Section 3 (Qs) - Fraud Prevention

Most experts agree that it is much easier to detect fraud than it is to prevent it.

To reinforce in anti-fraud culture, management should:

A. Show employees that unethical Behavior will not be tolerated.

B. Create an environment in which employees feel safe challenging Management's decisions.

C. Visibly adhere to the same set of Ethics policies that are required of all employees.

D. All of the above

Communications regarding the organization's anti-fraud policy should be presented in a positive, non accusatory manner.

Establishing and communicating the proper flow of information to everyone in the organization is an essential component of a fraud prevention program.

Proactive audit procedures, such as fraud assessment questioning and surprise audits, can help demonstrate Management's intention to aggressively seek out fraud.

If an action is legal, it is also ethically correct.

A detailed anti-fraud policy should outline the types of actions that are considered to be fraud. Which of the following should be included on that list?

A. Disclosing proprietary information to competitors.

B. Personal use of company equipment.

C. Forging or altering documents.

D. All of these answers are correct.

Of the following, which is the most effective method of preventing fraud?

A. Increasing the perception of detection.

B. Conducting covert audits.

C. Screening employees.

D. Having an open door policy

Which of the following should be covered in employee anti-fraud training?

A. Examples of past transgressions and how they were handled.

B. The exact procedures management uses to detect fraud.

C. A detailed explanation of the company's anti-fraud controls.

D. All of these answers are correct.

Managers and Executives should be expected to be fully aware of fraud risks and controls and should therefore be exempt from the organization's fraud awareness training initiatives.

Because the potential of being caught most often persuades tempted individuals not to commit a fraud, the existence of a thorough control system is essential to fraud prevention.

Two selling points of a fraud prevention program are frauds potentially negative impact on a company's profits and its potential effect on the organization's Public Image.

An entity's corporate culture is most effectively assessed using a checklist of initiatives to make sure all the elements of a strong tone at the top are in place.

Which of the following is false regarding employee anti-fraud education?

A. All anti-fraud training should be based on the organization's specific operations and fraud risks.

B. Mid-level managers should be charged with assisting training their team's about fraud.

C. Fraud awareness training efforts should be restricted to formal education mechanisms.

D. Fraud awareness training should be required for employees both at time of hire and periodically thereafter.

Components necessary to develop, Implement, and manage a comprehensive Ethics program include:

A. A designated ethics official.

B. Sanctions for unethical Behavior.

C. A vision statement.

D. All of these answers are correct

Which of the following is an effective method of increasing the perception of detection?

A. Requiring strong management oversight.

B. Forcing employees to take vacation time.

C. Conducting surprise audits.

D. All of these answers are correct.

Having an auditor ask employees questions such as "has anyone ever asked you to do anything that you felt was illegal or unethical?" Can Be an Effective method of uncovering fraud within an organization.

Factors that affect employee's ethical decisions include:

A. Tension between personal standards and organizational needs.

B. Industry and organization ethical codes.

C. The law and other government regulations.

D. All of these answers are correct.

The detailed anti-fraud policy can give management legal grounds to investigate and punish violators.

Which of the following should be emphasized in an employee reporting program?

I. Fraud, waste, and abuse occur in only a few companies.

II. The company actively encourages employees with information to come forward.

III. The employee's name must be disclosed.

IV. The report need not be made to one's immediate supervisor.

Requiring employees in certain functions (E.g., accounting clerks) periodically rotate job duties Can Be an Effective anti-fraud measure.

Surprise audits can be effective in both preventing and detecting fraudulent conduct.

Management of blue top Incorporated is implementing a formal background check policy for its employees. Which of the following is not a best practice that it should Implement as part of this initiative?

A. Place a low priority on checking professional references, since most people won't provide a bad reference.

B. Check the background of any employee who will have constant access to cash, checks, and credit card numbers.

C. Run a background check on existing employees who are being promoted or moved to positions that include access to easily stolen assets.

D. Ask a candidate's previous employers whether the individual is eligible for rehire.

Which of the following mechanisms can be used to help increase the perception of detection in an organization?

A. Employee anti-fraud education.

B. Hotlines.

C. Rewards for whistleblowers.

D. All of these answers are correct.

Managers should be instructed to observe employees Lifestyles for warning signs of Fraud, and employees should know that supervisors are watching for unexplained or suspicious of this nature.

For analytical review procedures performed during a financial statement audit to be most effective in uncovering fraud, the scheme must materialia impact the financial statements.

Which of the following factors complicates the ability of determining clear ethical Rights and Wrongs?

A. Tension often exists between personal standards and organizational needs.

B. Moral standards and accepted social behavior change over time.

C. Different groups within the same Society might have conflicting ideas of right and wrong.

D. All of these answers are correct.

Which of the following is an effective way to help prevent fraud through the organization's performance measurement and management programs?

A. Tying employee compensation to aggressive organizational performance goals.

B. Including ethics-based metrics is a component of performance evaluations.

C. Placing the responsibility for identifying training needs and performance deficiencies in the employee's hands.

D. Establishing Loosely defined job descriptions that enable employees flexibility in their roles.

Which of the following controls can help minimize the pressures that might lead an employee to commit fraud?

A. Employee support programs.

B. Fair Personnel policies and procedures.

C. Open Door management policies.

D. All of these answers are correct.

Which of the following is true regarding an organization's ethics policy?

A. In developing the policy, management should not consider the existing ethical tone set by leadership.

B. In developing policy, management should consider how various members of the organization define success.

C. Access to the policy should be restricted to company employees only.

D. Access to the policy should be restricted to external parties only.

The way that management handles incidence of fraud with any organization plays an important role in his fraud prevention program.

Unless specific unacceptable conduct is detailed in an anti-fraud policy, there can be legal problems in discharging a honest employee.