Chapter 17 – Occupational Fraud and Abuse: The Big Picture

1. The terms deterrence and prevention mean the same thing and can be used
interchangeably.
a. True
b. False

2. Fraud prevention involves removing the root cause of fraudulent behavior, such as
economic deprivation or social injustice.
a. True
b. False

3. Modification of behavior through the perception of negative sanctions is called:

a. Deterrence
b. Prevention
c. Preclusion
d. Dissuasion

4. The axiom that states “employees who believe that they will be caught engaging in
occupational fraud and abuse are less likely to commit it” is called:
a. Cognitive choice
b. Preventive selection
c. Perception of detection
d. None of the above

5. For the past several months the Adams Shop, a mom and pop retail store, has suffered
costly losses due to the theft of merchandise. Putting in a comprehensive surveillance
system that covers all of the entrances and exits at all four of their locations is not
feasible at this time. Nevertheless, they have decided to install several surveillance
cameras in their flagship store. They notified their employees that the cameras were
being installed and placed posters at the store entrances notifying their customers of
the new security. Not surprisingly, thefts decreased dramatically within a month and
continued to decline over the next six months. Without the cash to install cameras in
all the stores, Adams installed fake cameras at the other three stores and let
employees and customers at those locations know about the cameras. Thefts dropped
at the other stores as well. The concept that most likely explains why the thefts
decreased is known as:
a. Pre-emptive anti-fraud strikes
b. Surreptitious detection
c. Proactive deterrence
d. Perception of detection

6. Which of the following choices is not an action that will increase the perception of
detection within an organization?
a. Conducting clandestine audits
b. Increasing the use of analytical reviews
c. Developing employee anti-fraud education programs
d. Establishing a reporting program
7. Vigorously prosecuting fraud perpetrators is considered to be the best proactive way
to deter fraud.
a. True
b. False

8. The implementation of hidden controls is a crucial component of an effective

proactive fraud deterrence plan.
a. True
b. False

9. Having an adequate program to report fraud is vital to the success of an

organization’s efforts to detect and deter fraud. Which of the following is a key point
that should be emphasized in such a program?
a. If everyone works together, fraud, waste, and abuse can be completely eliminated
within the organization.
b. There is an exact method for reporting suspected wrongdoing.
c. Penalties may be assessed on employees who report inaccurate information,
regardless of intent.
d. All of the above

10. Although hotlines are an essential part of an effective fraud reporting system, only
about 5 percent of hotline calls are actually developed into solid cases.
a. True
b. False

11. The concept of ______________ provides that corporations can legally be held
criminally responsible for the acts of their employees if those acts were done in the
course and scope of their employment and for the apparent benefit of the corporation.
a. Civil responsibility
b. Displaced criminal sanctions
c. Imputed liability
d. Connected accountability

12. Dean Crawley is a foreman for the Albuquerque Construction Co. As part of his
duties, Dean often must run to the hardware store to purchase supplies when they are
needed immediately for a building project. One afternoon, Dean’s building crew ran
out of a particular sized nail and needed 35 more right away to meet their tight project
deadline. Dean went to the nearest hardware store to restock, but quickly realized he
had forgotten his wallet. Rather than waste precious time retrieving his wallet, he
slipped 40 nails into his pockets and walked out without paying for them. Even
though Dean’s actions specifically violated company policies, the company may still
be held criminally responsible for his theft.
a. True
b. False
13. The Corporate Sentencing Guidelines allow organizations that have an effective fraud
prevention and detection program in place to receive more lenient criminal sentences
than those without such a program.
a. True
b. False

14. As it relates to Corporate Sentencing Guidelines, corporations are required to perform

certain minimum steps for due diligence. Which of the following is not one of the
required steps?
a. Consistently enforce standards through appropriate discipline.
b. Have policies defining standards and procedures to be followed by the
organization’s agents and employees.
c. Assign internal audit personnel to ensure compliance.
d. Use due care not to delegate significant authority to people who are known to
have a propensity to engage in illegal activities.

15. The school of ethical thought that advocates concrete ethical principles that cannot be
violated is the:
a. Fundamental ethical principle
b. Utilitarian ethical principle
c. Modern ethical principle
d. Imperative ethical principle

16. The school of ethical thought that advocates situational ethics, i.e., each behavior
should be evaluated on its own merits, is the:
a. Imputed ethical principle
b. Circumstantial ethical principle
c. Utilitarian ethical principle
d. Imperative ethical principle

17. Brian Ferguson is a cashier at a 24-hour convenience store. He has worked the night
shift for the last year and a half, and often fills in for other employees at the last
minute, but has never received a raise. Furthermore, Brian just got passed over for a
promotion to store manager, which would have nearly doubled his pay.
Understandably, he is outraged. Because his employer is so “cheap” and “unfair,”
Brian begins taking cases of beer and snacks home to supplement his income. The
term that best describes Brian’s theft as retribution for his inadequate pay is:
a. Involuntary breach
b. Wages in kind
c. Actionable rationalization
d. Imperative ethics

18. Which of the following should be included in an organization’s formal ethics policy?
a. Specific conduct that violates the policy
b. A statement that dishonest acts will be punished
c. Information on how unethical conduct can be reported
d. All of the above
19. The “tone at the top” that is set by management is more important in providing a
strong ethical message to employees than having a formal organizational ethics policy
in place.
a. True
b. False

20. All organizations, regardless of size, should institute a formal ethics policy.
a. True
b. False