Corruption

1. Which of the following is not a type of corruption scheme?

a. Bribery
b. Conflict of interest
c. Illegal gratuities
d. Concealed payments

2. ___________________ is the offering, giving, receiving, or soliciting of something

of value as a reward for a favorable decision.
a. Business diversion
b. Economic extortion
c. Illegal gratuity
d. Commercial bribery

3. The offering, giving, receiving, or soliciting of something of value for the purpose of
influencing a business decision without the knowledge or consent of the principal is
known as:
a. Official bribery
b. Commercial bribery
c. Conflict of interest
d. Illegal gratuity

4. Which of the following is a type of kickback scheme?

a. Improper disclosure
b. Overbilling
c. Turnaround sale
d. Extortion

5. A corruption scheme in which several bidders conspire to split contracts, thereby

ensuring that each gets a certain amount of work, is known as:
a. Bid pooling
b. Bid rigging
c. Bid division
d. Bid diversion

6. To deter kickback schemes, an organization should implement which of following

procedures?
a. Separate the purchasing, authorization, and cash disbursements functions.
b. Track purchase levels by vendor.
c. Compare the prices paid for goods and services to market rates.
d. All of the above
7. The key component to most kickback schemes is:
a. Forged endorsements
b. Counterfeit invoices
c. Price inflation
d. Stealing customer statements

8. Which of the following is a red flag indicating that an employee may be receiving
kickbacks?
a. The purchase of inferior-quality inventory or merchandise
b. An unusually high volume of purchases from a particular vendor
c. The payment of purchase amounts that are frequently above market rates
d. All of the above

9. To facilitate a bribery scheme, a fraudster might divert company funds to a non-

company account from which the illegal payments can be made. This account is
called a:
a. Slush fund
b. Petty cash fund
c. Bid pool
d. None of the above

10. To safeguard against kickback schemes, which of the following procedures should an
organization implement?
a. Have an employee in the purchasing department review the organization’s
payment patterns on a quarterly basis.
b. Establish a written policy specifying that employees cannot accept more than
$500 annually in gifts from customers or suppliers.
c. Prohibit employees from engaging in any transaction on behalf of the
organization when they have an undisclosed personal interest in the
transaction.
d. All of the above

11. Which of the following would likely not be a potential target for accepting bribes in a
big-rigging scheme?
a. A product assurance representative
b. An accounts payable clerk
c. A contracting official
d. The engineer in charge of the project’s technical specifications

12. The typical bid-rigging scheme committed during the need recognition phase of the
contract negotiation process involves defining a “need” that can be met only by a
certain supplier or contractor.
a. True
b. False

13. Which of the following is a red flag that might indicate that a bid-rigging scheme is
occurring?
 a. The contract price is unusually low.
b. A high bid is followed by amendments that reduce the payments to the contractor.
c. The losing bidders become sub-contractors on the project.
d. Many more bidders responded to the request for proposals than expected.

14. If a government employee agrees to award a contract to a vendor in exchange for a

promise of future employment, this is considered to be an illegal gratuity.
a. True
b. False

15. The primary approach for preventing conflicts of interest schemes is to develop and
implement which of the following?
a. A voucher system
b. A company ethics policy
c. A document retention program
d. An anonymous reporting mechanism to receive tips and complaints

16. If an employee approves payment on an invoice that originates from a real company
in which he or she has a hidden economic interest, this is considered to be a conflict
of interest scheme.
a. True
b. False

17. Which of the following schemes can be detected by identifying vendor addresses that
are not designated as a business address?
a. Shell company schemes
b. Kickback schemes
c. Conflicts of interest
d. All of the above

18. Extracting round-dollar payments and summarizing them by vendor can help detect
both corruption and billing schemes.
a. True
b. False

19. Identifying trends in over-purchased and/or obsolete inventory over several periods is
a proactive computer audit test that can be used to detect which of the following
schemes?
a. False purchases
b. Corruption
c. Overstated expenses
d. None of the above

20. Matching the vendor master file to the employee master file is a proactive computer
audit test that can be used to detect which type of fraud scheme(s)?
a. Bribery
b. Shell company
 c. Both bribery and shell company
d. None of the above

21. According to the 2012 Report to the Nations on Occupational Fraud and Abuse,
schemes involving corruption were the least common of the three types of
occupational fraud schemes.
a. True
b. False

22. According to the 2012 Report to the Nations on Occupational Fraud and Abuse, the
median loss due to corruption schemes was the highest of the three types of
occupational fraud schemes.
a. True
b. False

23. According to the 2012 Report to the Nations on Occupational Fraud and Abuse,
bribery schemes occurred more often than other types of corruption schemes.
a. True
b. False

24. Stanley Block works in the IT department at Towery, Inc. After finding out that the
company is planning to purchase four more computers for the accounting department,
Stanley bought four computers from a friend for $1,200. Then, using his brother’s
name and address as vendor information, he resold the computers to Towery for
$2,300. This type of scheme is known as a(n):
a. Over-purchase sale
b. Resource diversion sale
c. Double-sided sale
d. Turnaround sale

25. Johanna Pye is a hair stylist at Mamon Salon. The salon’s policy states that stylists
receive 40 percent of the revenue they generate as their compensation. Johanna grew
tired of sharing her income with the salon and decided she wanted to make more
money. She continued seeing her existing clients at the salon, but when new clients
called for an appointment, Johanna lied and told them the salon was completely
booked for the next few months. She then offered to come to their homes and cut
their hair for 10 percent less than what the clients would be charged at the salon. She
did not report the house call appointments to the salon, and was therefore able to keep
all the income she generated from these side clients. This is an example of what type
of scheme?
a. Shell company
b. Resource diversion
c. Business diversion
d. Double dealing
26. Fred Weaver is the contracts manager for a city government. In order for anyone to
do business with the municipality, he or she must pay Fred 10 percent of the total
amount of the contract. This type of corruption is known as:
a. Bribery
b. Economic extortion
c. A conflict of interest
d. Bid-rigging

27. Abe Wilson works as a city councilman in large city on the east coast. As part of his
duties, he negotiated the purchase of some land in order to build a new water
treatment plant for the city. The land was sold to the city by Jake Bryan for terms that
were favorable to the city. After the sale was finalized, Bryan treated Abe and his
wife to an all-expenses-paid Alaskan cruise. This type of fraud is known as:
a. A conflict of interest
b. Bribery
c. An illegal gratuity
d. Economic extortion

28. John Clark works as a land buyer for a city government. After negotiating the
purchase of a parcel of land to be used for a new library, he asked the seller out for a
coffee date, and she accepted. This situation is an example of an illegal gratuity.
a. True
b. False

29. Julius Smith is a purchasing agent for a Louisiana state agency. He has a project
budgeted for $24,000 that he would like to hire RGS Consultants to handle.
Unfortunately for Julius and RGS Consultants, the state has a requirement that all
projects over $10,000 must be sent out for competitive bids. In order to avoid the
bidding process, Julius breaks the project into three component projects worth $8,000
each. RGS Consultants is subsequently awarded the contracts for all three projects.
What type of bid-rigging scheme is this?
a. Bid pooling
b. Underbidding
c. Bid splitting
d. Bid diversion

30. Donna Boyd is an internal auditor for GDP, Inc., an electronics manufacturer. While
conducting a routine review of the company’s inventory costing, she discovers that
the cost of one of the parts they use in manufacturing DVD players has been steadily
increasing over the last six months and is now much higher than the general market
price. Additionally, she notices that the company has been heavily favoring one
specific supplier for that part. Based on these circumstances, what type of fraud
scheme may be occurring at GDP?
a. Kickbacks
b. Conflict of interest
c. Shell company
Any of the above