A.  

A requirement for a corporate governance framework that protects the exercise of management’s rights.

B.  

Support for the equal treatment of all members of an organization’s governing body.

C.  

A request that governments implement effective internal controls to support good corporate governance practices.

D.  

An emphasis on the importance of timely, accurate and transparent disclosure mechanisms.

A.  

Crime originates from a rational and conscious decision made by the perpetrator in order to receive an intended benefit.

B.  

Crime originates from the application of excessive pressure and influence on the perpetrator by external sources.

C.  

Crime can be deterred by increasing the potential for financial gain for the perpetrator.

D.  

Crime can be deterred by decreasing the personal risk to potential perpetrators.

A.  

To be most effective, access to the organization's ethics policy should be restricted to employees and other Internal parties only

B.  

In designing the ethics program, management should consider whether the organization currently has any ethical leadership Issues

C.  

An effective written ethics policy alone is sufficient to communicate management's ethical philosophy and serve as a comprehensive ethics program

D.  

All of the above

A.  

The objective of the assessment is to help the organization identify what makes it most vulnerable to fraud.

B.  

The assessment should be used to improve employee fraud awareness

C.  

The assessment team should consider how employees behave as part of its assessment

D.  

The designation of an area as high risk should only occur if the assessment has conclusively revealed that fraud is occurring there.

A.  

Internal controls; financial reporting model

B.  

Regulatory requirements, risk appetite

C.  

Objectives; resources

D.  

Risk appetite, ability to meet its objectives

A.  

The organization's incentive programs

B.  

The possibility of management's override of controls

C.  

Risks to the organization's reputation

D.  

All of the above

A.  

Gian must ensure that the company's investment in the fraud risk management program outweighs the benefit of those controls.

B.  

When expressing the organization's risk appetite, Gian should do so without regard to the company's culture or operations.

C.  

Gian must assign both a quantitative and qualitative measure to the company's risk appetite to accurately measure the program's effectiveness.

D.  

Gian should examine previous fraud occurrences to determine how the ideal fraud risk management program would have prevented them.

A.  

Monitoring

B.  

Control environment

C.  

Risk assessment

D.  

Control activities

A.  

Strong intervention of the government

B.  

Voluntary changes in corporate attitudes and structure

C.  

Consumer action to force change

D.  

Media blacklisting of the organization

A.  

Hiring policies and procedures

B.  

Independent reconciliations

C.  

Separation of duties

D.  

Fraud awareness training

A.  

Criminal behavior is learned using the same mechanisms as other learning.

B.  

Criminal behavior is learned through a process that is the same as imitation.

C.  

Criminal behavior is explained by an individual's general needs and values.

D.  

Criminal behavior is acquired through casual interactions in large groups.

A.  

True

B.  

False

A.  

True

B.  

False

A.  

Positive reinforcement

B.  

Negative reinforcement

C.  

Punishment

D.  

None of the above

A.  

In conducting the audit, Alicia’s objectives are likely narrower than those of a private-sector financial statement audit.

B.  

Alicia must comply with the requirements found in International Standard on Auditing 240 as they apply to both private- and public-sector audits.

C.  

Alicia should focus on potential fraud and does not need to consider the possibility of abuse or other misconduct during the audit engagement.

D.  

If Alicia identifies fraud during the audit engagement, she must immediately withdraw from the engagement.

A.  

It functions as a reference and benchmark for ethical guidance.

B.  

It offers fewer and less direct solutions to professional ethical dilemmas than might exist under general ethical principles.

C.  

It acts as a substitute for legal and regulatory requirements that apply to the profession.

D.  

It replaces the need for individuals to consult their own principles.

A.  

Eliece should immediately contact management at Silver Inc. to provide information about her conversation with Jewel and her request for confidentiality.

B.  

Eliece should promise Jewel that she will keep the information confidential even though she knows that she will likely be unable to keep that promise.

C.  

Eliece should encourage Jewel to report the information to law enforcement because she cannot agree to Jewel’s request.

D.  

Eliece should tell Jewel that she will try to keep the information as confidential as possible but she might have an ethical obligation to inform their employer.

A.  

Obtaining reasonable assurance that the organization's financial statements are free of material misstatements caused by fraud

B.  

Overseeing management's actions to manage fraud risks

C.  

Evaluating indicators of fraud and deciding whether any further action is necessary or whether an investigation should be recommended

D.  

Establishing and maintaining effective anti-fraud controls at a reasonable cost

A.  

Management seeks diversity in attitudes and perspectives when hiring employees.

B.  

Management separates employee performance goals from company performance goals.

C.  

Management encourages employee loyalty through social functions.

D.  

Management rewards employees who challenge how the company functions.

A.  

Confront Bridgette about the disagreements and discuss how they increase the department's risk of fraud.

B.  

Include her disagreements with Bridgette as a factor when assessing the risk of fraud in the accounts receivable department.

C.  

Automatically designate the accounts receivable department as a high-risk area.

D.  

Have someone else perform the fraud risk assessment work related to the accounts receivable department's activities.

A.  

Pressure from changes in the competitive environment

B.  

Lowered regulatory enforcement by the government

C.  

Loss of funding from financial institutions

D.  

Demands from consumers to change

A.  

A mandatory independent compensation committee

B.  

Shareholder oversight of internal controls

C.  

A written charter for management

D.  

Adequate audit committee resources and authority

A.  

The fraud risk assessment can be effectively conducted by people inside or outside of the organization.

B.  

To ensure the independence of the team members, a fraud risk assessment must be conducted by a consultant or other external party.

C.  

If the individuals conducting the fraud risk assessment truly believe that fraud could not happen at the organization, then the assessment process should reflect that belief.

D.  

The fraud risk assessment is most effective when management's influence on the process is limited

A.  

The fraud risk assessment report should be delivered in a style most suited to the language of the business

B.  

The fraud risk assessment report should contain a detailed, comprehensive list of every assessment finding

C.  

A fraud risk assessment report should reflect the assessment team's subjective perspective regarding the risks identified

D.  

All of the above

A.  

Acting in a way that could be deemed unethical by the industry

B.  

Drawing conclusions based upon evidence

C.  

Participating in an activity where there is an undisclosed conflict of interest

D.  

Engaging in behavior that is against the law

A.  

An ethics program should avoid addressing rewards for ethical behavior and sanctions for unethical behavior

B.  

In designing the ethics program, management should consider how stakeholders throughout the organization define success

C.  

To be most effective, access to the organization’s ethics policy should be restricted to external parties such as vendors and customers

D.  

Having a written ethics policy is sufficient to communicate management’s ethical philosophy and serve as a comprehensive ethics program

A.  

Men commit significantly more frauds than women do.

B.  

Most fraudsters have previous criminal convictions for fraud-related offenses.

C.  

An unwillingness to share duties is the most reported red flag displayed by fraud perpetrators prior to the detection of their crime.

D.  

Frauds committed by staff-level employees cause higher median losses than those committed by owners and executives.

A.  

Social control theory

B.  

Operant theory

C.  

Cognitive theory

D.  

Behavioral theory

A.  

True

B.  

False

A.  

Conditioning theory

B.  

Routine activities theory

C.  

Rational choice theory

D.  

Social control theory

A.  

Receipt of kickbacks

B.  

Espionage by competitors

C.  

Payment of bribes

D.  

Aiding and abetting vendor fraud

A.  

True

B.  

Flase

A.  

Susannah should confront management with her audit findings and try to get a confession.

B.  

Susannah should Immediately report her findings to the secunties regulators

C.  

Susannah should report her findings to the audit committee of the board of directors.

D.  

Susannah should not disclose her findings to any other parties due to client confidentiality.

A.  

True

B.  

False

A.  

Overseeing the organization's fraud risk management activities

B.  

Designing the fraud risk management program

C.  

Punishing fraud perpetrators discovered through fraud risk management activities

D.  

Implementing the fraud risk management program

A.  

True

B.  

False

A.  

Incorporate an element of predictability in the selection of auditing procedures to be performed

B.  

Consider the knowledge, skill, and ability levels of the individuals who are assigned significant audit responsibilities

C.  

Disregard the entity's selection and application of accounting policies concerning complex transactions

D.  

All of the above

A.  

The auditors should assume that all audit evidence collected previously is unreliable and withdraw from the audit engagement

B.  

The auditors should assess the need to adjust the nature, timing, and extent of remaining audit procedures based on this evidence.

C.  

The auditors can ignore the misstatement because the omitted amount is less than the quantitative materiality threshold and therefore immaterial to the audit.

D.  

The auditors do not need to be concerned with this evidence, as asset misappropriation schemes are not considered relevant or material for external audit purposes.

A.  

Give shareholders oversight of hotline reporting programs

B.  

Have adequate compensation committee resources and authority

C.  

Develop a written charter for management

D.  

Have a mandatory independent audit committee

A.  

True

B.  

False

A.  

The program takes human and cultural factors into account.

B.  

The program is static and consistent, even during times of organizational change.

C.  

The program facilitates continuous improvement.

D.  

The program is customized and proportionate to the organization's operations and objectives.

A.  

Positive reinforcement

B.  

Negative reinforcement

C.  

Punishment

D.  

None of the above

A.  

Use a checklist of initiatives to make sure all the elements of a strong tone at the lop are in place

B.  

Create an environment in which employees are dissuaded from challenging management's decisions

C.  

Visibly adhere to the same set of ethics policies that is required of all employees

D.  

All of the above

A.  

The program must include mechanisms to address breaches in compliance.

B.  

The punishment for intentional noncompliance should be carried out in a consistent and firm manner.

C.  

Formal sanctions for intentional noncompliance should be determined and enacted privately

D.  

A specific individual or team should be designated as responsible for monitoring compliance with the program

A.  

Blue should consider Green's expected purchasing pattern and method of payment in determining whether to accept the transaction.

B.  

Blue only needs to undertake due diligence procedures if Green is requesting to pay on credit.

C.  

Blue should perform the same level of due diligence as it would for any other customer to avoid claims of discrimination.

D.  

Blue does not need to undertake any specific due diligence procedures for this transaction.

A.  

True

B.  

False

A.  

Josie should report her findings to those charged with governance of the organization.

B.  

Josie should not disclose her findings to anyone until after she has conducted a full investigation.

C.  

Josie should immediately report her findings to the local media.

D.  

Josie should confront Carissa with her audit findings and try to get a confession.

A.  

General counsel

B.  

Human resources

C.  

Management

D.  

Fraud examiners

A.  

The program must include mechanisms to monitor and identify breaches in compliance.

B.  

The responsibility of handling suspected incidents of noncompliance should be delegated to someone outside of the company.

C.  

Formal sanctions for intentional noncompliance should be well-publicized throughout the company

D.  

There should be measures in place to address failures in the design or operation of anti-fraud controls, as well as fraud occurrences

A.  

Collusion between contractors

B.  

Adding ghost employees to payroll

C.  

Reporting revenue in the wrong period

D.  

Embezzling incoming customer payments

A.  

Inherent risks are risks that remain after efforts are made to mitigate fraud risk.

B.  

The objective of anti-fraud controls is to completely eliminate the inherent fraud risk.

C.  

The objective of anti-fraud controls is to reduce the residual fraud risk to a level that is significantly lower than the inherent fraud risk.

D.  

Residual risks are risks that are present before the effect of internal controls.

A.  

True

B.  

False

A.  

Adding ghost employees to payroll.

B.  

Embezzling incoming customer payments.

C.  

Collusion between contractors.

D.  

Reporting revenue in the wrong period.

A.  

Harry should keep the communication private and only share it with executive management.

B.  

Harry's communication should encourage employees to participate in the assessment process.

C.  

Harry should find a generic template to use as the primary communication to the entire staff.

D.  

Harry's communication should be sent to the entire staff from his own email address.

A.  

Positive reinforcement

B.  

Loss of reward

C.  

Punishment

D.  

Negative stimuli

A.  

Serving as the intermediary between staff-level employees and management.

B.  

Assessing the strategy and underlying purpose of management's decisions and actions.

C.  

Electing the company shareholders and supervising their decisions and actions.

D.  

Directing employees to organize and execute business activities.

A.  

True

B.  

False

A.  

Independent monitoring

B.  

Operating environment

C.  

Risk tolerance

D.  

Governance and culture

A.  

Undertaking an engagement that decreases the fraud examiner's ability to perform their duties for their full-time employer

B.  

Accepting an assignment to assess red flags of fraud at an organization in which the fraud examiner is a partner, provided the fraud examiner's ownership interest is disclosed

C.  

Undertaking engagements for both sides in a case of an alleged product substitution scheme

D.  

Accepting an assignment to secretly infiltrate the fraud examiner's employing organization and transmit inside information to another party

A.  

Performance

B.  

Strategy and objective-setting

C.  

Governance and culture

D.  

Information, communication, and reporting

A.  

To inform the development of audit programs for areas that have been identified as having a high risk of fraud.

B.  

To confirm whether there is conclusive evidence that fraud is occurring within the company.

C.  

To validate whether the organization is appropriately managing moderate-to-high fraud risks.

D.  

To design audit tests to evaluate whether fraud risk controls are operating effectively.

A.  

Management seeks out diversity in attitudes and perspectives when hiring employees

B.  

Rewards are given to employees who challenge the status quo

C.  

Management links employee performance goals with company performance goals

D.  

All of the above

A.  

Formal sanctions for intentional noncompliance should be kept private and only shared if a party absolutely needs to know.

B.  

All employees at the organization should be responsible for monitoring compliance with the program.

C.  

Punishment for intentional noncompliance should be individualized based on the offender's personal circumstances.

D.  

Systems to monitor and identify breaches in compliance must be included in the fraud risk management program.

A.  

True

B.  

False

A.  

They state that a corporate governance framework should promote transparent and fair markets and the efficient allocation of resources.

B.  

They assert that a corporate governance framework should ensure that the treatment of shareholders differs based on the class of stock they own.

C.  

They are intended to be applicable in emerging markets but not in developed economies.

D.  

They are required to be implemented by all corporations in the jurisdictions that have officially adopted them.

A.  

Aaron should remain alert for fraud but does not need to consider the potential for abuse or other misconduct during the audit engagement.

B.  

Aaron does not need to comply with the requirements found in International Standard on Auditing 240 as they do not apply to the engagement.

C.  

Aaron likely does not have the ability to withdraw from the engagement even if fraud is identified during the audit.

D.  

Aaron's audit objectives are likely narrower than those of a private-sector financial statement audit.

A.  

The behavior will return when punishment ceases

B.  

The behavior will be permanently suppressed

C.  

The behavior will occur more frequently.

D.  

The behavior will not be affected by the punishment

A.  

Transparency

B.  

Responsibility

C.  

Fairness

D.  

Accountability

A.  

The assessment team should consider how employees behave as part of Its assessment

B.  

The assessment should be used to improve employee fraud awareness.

C.  

The designation of an area as being high risk does not conclusively mean that fraud is occurring there.

D.  

The objective of the assessment is to provide an estimate of the organization's fraud losses.

A.  

To ensure the independence of the team members, a consultant or another external party must conduct the fraud risk assessment.

B.  

If the individuals conducting the fraud risk assessment believe that fraud could not happen within the organization, then the assessment process should reflect that belief.

C.  

The fraud risk assessment can be conducted effectively by people inside or outside of the organization.

D.  

The fraud risk assessment is most effective when management's influence on the process is limited.

A.  

Corporate violations that involve large sums of money are often spread among so many organizations that each gains very little individually.

B.  

Violations are caused by innocent errors in judgment rather than economic necessity.

C.  

Government regulations are justified because the additional costs of regulations and bureaucratic procedures increase government profits.

D.  

Government regulation is unnecessary because the matters being regulated are unimportant.

A.  

True

B.  

False

A.  

Avoidance of differences of opinion on all material matters

B.  

Independence of mental attitude and avoidance of conflicts of interest

C.  

Prioritization of desires for personal gain over the interests of clients

D.  

Ability to conceal errors to preserve the reliability of the work performed

A.  

The assessment team would like to provide a means for anonymous employee suggestions or responses to questions posed.

B.  

The assessment team would like to observe the interactions of several employees discussing the organization's current fraud awareness training.

C.  

The assessment team would like to obtain individuals' responses through a formal electronic questionnaire.

D.  

The assessment team would like to get candid one-on-one feedback from employees in a private setting.

A.  

Reporting revenue in the wrong accounting period

B.  

Fraudulent customer payments

C.  

Espionage by competitors

D.  

Payment of bribes to procure business

A.  

Asset misappropriation; corruption

B.  

Corruption, asset misappropriation

C.  

Financial statement fraud: corruption

D.  

Asset misappropriation: financial statement fraud