, comes from the word:
Answer
Contract.
Conserve.
Confuse.
Confidence.
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Question In fraud prosecution cases, ______ matter consists of the underlying data and all corroborating information available.
Answer
evidential
remedial
supplement
elementary
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Question The study conducted by the Association of Certified Fraud Examiners in 2008 estimated that U.S. organizations lose _____ percent of
their annual revenues to fraud.
Answer
8
7
23
17
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Question A company was the victim of several frauds that totaled approximately $10 million in one year. With a profit margin of 10 percent, and
assuming that the companys product sold for $1,000 per unit, how many additional units must the company sell to compensate for the fraud losses?
Answer
1 million
100 million
100,000
10,000
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Question Given below are the profit margins and fraud related losses of four economies. Which economy will have to generate the maximum dollar
amount of additional revenues to recover the loss to aggregate income?
Economy A 10% $225 million
Economy B 10% $150 million
Economy C 5% $100 million
Economy D 2% $ 50 million
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Answer
Economy A
Economy D
Economy C
Economy B
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Question The GDP in the economy of Ponziland was $5 billion in the year prior to the frauds (year 1). The economy were growing at 4 percent.
Frauds during the year reduce aggregate income by $200 million. During the year, the economy has:
Answer
shrunk by 1 percent.
grown by only 1 percent.
remained flat.
grown by 4 percent.
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Question What is the single most critical element for a fraud to be successful?
Answer
Criminal intent
Confidence
Greed
Compulsion
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Question Fraud statistics come from all of the following sources EXCEPT:
Answer
Government agencies
Researchers
Insurance Companies
Victims
Fraud perpetrator
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