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11 is the most common fraud but is the most expensive fraud a fraudulent 4297960


11) ________ is the most common fraud, but ________ is the most expensive fraud.

A) Fraudulent financial reporting, misappropriation of assets

B) Misappropriation of assets, fraudulent financial reporting

C) Misappropriation of assets, cooking the books

D) Cooking the books, misappropriation of assets


12) ________ is the element in the fraud triangle results from either critical need or greed on the part of the perpetrator.

A) Motive

B) Opportunity

C) Rationalization

D) Reasoning


13) The three main components of the fraud triangle are:

A) rationalization, opportunity and greed.

B) opportunity, motive and lack of ethics.

C) motive, opportunity and rationalization.

D) none of the above.

14) Fraud is the ultimate unethical act in business because:

A) the perpetrators usually do so for their own short-term economic gain at the expense of others.

B) fraud is illegal.

C) fraud violates the rights of many for the temporary betterment of a few.

D) of all of the above.


15) Which of the following is a true statement regarding fraud?

A) Fraud is committed when an error is made.

B) Fraud does not occur in not-for-profit organizations.

C) The expansion of e-commerce has caused fraud to decrease.

D) Most businesses surveyed had experienced fraud.


16) Fraudulent financial reporting:

A) is committed by lower level employees of a company.

B) makes the company appear in poor financial condition.

C) deceives investors and creditors.

D) involves stealing cash or inventory from the company.


17) Several large frauds occurred in 2001 and 2002. Which of the following was NOT a consequence of these frauds?

A) Arthur Anderson, LLP was convicted of fraud but was allowed to stay in business.

B) There were adverse market reactions throughout the world.

C) Thousands of jobs were lost when Enron and WorldCom went out of business.

D) There was a loss of confidence in the financial reporting system.

18) An employee states that he committed fraud because he was “underpaid and overworked.” This is an example of:

A) opportunity.

B) motive.

C) rationalization.

D) understanding.


19) Sharon is the receptionist and office manager for The Best Construction Company. Sharon handles all of the office duties including billing, cash receipts, payroll, depositing checks and preparing the monthly bank reconciliation. She also prepares all of the checks for disbursements and is an authorized signer on all checks under $25,000. For checks above this amount, two signatures are required. She has been a trusted employee of The Best Construction Company for many years, but still makes just a small amount above minimum wage. She is even the godmother to two of the owner's children and often watches them while their parents go on exotic vacations. Sharon is such a good employee that she rarely takes vacations. Since the owner trusts her completely, he concentrates on the construction business and leaves all of the office work to Sharon. He would never interfere with her work since he has very little accounting knowledge. Sharon has recently become a grandmother and enjoys buying her grandchildren expensive toys and clothes. She has just bought a new Hummer for herself and an exclusive condo in the Virgin Islands.


What are the three elements of the fraud triangle? Which element(s) of the triangle are present in this case? Explain briefly.



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