1. Employees should be made aware of the firm’s commitments to ethics.

o True
o False

2. Business bankruptcy cases always involve fraudulent behavior.

o True
o False

3. According to ACFE study, most frauds are committed by employees in management

positon.
o True
o False

4. Of the Fraud Triangle situational pressure is the factor that actually facilitates the act.
o True
o False

5. Ethical issues and legal issues are essentially the same.

o True
o False

6. In fraud commission, collusion among employees will be difficult to prevent but easy to
detect.
o True
o False

7. The internal control system is the responsibility of management.

o True
o False

8. Skimming is stealing cash after it is recorded on the organization’s books and records.
o True
o False

9. All of the following are factors in the fraud triangle except

o Ethical behavior of an individual
o Pressure exerted on an individual at home and job related
o Opportunity to gain access to assets
o Materiality of the assets
10. For an action to be called fraudulent, all of the following conditions are required except
o poor judgement
o false representation
o intent to deceived
o injury of loss

11. Forces which may permit fraud to occur do not include.

o gambling addiction
o centralized decision making environment
o questionable integrity of employees
o lack of segregation of duties

12. The most cost-effective type of internal control is

o preventive control
o accounting control
o detective control
o corrective control

13. A physical inventory count is an example of a

o preventive control
o detective control
o corrective control
o feedforward

14. Giving or receiving something of value because of an official act that has been taken is
o bribery
o conflict of interest
o illegal gratuity
o economic extortion

15. Which of the following is not an internal control procedure?

o authorization counting records
o management’s operating style
o independent verification
o accounting records

16. Situational pressure includes personal or job-related stresses that could coerce an
individual to act dishonestly.
o True
o False
17. Preventive controls are passive techniques designed to reduce fraud.
o True
o False

18. Defalcation is another word for financial fraud.

o True
o False

19. A check digit is a method of detecting data coding errors.

o True
o False

20. The Sarbanes-Oxley Act requires only that a firm keep good records.
o True
o False

21. Opportunity involves direct access to assets and/or access to information that controls
assets.
o True
o False

22. The objective of SAS 99 is to seamlessly blend the auditor’s consideration of fraud into
all phases of the audit process.
o True
o False

23. Which of the following is an example of an input control test?

o sequence check
o zero value check
o spooling check
o range check

24. Forces which may permit fraud to occur do not include

o a gambling addiction
o lack of segregation of duties
o centralized decision-making environment
o questionable integrity of employees
25. The correct purchase order number is 123456. Which of the following is an example of a
transposition error?
o 1234567
o 12345
o 124356
o 123454

26. Which input control check would detect a posting to the wrong customer account?
o missing data check
o check digit
o reasonableness check
o validity check

27. Which of the following is not a principal type of corruption?

o bribery
o skimming
o conflict of interest
o economic extortion

28. The bank reconciliation uncovered a transposition error in the books. This is an example
of a
o preventive control
o detective control
o corrective control
o none of the above

29. Which of the following is an objective of batch controls?

o to ensure that all transactions include transaction codes
o to locate any fraudulent data in the batch
o to coordinate run-to-run controls with batch controls
o to reconcile system output with the data originally input into the system

30. The importance to the accounting profession of the Sarbanes-Oxley Act is that
o bribery will be eliminated
o management will not override the company’s internal controls
o management is required to certify the internal control system
o firms will not be exposed to lawsuits

31. All of the following are conditions for fraud except

o false representation
o injury or loss
o intent
o material reliance
32. Which of the following is not an example of a processing control?
o a hash total
o a record count
o a batch total
o a check digit

33. When duties cannot be segregated, the most important internal control procedure is
o supervision
o independent verification
o access controls
o accounting records

34. Internal control systems have limitations. These include all of the following except
o possibility of honest error
o circumvention
o management override
o stability of systems

35. According to common law, a fraudulent act must

o intend to cause injury or loss regardless of whether or not such loss occur
o include a false statement or nondisclosure
o both a and b
o neither a nor b

36. Which of the following is not part of the COSO framework?

o monitoring
o risk assessment
o certification by management
o control activities

37. Which of the following is not an internal control procedure?

o authorization
o management’s operating style
o independent verification
o accounting records

38. Which of the following is an example of an input error correction technique?

o immediate correction
o rejection of batch
o creation of error file
o all are examples of input error correction techniques
39. The employee entered “40” in the “hours worked per day” field. Which check would
detect this unintentional error?
o numeric/ alphabetic data check
o sign check
o limit check
o missing data check

40. The board of directors consists entirely of personal friends of the CEO. This indicates a
weakness in
o the accounting system
o the control environment
o control procedures
o This is not a weakness.

41. Business ethics involves

o how managers decide on what is right in conducting business
o how managers achieve what they decide is right for the business
o both a and b
o none of the answers

42. An example of a hash total is

o total paychecks-Php 12,315
o total number of employees-10
o sum of the social security numbers-12,555,437,251
o all of the above

43. One characteristic of employee fraud is that the fraud

o is perpetrated at a level to which internal controls do not apply
o involves misstating financial statements
o direct conversion of cash or other assets for employee’s personal benefit
o misappropriating assets involving 3rd parties

44. Systems that use a sequential master files employ a backup technique called
o batch check
o destructive update
o grandfather-father-son
o master file backup

45. A well-designed purchase order is an example of a

o preventive control
o detective control
o corrective control
o is not a control measure
46. An accounting system that maintains an adequate audit trail is implementing which
internal control procedure?
o access controls
o segregation of duty
o independent verification
o accounting record

47. For an action to be called fraudulent, all of the following conditions are required except
o poor judgement
o false representation
o intent to deceive
o injury or loss

48. Which of the following is a preventive control?

o credit check before approving a scale on account
o bank reconciliation
o physical inventory account
o comparing the accounts receivable subsidiary ledger to the control account

49. Which control procedure can prevent or detect if a manager forgot to record in the
accounting records the daily bank department
o segregation of duties
o independent verification
o accounting records
o supervision

50. Employee fraud involves three steps. Of the following, which is not involved?
o concealing the crime to avoid detection
o stealing something of value
o misstating financial statements
o converting the asset to a usable form