TRUE OR FALSE

1. Statement 1 : The open invoice method is often used to manage trade accounts
receivable (sales to other business organizations).

Statement 2 : The balance forward method is used extensively for consumer accounts.

a. Both statements are true.

b. Both statements are false.
c. Statement 1 is only true.
d. Statement 2 is only true

2. Statement 1: Almost all boards of directors are composed of individuals who are not
independent.

Statement 2: A Thomson Financial survey revealed the strong belief that executives
have abused stock-based compensation.

a. Both statements are true.

b. Both statements are false.
c. Statement 1 is only true.
d. Statement 2 is only true

3. Statement 1: Justifiable reliance. The misrepresentation must not have been a

substantial factor on which the injured party relied.

Statement 2 : Management fraud or fraud by nonmanagement employees, is generally

designed to directly convert cash or other assets to the employee’s personal benefit.

a. Both statements are true.

b. Both statements are false.
c. Statement 1 is only true.
d. Statement 2 is only true

4. Statement 1. ACI can be used to manipulate the organisations data.

Statement 2. Documentation should include risk factors identified and the auditors
response to them.

a. Both true
b. Both false
c. Only statement 1 is true.
d. Only statement 2 is true.
 5. Statement 1 : Payroll fraud is the distribution of fraudulent paychecks to existent
and/or nonexistent employees.

Statement 2 : A pass-through fraud is similar to the shell company fraud with the
exception that a transaction actually takes place.

a. Both statements are true.

b. Both statements are false.
c. Statement 1 is only true.
d. Statement 2 is only true

6. Statement 1: In payments to nonexistent employees it involves entering fictitious

employees into the payroll system.
Statement 2: The two common forms of payroll fraud are underpayment of employees
and payments to nonexistent employees.
a. Statement 1 is false
b. Statement 2 is false
c. Both statements are true
d. Both statements are false

7. Statement1: The risk of material misstatement due to fraud always exists.

Statement 2: The auditor’s response to detected misstatements due to fraud is thus
influenced by the degree of assessed risk
a. Statement 1 is false
b. Statement 2 is false
c. Both statements are true
d. Both statements are false

8. Statement 1: ACFE stands for Association of Certified Fraud Examiners (ACFE)

Statement 2: The fraud triangle consists of three factors that contribute to or are
associated with management and employee fraud.
a. Statement 1 is false
b. Statement 2 is false
c. Both statements are true
d. Both statements are false

9. Statement 1: Recording an expense is a possible way to conceal the theft of cash.

Statement 2: A check is an example of a source document.
a. Statement 1 is false
b. Statement 2 is false
c. Both statements are true
d. Both statements are false
10. Statement 1: Analytical anomalies are present in every fraud.

Statement 2: Most people who commit fraud use the embezzled funds to save for
retirement.
a. Statement 1 is false
b. Statement 2 is false
c. Both statements are true
d. Both statements are false

11. Statement 1: There are 4 key stages of information system.

Statement 2: The first key stage of information system is the Data Collection.
a. Statement 1 is false
b. Statement 2 is false
c. Both statements are true
d. Both statements are false

12. Statement 1: The Three levels of computer ethics are: Pop, Para and Geographical.
Statement 2: Those who do not benefit should not carry the burden of risk.
a. Statement 1 is false
b. Statement 2 is false
c. Both statements are true
d. Both statements are false

13. I. Fake suppliers have physical facilities, the perpetrator of the fraud will sometimes rent a
P.O. box to receive payments by mail.
II. The audit procedure to use in Sequential Invoice Numbers is ACL to sort the records of the
invoice file by invoice number and vendor number.
III. To divert attention away from excessive purchases made from the same vendor, a
perpetrator may create several phony suppliers that share the same mailing address.
IV. A management review and signature is required for all checks that exceed the threshold.
Those that fall below the limit are reviewed.
a. I, III, IV are true
b. II & IV are true
c. II & III are true
d. All statements are true

14. Statement 1: Susceptibility of liabilities to misappropriation. The susceptibility of a liability

pertains to its nature and the degree to which it is subject to theft.
Statement 2: Management conditions include the economic and regulatory environment in
which the entity operates.
a. Statement 2 is false.
 b. Statement 1 is false.
c. Both statements are false.
d. Both statements are true.

15. Statement 1: An illegal gratuity occurs when an employee acts on behalf of a third party
during the discharge of his or her duties or has self - interest in the activity being performed.
Statement 2: Bribery Is the use of force by an individual or organization to obtain something of
value.
a. Statement 2 is false.
b. Statement 1 is false.
c. Both statements are false.
d. Both statements are true.

MULTIPLE CHOICE
1. SOX imposes new corporate disclosure requirements,except:
a. Annual reports filed with the SEC must include a statement by management,
asserting that it is responsible for creating and maintaining adequate internal
controls and asserting to the effectiveness of those controls.
b. Officers must certify that the company’s accounts “fairly present” the firm’s
financial condition and results of operations.
c. Public companies must report all off-balance-sheet transactions.
d. Public companies are prohibited from making loans to executive officers
and directors

2. They set auditing, quality control, and ethics standards; to inspect registered accounting
firms; to conduct investigations; and to take disciplinary actions.
a. Public Company Accounting Over- sight Board (PCAOB)
b. Philippine Financial Reporting Standards (PFRS)
c. Board of Accountancy (BOA)
d. Generally Accepted Auditing Standards (GAAP)

3. Business ethics involves

a. how managers decide on what is right in conducting business.
b. how managers achieve what they decide is right for the business.
c. both a and b.
d. only a.

4. All of the following are conditions for fraud except

a. false representation.
b. injury or loss.
c. intent.
 d. material reliance.
.
5. ____ can be used to manipulate the organization data to search for transaction that fit the
profile

a. ACI
b. ACL
c. AC
d. ACIL
6. The auditor should document in the working process the criteria used for ____ the fraud
risk factors.

a. Identifying
b. Assessing
c. Analyzing
d.Recording

7. It is often used to manage trade accounts receivable (sales to other business

organizations). Each invoice is recorded as a separate item in the invoice file.

a. The open invoice method

b. The balance forward method
c. Lapping Accounts Receivable
d. Payroll Fraud

8. __________ are required to pay only a minimum amount off the balance.

a. Accountant
b. Customers
c. Vendor
d. Supplier

9. The asset misappropriation scheme type that has the biggest loss according to ACFE study is
a. Skimming
b. Cash Larceny
c. Check Tampering
d. Payroll

10. All are examples of Billing Schemes except:

a. Shell company fraud
b. Pass- Through Fraud
c. Lapping Fraud
 d. Pay- and - Return Scheme

11. What are the common forms of payroll fraud?

a. Payments to nonexistent employees
b. Overpayment of employees
c. Both a and b
d. None of the above

12. The only evidence of fraud in the underlying data is in the timing difference between when
payment is received and when it is recorded. This fraud technique refers to?
a. Lapping Account Receivable
b. Payroll fraud
c. Non cash fraud
d. Theft of cash

13.When the fraud has had a material effect on the financial statements or the auditor is unable
to evaluate its degree of materiality, the auditor should:
I. Consider the implications for other aspects of the audit.
II. Discuss the matter with senior management and with a board of director’s audit
committee.
III. Attempt to determine whether the fraud is material.
IV. Suggest that the client consult with legal counsel, if appropriate.

a. I
b. I, II
c. II, III, IV
d. I, II, III, IV

14. The auditor’s judgments about the risk of material misstatements due to fraud may affect the
audit in which ways:
a. Engagement staffing and extent of supervision.
b. Professional skepticism.
c. Nature, timing, and extent of procedures performed.
d. All of the above

15. ACFE stands for

a. Association of Certified Fraud Examiners
b. Association of Certified Financial Examiners
c. Associated and Certified Fraud Examiners
d. Association of Certified Forensic Examiners

16. It consists of three factors that contribute to or are associated with management and
employee fraud.
a. The perpetrators of Frauds
 b. The Fraud Triangle
c. Fraud
d. Sarbanes-Oxley Act and Ethical Issues

17. Fraud perpetrators:

a. Look like other criminals.
b. Have profiles that look like most honest people.
c. Are usually very young.
d. Are none of the above.

18. Which of the following is not one of the three

elements of fraud?
a. Perceived pressure.
b. Perceived opportunity.
c. Rationalization.
d. Intelligence

19. Which one is not a characteristic of useful information?

a. Relevance
b. Timeliness
c. Reliability
d. Summarization

20. What are the two classes of Data Processing fraud?

a. Program fraud & Operation Fraud
b. Masquerading & Piggybacking
c. Scavenging and Eavesdropping
d. Corrupting & Stealing

21. It involves finding the answers to two questions: (1) How do managers decide what is right
in conducting their business? and (2) Once managers have recognized what is right, how do
they achieve it?
a. Justice
b. Ethical Decisions
c. Business Ethics
d. Minimize risk

22. All systems professionals need to reach this level of competency so they can do their jobs
effectively.
a. Para computer ethics
 b. Pop computer Ethics
c. Geographical computer ethics
d. Theoretical computer ethics

23. This will highlight records that possess series characteristics, which can then be retrieved for
further review.
A. Vendors with P.O. Boxes
B. Vendors with Employee Addresses
C. Sequential Invoice Numbers
D. Multiple Companies with the Same Address

24. To highlight suspicious activity that warrants further investigation, sort payments records that
fall within this range by vendor.
A. Vendors with P.O. Boxes
B. Vendors with Employee Addresses
C. Invoice Amounts Slightly below the Review Threshold
D. Multiple Companies with the Same Address

25. _______________, such as cash and bearer bonds, are more susceptible to
misappropriation than _______________ such as steel girders and physical plant equipment.

a. Liquid liabilities, non liquid liabilities.

b. Non liquid liabilities, liquid liabilities.
c. Liquid assets, non liquid assets.
d. Non liquid assets, liquid assets.

26. This class of risk factors involves the inadequacy or lack of controls designed to prevent or
detect misappropriation of assets.

a. Industry
b. Procedure
c. Controls
d. Management
27. involves giving , offering , soliciting , or receiving things of value to influence an official in the
performance of his or her lawful duties .

a. Bribery
b. Illegal gratuities
c. Conflict of interest
d. Unicorn
28. involves an executive , manager , or employee of the organization in collusion with an
outsider.

a. Bribery
b. Corruption
c. Economic extortion
d. Unicorn