Introduction to Fraud Examination. Course #5695B/QAS5695B Exam Packet

Transcription

1 Introduction to Fraud Examination Course #5695B/QAS5695B Exam Packet

2 INTRODUCTION TO FRAUD EXAMINATION (COURSE #5695B/QAS5695B) COURSE DESCRIPTION This course is an ideal introduction for beginners in the field of fraud examination and fraud-awareness auditing. It outlines the basics surrounding fraud examination including the law and criminology related to fraud and also presents the components associated with both employee and management fraud. The course also provides an overview of the general fraud examination methodology and fraud theory approach. It identifies fraud examiners characteristics and provides insight regarding documentary and interview evidence, and techniques for conducting a successful interview while maintaining employees rights during the examination process. Uses material entitled Introduction to Fraud Examination. PLEASE NOTE: This course material is a component of #5065/QAS5065, Fraud Examination for Managers and Auditors, and therefore we recommend that you should not take both courses in the same CPE reporting period. No prerequisites. Course level: Basic. Course #5695B/QAS5695B - 10 CPE hours. LEARNING ASSIGNMENTS and OBJECTIVES As a result of studying each assignment, you should be able to meet the objectives listed below each individual assignment. ASSIGNMENT SUBJECT 1 Chapter 1: Law Related to Fraud Chapter 2: Criminology Related to Fraud Study the materials from pages 1-1 to 2-29 Complete the review questions at the end of each chapter Answer final exam questions 1 to 22 Objectives: To explain the law as it relates to fraud including criminal and civil actions for fraud To define fraud and the various types of activities that constitute fraudulent acts To classify economic crime defining both occupational and organizational crime Exam Page -1

3 ASSIGNMENT SUBJECT 2 Chapter 3: Employee Fraud Chapter 4: Management Fraud Study the materials from pages 3-1 to 4-31 Complete the review questions at the end of each chapter Answer the final exam questions 23 to 40 Objectives: To identify various employee fraud schemes To name management fraud techniques as they relate to misstated financial statements ASSIGNMENT SUBJECT 3 Chapter 5: Fraud Examination Study the materials from pages 5-1 to 5-32 Complete the review questions at the end of the chapter Answer the final exam questions 41 to 50 Objectives: To describe fraud theory approach and the methodology of such To explain documentary and interview techniques ASSIGNMENT 4 Complete the Answer Sheet and Course Evaluation and Mail to PES for credit NOTICE This course and test have been adapted with permission from material written by Dr. Jack Robertson, PhD, CPA, CFE as presented in the text Fraud Examination for Managers and Auditors. This course is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice and assumes no liability whatsoever in connection with its use. Since tax laws are constantly changing, and are subject to differing interpretations, we urge you to do additional research and consult appropriate experts before relying on the information contained in this course to render professional advice. No portion of this work may be reproduced or transmitted in any form or by any means electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system without the written permission of the publisher. Professional Education Services, LP 2010 Program publication date 8/26/10 Exam Page -2

4 INTRODUCTION TO FRAUD EXAMINATION (COURSE #5695B/QAS5695B) EXAM OUTLINE COURSE EXPIRATION DATE: Per AICPA and NASBA standards, this course must be completed within one year from the date of purchase. TEST FORMAT: The following final exam, consisting of 50 true/false and/or multiple choice questions, is based specifically on the material included in this course. The answer sheet must be completed and returned to PES for CPE certification. You will find the answer sheet at the back of this exam packet so that you may easily remove it and use it while taking your test. LICENSE RENEWAL INFORMATION: The Introduction to Fraud Examination course (#5695B/QAS5695B) qualifies for 10 CPE hours. PROCESSING: Your exam will be graded promptly. You must score 70% or better to pass. When you pass, your certificate of completion will be mailed. If you do not pass, we will give you a courtesy call to inform you of this and then another answer sheet will be sent to you free of charge. GRADING OPTIONS: Please choose only one of the following. There is no additional charge for any of these grading options. Make sure to fill out your answer sheet completely prior to submitting it. ONLINE GRADING Visit our website at Login to your account (if you are a first-time user you must set up a new user account). Go to the MY CPE tab and click the My CPE Exams in Progress folder. If your exam is not already located in this folder, click Add Exam Previously Purchased and follow the instructions. MAIL Your exam will be graded and your certificate of completion mailed to you the same day we receive it. Your certificate will be dated according to the postmark date; therefore, you do not need to overnight your exam. Please mail your answer sheet to: Professional Education Services, LP 4208 Douglas Blvd., Ste 50 Granite Bay, CA FAX Your exam will be graded and you will be contacted either via phone or fax with your results within 4 business hours of receipt. A copy of your graded exam and certificate of completion will be mailed to you the same day we receive it. Your certificate will be dated according to the fax date. If you choose to fax your exam, please do not mail it. Your fax will serve as the original. Please refer to the attached answer sheet for further instructions on fax grading. Fax number (916) Thank you for using Professional Education Services. We appreciate your business!! Exam Page -3

5 INTRODUCTION TO FRAUD EXAMINATION (COURSE #5695B/QAS5695B) FINAL EXAM The following questions are either true or false and/or multiple choice. Please indicate your choice on the enclosed Answer Sheet. 1. Fraud may be: a) prosecuted only in a criminal action b) prosecuted only in a civil action c) prosecuted in either a civil or a criminal action, or both 2. Criminal and civil actions for fraud: a) may be brought in federal court only b) may be brought in state court only c) may be brought in federal or state court d) may be brought only when the fraud amount exceeds $100, Which of the following is an example of a principal type of fraud: a) bribery b) breach of fiduciary duties c) theft of trade secrets or intellectual property 4. Which of the following is not a common element between bribery and illegal gratuity: a) giving or receiving b) to influence c) a thing of value d) an official act 5. The wrongful taking of money or property of another with the intent to convert or deprive the owner of its possession and use is: a) embezzlement b) larceny c) theft of trade secrets 6. Persons in a position of trust or fiduciary relationship, such as officers, agents and brokers, owe certain duties to their principals or employers. The principal fiduciary duties are: a) loyalty and care b) honesty and integrity c) honor and simplicity 7. Racketeer Influenced and Corrupt Organizations (RICO) is probably the best known and most controversial federal statute in use today. 8. The statute and regulations effectively give which entity supervisory authority over the financial management and reporting functions of publiclyheld corporations: a) the SEC b) the CIA c) the FBI d) the DEA 9. Re: Conspiracy if a conspiracy is shown: a) the acts and statements of one coconspirator may not be admitted into evidence against all b) each co-conspirator may be convicted for the underlying substantive offense c) each co-conspirator is considered a separate entity and evidence related to one does not affect any of the others 10. In the Federal Corruption Statutes, 212 and 213 forbid giving a loan or a gratuity to: a) a bank examiner b) a publicly elected official c) an employee of a federally-connected financial institution d) an attorney Exam Page -4

6 11. Which of the following is true in regard to 1001 Fraud Statements and Entries: a) one thing that 1001 is most often used to prosecute for is false statements made on an application for such things as federal employment, credit, and visa applications b) a statement is considered false if it was known to be untrue when it was made c) a statement is fraudulent if it was known to be untrue and was made with the intent to deceive a government agency 12. Computer crime is a new and somewhat amorphous term referring both to cases in which a computer is the instrument of a crime and those in which it is the object. 13. Corporations and other organizations may be criminally liable for offenses committed by their agents if committed in the scope of the agent s duty and with the intended purpose of benefiting the organization. 14. Acts defined as being in violation of civil and criminal law designed to bring financial reward for the offender can be called: a) economic crime b) professional crime c) temptation crime d) monetary-reward crime 15. Which of the following is not an element of the definition of white-collar crime as stated by the Dictionary of Criminal Justice Data Terminology: a) violent crime b) committed by means of deception c) by persons whose occupational status is entrepreneurial d) utilizing their special occupational skills and opportunities 16. White-collar crime can be broken down simply into two categories: a) opportunity crime and situational crime b) organizational crime and occupational crime c) occasional crime and professional crime 17. There are six main types of corporate illegal behavior. The type that involves terms of sales, exchange agreements and payment maneuvers is known as: a) administrative b) environmental c) transactional d) labor 18. The type of corporate illegal behavior that involves noncompliance with the requirements of an agency or court and information-reporting violations is: a) administrative b) environmental c) financial d) manufacturing 19. Enforcement strategies include two main theories. The system that provides economic incentives for voluntary conformity to the law is the theory of: a) compliance b) deterrence c) conformity d) administration 20. Inventory shrinkage is often attributable to employee pilferage, not shoplifting. It is estimated that is added to the cost of retail goods because of inventory shrinkage: a) 2-4 percent b) 5-10 percent c) percent d) 25 percent Exam Page -5

7 21. A common technique of pilferage is: a) employees hiding items in the trash and coming back later to retrieve them b) clerks selling sale merchandise at regular prices and pocketing the difference c) receiving clerks obtaining duplicate warehouse keys coming back and stealing merchandise 22. Superzapping is a scheme often used in security protected programs that allows a programmer to make changes within a program. 23. Employee fraud is a type of occupational crime. It is the use of fraudulent means to take money or other property from an employer. 24. A cash scheme whereby cash is recorded in more than one bank account, but in reality, the cash is either non-existent or is in transit is known as: a) skimming b) alteration of cash receipt docu-mentation c) fictitious refunds and discounts 25. Which of the following is not a basic scheme in accounts receivable employee fraud: a) lapping b) kiting c) fictitious sales with corresponding accounts receivable d) diversion of receipts on old written-off accounts 26. The accounts receivable scheme wherein cash received from a customer is originally misappropriated and at a later date cash received from another customer is credited to the first customer s account is called: a) lapping b) diversion of receipts on old-written off accounts c) fictitious sales with corresponding accounts receivable d) false charges to inventory-related accounts 27. The most common inventory scheme related to employee fraud is: a) false charges to inventory related accounts b) embezzlement of scrap proceeds c) appropriating inventory for personal use d) creating fictitious accounts receivable to disguise fictitious sales 28. Which of the following is not an example of a purchasing scheme: a) fictitious invoices b) over-billing c) appropriating inventory for personal use d) duplicate payments 29. Conflict of interest schemes are variations of the rule that a fiduciary, agent or employee must act in good faith, with full disclosure, in the best interest of the principal or employer. 30. Most experts agree that it is much easier to prevent than detect fraud. Also, increasing the perception of detection may well be the most effective fraud prevention method. Exam Page -6

8 31. Which of the following is false in regard to possible prevention methods for employee fraud: a) employee fraud education should be positive and non-accusatory with the goal being to make employees within the company be the eyes and ears b) a reporting program should emphasize that the employee s report be made to their immediate supervisor c) with a reward policy, strict criteria should establish reward payments d) proactive fraud policies generated from the top of the operation means that the company will aggressively seek out possible fraudulent conduct instead of waiting for cases to come to its attention 32. Which of the following is not a reason why people commit financial statement fraud: a) to encourage investment through the sale of stock b) to receive lower purchase prices for acquisitions c) to receive performance-related bonuses d) to meet company goals and objectives 33. In general, financial statement fraud occurs through: a) the overstatement of assets and income b) the understatement of liabilities and expenses c) false or omitted disclosures in notes to financial statements 34. Co-conspirators in a less-than-arm s-length transaction can be: a) inside or outside the company b) an affiliated or non-affiliated company c) a related or non-related party 35. The financial statement scheme which typically involves: 1) early booking, 2) holding the books open, and 3) untimely accounting for discounts and returns is known as: a) improper sales accounting b) improper deferral of costs and expenses c) revenue recognition in the wrong period d) improper percentage-of-completion accounting 36. Sham transactions are transactions which: a) have significant economic substance or purpose b) are commonly used to deflate earnings or assets c) in some cases, hide the true nature of a transaction d) both a and b 37. Most improper asset valuations involve: a) purchase-versus-pooling accounting methods b) misclassification of fixed and other assets c) improper capitalization of inventory or startup costs d) fraudulent overstatement of inventory and receivables 38. In creating fictitious accounts receivable, the typical entry would be to: a) debit accounts receivable and credit sales b) credit accounts receivable and debit sales c) debit accounts receivable and debit sales d) credit accounts receivable and credit sales 39. A common method for improper deferral of costs and expenses is: a) omissions of liabilities b) capitalization of expenses c) failure to accrue enough warranty costs and liabilities Exam Page -7

9 40. Who has the obligation to disclose to the shareholders significant fraud committed by officers, executives and others in important positions of trust: a) the attorneys associated with the criminal indictment b) the management c) the auditors 41. For fraud examiners, the key element is suspicion known as predication. Which of the following is an example of a circumstance of predication: a) tips b) red flags c) shortages 42. Which of the following is not listed as one of the three essential skills required of fraud examiners: a) document examination skills b) interview skills c) writing skills d) detective operation skills 43. Documentary evidence is generally obtained by three methods. The method which is ordinarily issued by a court or by a grand jury is: a) a subpoena b) a search warrant c) voluntary consent 44. Some things to be considered when investigating document authenticity include a signature that appears to be unnatural, use of more than one style of typewriting, and a questionable date of preparation. 45. Generally, which of the following would the examiner interview last: a) the suspect b) neutral third party witnesses c) corroborative witnesses d) co-conspirators 46. The interviewer can ask five general types of questions. The type of question which seeks to establish the credibility of the respondent is the: a) introductory question b) informational question c) assessment question d) admission-seeking question 47. Paying attention to verbal and non-verbal responses help an interviewer assess a respondent s credibility. Which of the following is frequently an indicator of dishonesty or deception: a) selective memory when it comes to important facts b) using oaths to add credibility, such as, I swear or To tell the truth c) repetition of the interviewer s question to gain time to think of what to say Fraud examiners must be careful not to violate a person s civil rights when obtaining and examining documents or when conducting interviews. 49. Employers cannot engage in defamation of an employee s character. Which of the following is not an element that constitutes defamation: a) statement of fact b) subject the person to ill will or disrepute c) published to one or more persons d) made without privilege 50. Fraud examination report information: a) should include examiner editorial and judgment b) should include all matters involved with the examination, relevant or not c) can be presented in either chronological or transaction order d) should include the examiner s opinion on guilt or innocence regarding all persons and parties involved Congratulations you ve completed the exam! Exam Page -8

10 INTRODUCTION TO FRAUD EXAMINATION #5695B/QAS5695B (10 CPE hours) ANSWER SHEET (8/10) Important Note: For certification, this answer sheet must be completed and submitted to PES for grading within one year from the date of purchase. Please use black ink and print for quicker processing thank you. Name (as it appears on your license) Address City State Zip Home Work Daytime Phone ( ) address (for online grading) License Number State Expiration Date CPA, CFP, EA (circle one) If course was ordered by another party, please indicate name here: GRADING OPTIONS Please choose only ONE of the following: ONLINE GRADING Visit our website at o Login to your account (if you are a first-time user, you must set up a new user account). o Go to the MY CPE tab and click the My CPE Exams in Progress folder. o If your exam is not already located in this folder, click Add Exam Previously Purchased and follow the instructions. Mail Mail your exam to: PES, 4208 Douglas Blvd., Ste 50, Granite Bay, CA Fax Fax your exam to (916) and choose one of the following options: Please: mail my results only or fax phone my results to: ( ) PLEASE INDICATE YOUR ANSWER BY FILLING IN THE APPROPRIATE CIRCLE A B C D A B C D A B C D 1. O O O O 21. O O O O 41. O O O O 2. O O O O 22. O O O O 42. O O O O 3. O O O O 23. O O O O 43. O O O O 4. O O O O 24. O O O O 44. O O O O 5. O O O O 25. O O O O 45. O O O O 6. O O O O 26. O O O O 46. O O O O 7. O O O O 27. O O O O 47. O O O O 8. O O O O 28. O O O O 48. O O O O 9. O O O O 29. O O O O 49. O O O O 10. O O O O 30. O O O O 50. O O O O 11. O O O O 31. O O O O 12. O O O O 32. O O O O 13. O O O O 33. O O O O 14. O O O O 34. O O O O 15. O O O O 35. O O O O 16. O O O O 36. O O O O 17. O O O O 37. O O O O 18. O O O O 38. O O O O 19. O O O O 39. O O O O 20. O O O O 40. O O O O Please complete the attached course evaluation your opinion is extremely valuable. Exam Page -9

11 Introduction to Fraud Examination #5695B/QAS5695B - Course Evaluation Rate on a scale of 1-10 with 1 being poor and 10 being excellent. 1. The course met the course objectives described in the promotional material. 2. The course was up to date, held my interest, was timely, and effective. 3. The course materials were understandable, valuable, and suitable for a correspondence course. 4. The amount of advance knowledge and stated prerequisites were appropriate. 5. The completion time was appropriate for the number of credits allowed. 6. The course met my professional education needs. Please answer the following questions mark/rate any and all that may apply 1. How would you rate PES s order desk customer service 2. What can PES do to keep you as a valued customer? 3. Any other comments regarding this course or our company would be appreciated. 4. What other courses/subjects would you like to see PES offer in the future? Mail to: Professional Education Services, LP 4208 Douglas Blvd., Ste 50, Granite Bay, CA Exam Page -10