TEST BANK OF ACCOUNTING INFORMATION SYSTEMS, 12E
BY MARSHALL B. ROMNEY
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Accounting
Information Systems, 12e (Romney/Steinbart)
Chapter 5 Computer
Fraud
1)
Perhaps the most striking fact about natural disasters in relation to AIS
controls is that
A)
many companies in one location can be seriously affected at one time by a
disaster.
B)
losses are absolutely unpreventable.
C)
there are a large number of major disasters every year.
D)
disaster planning has largely been ignored in the literature.
1
2)
Which of the following best describes lapping?
A)
Applying cash receipts to a different customer's account in an attempt to
conceal previous thefts of cash receipts.
B)
Inflating bank balances by transferring money among different bank accounts.
C)
Increasing expenses to conceal that an asset was stolen.
D)
Stealing small amounts of cash, many times over a period of time.
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3)
Which of the following is the greatest risk to information systems and causes
the greatest dollar losses?
A)
human errors and omissions
B)
physical threats such as natural disasters
C)
dishonest employees
D)
fraud and embezzlement
2
4)
All of the following could lead to computer fraud except
A)
allowing computer operators full access to the computer room.
B)
releasing data to unauthorized users.
C)
allowing computer users to test software upgrades.
D)
storing backup tapes in a location where they can be quickly accessed.
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5)
Which of the following is not an example of the fraud triangle
characteristic concerned with easing a fraudster's conscience?
A)
Revenge against the company
B)
Sense of entitlement as compensation for receiving a lower than average raise
C)
Intent to repay "borrowed" funds in the future
D)
Belief that the company won't suffer because an insurance company will
reimburse losses
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6)
Most fraud perpetrators are insiders because
A)
insiders are more dishonest than outsiders.
B)
insiders know more about the system and its weaknesses than outsiders.
C)
outsiders are more likely to get caught than insiders.
D)
insiders have more need for money than outsiders.
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7)
Most frauds are detected by
A)
external auditors.
B)
internal auditors.
C)
accident.
D)
hotline tip.
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8)
Amy wants to open a floral shop in a downtown business district. She doesn't
have funds enough to purchase inventory and pay six months rent up front. Amy
approaches a good friend, Coleen, to discuss the possibility of Coleen
investing funds and becoming a 25% partner in the business. After a lengthy
discussion Coleen agrees to invest. Eight months later, Coleen and Amy have a
falling out. In order for Coleen to sue Amy for fraud, all the following must
be true except
A)
Amy told Coleen she had worked at a floral shop for several years, when in fact
she did not have any prior experience in floral retail.
B)
Coleen's decision to invest was primarily based on Amy's assertion that she had
prior floral retail experience.
C)
Coleen's 25% share of the business is worth substantially less than her initial
investment.
D)
Before Coleen invested, Amy prepared a detailed business plan and sales
forecasts, and provided Coleen with copies.
3
9)
Perpetrators of theft of company assets typically exhibit all the following
characteristics except that they
A)
attempt to return or pay back stolen amounts soon after the initial theft, but
find they are unable to make full restitution.
B)
use trickery or lies to gain the confidence and trust of others at the
organization they defraud.
C)
become bolder and more greedy the longer the theft remains undetected.
D)
begin to rely on stolen amounts as part of their income.
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10)
"Cooking the books" is typically accomplished by all the following except
A)
inflating accounts payable.
B)
accelerating recognition of revenue.
C)
delaying recording of expenses.
D)
overstating inventory.
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11)
SAS No. 99 requires that auditors
A)
plan audits based on an analysis of fraud risk.
B)
detect all material fraud.
C)
alert the Securities and Exchange Commission of any fraud detected.
D)
take all of the above actions.
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12)
Which of the following is not a management characteristic that increases
pressure to commit fraudulent financial reporting?
A)
Close relationship with the current audit engagement partner and manager
B)
Pay for performance incentives based on short-term performance measures
C)
High management and employee turnover
D)
Highly optimistic earnings projections
8
13)
Intentional or reckless conduct that results in materially misleading financial
statements is called
A)
financial fraud.
B)
misstatement fraud.
C)
fraudulent financial reporting.
D)
audit failure fraud.
5
14)
Researchers have compared the psychological and demographic characteristics of
white-collar criminals, violent criminals, and the general public. They found
that
A)
few differences exist between white-collar criminals and the general public.
B)
white-collar criminals eventually become violent criminals.
C)
most white-collar criminals invest their illegal income rather than spend it.
D)
most white-collar criminals are older and not technologically proficient.
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15)
Which of the following is an opportunity that could contribute to employee
fraud?
A)
an employee's spouse loses their job
B)
an employee suddenly acquires lots of credit cards
C)
an employee is upset that he was passed over for a promotion
D)
close association with suppliers or customers
9
16)
Which of the following is a financial pressure that could cause an employee to
commit fraud?
A)
a feeling of not being appreciated
B)
failing to receive a deserved promotion
C)
believing that their pay is too low relative to others around them
D)
having a spouse injured in a car accident and in the hospital for several weeks
7
17)
Opportunity to commit fraud is comprised of three stages. The stage that often
takes most time and effort would include
A)
stealing inventory from the warehouse.
B)
selling stolen inventory to get cash.
C)
lapping accounts receivable.
D)
creating false journal entries to overstate revenue.
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18)
In many cases of fraud, the ________ takes more time and effort than the
________.
A)
concealment; theft
B)
theft; concealment
C)
conversion; theft
D)
conversion; concealment
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19)
Which of the following is the best way to hide theft of assets?
A)
Creating "cash" through the transfer of money between banks
B)
Conversion of stolen assets into cash
C)
Stealing cash from customer A and then using customer B's balance to pay
customer A's accounts receivable
D)
Charging the stolen asset to an expense account
8
20)
In a ________ scheme, customer receipts are stolen and then subsequent payments
by other customers are misapplied to cover the theft of the original receipts.
A)
kiting
B)
laundering
C)
bogus expense
D)
lapping
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21)
One fraudulent scheme covers up a theft by creating cash through the transfer
of money between banks. This is known as
A)
lapping.
B)
misappropriation of assets.
C)
kiting.
D)
concealment.
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22)
Which characteristic of the fraud triangle often stems from a lack of internal
controls within an organization?
A)
pressure
B)
opportunity
C)
rationalization
D)
concealment
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23)
Which situation below makes it easy for someone to commit a fraud?
A)
placing excessive trust in key employees
B)
inadequate staffing within the organization
C)
unclear company policies
D)
All of the above situations make it easy for someone to commit a fraud.
9
24)
What is the most prevalent opportunity within most companies to commit
fraud?
A)
lack of any internal controls
B)
failure to enforce the internal controls
C)
loopholes in the design of internal controls
D)
management's failure to believe employees would commit fraud
9
25)
Which characteristic of the fraud triangle relates to excuses that perpetrators
use to justify their illegal behavior?
A)
pressure
B)
opportunity
C)
rationalization
D)
concealment
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26)
The US Justice Department defines computer fraud as
A)
any crime in which a computer is used.
B)
an illegal act in which knowledge of computer technology is essential.
C)
any act in which cash is stolen using a computer.
D)
an illegal act in which a computer is an integral part of the crime.
0
27)
The most efficient way to conceal asset misappropriation is to
A)
write-off a customer receivable as bad debt.
B)
alter monthly bank statements before reconciliation.
C)
alter monthly physical inventory counts to reconcile to perpetual inventory
records.
D)
record phony payments to vendors.
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28)
Computer fraud is often much more difficult to detect than other types of fraud
because
A)
perpetrators usually only steal very small amounts of money at a time, thus
requiring a long period of time to have elapsed before they're discovered.
B)
massive fraud can be committed in only seconds, leaving little or no evidence.
C)
most perpetrators invest their illegal income rather than spend it, thus
concealing key evidence.
D)
most computer criminals are older and are considered to be more cunning when committing
such a fraud.
0
29)
Why is computer fraud often more difficult to detect than other types of fraud?
A)
Rarely is cash stolen in computer fraud.
B)
The fraud may leave little or no evidence it ever happened.
C)
Computers provide more opportunities for fraud.
D)
Computer fraud perpetrators are just more clever than other types of criminals.
0
30)
Why do many fraud cases go unreported and unprosecuted?
A)
Major fraud is a public relations nightmare.
B)
Fraud is difficult, costly, and time-consuming to investigate and prosecute.
C)
Law enforcement and the courts are often so busy with violent crimes that
little time is left for fraud cases.
D)
all of the above
1
31)
The fraud that requires the least computer knowledge or skill involves
A)
altering or falsifying source data.
B)
unauthorized use of computers.
C)
tampering with or copying software.
D)
forging documents like paychecks.
1
32)
The simplest and most common way to commit a computer fraud is to
A)
alter computer input.
B)
alter computer output.
C)
modify the processing.
D)
corrupt the database.
1
33)
Downloading a master list of customers and selling it to a competitor is an
example of
A)
data fraud.
B)
output theft.
C)
download fraud.
D)
fraudulent financial reporting.
3
34)
Which of the following will not reduce the likelihood of an occurrence
of fraud?
A)
encryption of data and programs
B)
use of forensic accountants
C)
adequate insurance coverage
D)
required vacations and rotation of duties
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35)
Which of the following is not an example of one of the basic types of
fraud?
A)
While straightening the store at the end of the day, a shoe store employee
finds and keeps an expensive pair of sunglasses left by a customer.
B)
An executive devised and implemented a plan to accelerate revenue recognition
on a long-term contract, which will allow the company to forestall filing for
bankruptcy. The executive does not own any stock, stock options or grants, and
will not receive a bonus or perk because of the overstated revenue.
C)
A purchasing agent places a large order at higher-than-normal unit prices with
a vendor that gave the agent tickets to several football games.
D)
A salesperson approves a large sales discount on an order from a company owned
partially by the salesperson's sister.
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36) On Monday
morning, Janet Pillsner, Chief Information Officer at International Securities
Corporation (ISC), got some bad news. A tape used to store system data backups
was lost while it was being transported to an offsite storage location. She
called a meeting of her technical staff to discuss the implications of the
loss. Which of the following is most likely to relieve her concerns over the
potential cost of the loss?
A) The shipper
has insurance that will reimburse ISC for the cost of the tape.
B) ISC has a
copy of the tape onsite, so a new copy for storage offsite can easily be
prepared.
C) The tape was
encrypted and password protected.
D) ISC has a
comprehensive disaster recovery plan.
5
37) A simple
method for catching or preventing many types of employee fraud is to
A) monitor all
employee behavior using video cameras.
B) require all
employees to take annual vacations.
C) explain to
employees that fraud is illegal and that it will be severely punished.
D) monitor
employee bank accounts and net worth.
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38)
Describe two kinds of fraud.
39)
What are the actions recommended by the Treadway Commission to reduce the
possibility of fraudulent financial reporting?
40)
Explain the impact of SAS No. 99 on auditors' responsibilities.
41)
Why is computer fraud on the rise?
42)
Describe at least four ways a company can make fraud less likely to occur.
43)
Describe four ways companies can reduce losses from fraud.
44)
What are some of the distinguishing characteristics of fraud perpetrators?
45)
Why do fraudulent acts often go unreported and are therefore not prosecuted?
46)
A teller at a savings and loan drive-through accepted a cash payment from
customer #1 for an auto loan. The teller appeared to process the payment, but
told the customer the printer was jammed and she can't print a receipt. The
customer accepted the excuse and drove away. The teller pocketed the cash and
wrote down customer #1's loan number and payment amount for future reconciling.
A couple of days before customer #1's monthly statement was printed, the teller
recorded a cash payment from customer #2 as if it were made by customer #1. The
teller pocketed the difference between the two payments. The teller continued
to steal and misapply customer payments for the next two years without
detection.
Identify
the type of fraud scheme described. Describe five controls you would implement
to address the fraud risk, and label each control as preventive or detective.
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