Which of the following is not a way to improve fraud detection?

Which of the following is not a way to improve fraud detection?

A) Install fraud detection software.
B) Implement a fraud hotline.
C) Employ a computer security officer.
D) Implement computer-based controls over input, processing, storage, and output activities.


Answer: D

Which of the following is not a way to reduce fraud losses?

Which of the following is not a way to reduce fraud losses?

A) Conduct periodic external and internal audits.
B) Maintain adequate insurance.
C) Use software to monitor system activity.
D) Store backup copies of program and data files.


Answer: A

Which of the following is not a way to make fraud less likely to occur?

Which of the following is not a way to make fraud less likely to occur?

A) Adopt an organizational structure that minimizes the likelihood of fraud.
B) Create an organizational culture that stresses integrity and commitment to ethical values.
C) Create an audit trail so individual transactions can be traced.
D) Effectively supervise employees.


Answer: C

The fraud appears to be misappropriation of assets that is being concealed with a lapping scheme. Controls would include:

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.

The fraud appears to be misappropriation of assets that is being concealed with a lapping scheme. Controls would include:

1. rotation of duties (primarily detective)
2. mandatory vacations (primarily detective)
3. surveillance with cameras (primarily detective)
4. staggered statement printing schedules, unknown to tellers (detective)
5. sequentially prenumbered, duplicate receipts (detective)
6. segregation of duties between cash handling and recording (preventive)
7. encourage customers to utilize on-line banking for loan payments and to frequently check balances (detective)

Describe four ways companies can reduce losses from fraud.

Describe four ways companies can reduce losses from fraud.

Answer: Maintain adequate insurance. Keep a current backup copy of all program and data files in a secure off-site location. Develop a contingency plan for fraud occurrences and other disasters that might occur. Use special software designed to monitor system activity and help companies recover from frauds and malicious actions.

Describe at least four ways a company can make fraud less likely to occur.

Describe at least four ways a company can make fraud less likely to occur.

Answer: A company can decrease fraud by: good hiring and firing practices; good management of unhappy employees; training in fraud awareness; manage and track computer licenses; implement signed confidentiality agreements; maintain visible security; educate the workforce in ethics and the penalties for illegal acts.

What are the actions recommended by the Treadway Commission to reduce the possibility of fraudulent financial reporting?

What are the actions recommended by the Treadway Commission to reduce the possibility of fraudulent financial reporting?

Answer: organizational environment that contributes to the integrity of the financial reporting process. Identify and understand the factors that lead to fraudulent financial reporting. Assess the risk of fraudulent financial reporting within the company. Design and implement internal controls to provide reasonable assurance that the fraudulent financial reporting is prevented.