Test Bank for Fraud Examination 7th Edition by Steve Albrecht
Chapter 01 - The Nature of Fraud
1. One way that criminal law differs from civil law is that it:
a. provides remedies for violations of private rights.
All Chapters ✅
b. must yield a unanimous verdict.
c. can have a jury of fewer than 12 persons. Answers Included ✅
d. allows for various claims in one action.
ANSWER: b
FEEDBACK: a. Incorrect. The requirement to provide remedies for violations of private rights is a
characteristic of civil law; criminal law deals with crimes against society as a
whole.
b. Correct. Criminal trials must result in a unanimous verdict.
c. Incorrect. The requirement for a unanimous vote characteristic of civil law;
criminal trial juries must have 12 persons.
d. Incorrect. In inclusion of various claims in one action is a characteristic of civil
law; criminal law permits only one claim at a time.
POINTS: 1
DIFFICULTY: easy
REFERENCES: Criminal and Civil Prosecution of Fraud
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER: Source: 6e revised
DATE CREATED: 2/8/2024 7:10 AM
DATE MODIFIED: 2/8/2024 7:14 AM
2. Which of the following is NOT an common element of a Ponzi scheme?
a. Gaining other's confidence
b. Promising abnormally high returns
c. Investing collected money
d. Using part of the investment principle to pay previous investors
ANSWER: c
FEEDBACK: a. Incorrect. Gaining other’s confidence is one of the most important elements of the
“con.”
b. Incorrect. Promising abnormally high returns is how fraudsters lure in investors.
c. Correct. Investing collected money is very unlikely.
d. Incorrect. In Ponzi schemes, the original principle is often used to make interest
payments.
POINTS: 1
DIFFICULTY: moderate
REFERENCES: Types of Fraud
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER: Source: 6e , revised
DATE CREATED: 2/9/2024 5:11 AM
DATE MODIFIED: 2/9/2024 5:32 AM
Page 1
,Chapter 01 - The Nature of Fraud
3. The following are all elements of Title 26, U.S. Code Section 7201 EXCEPT:
a. not reporting bribe income may be grounds for being charged with tax evasion.
b. a tax filing that excludes income from fraud may be considered a false return.
c. bribes may be lawfully deducted as business expenses.
d. failure to report income from fraud may be grounds for being charged with tax evasion.
ANSWER: c
FEEDBACK: a. Incorrect. Not reporting bribe income may be grounds for being charged with tax
evasion.
b. Incorrect. Filing income tax that excludes income from fraud may be considered
an improper tax filing.
c. Correct. Bribes cannot be deducted as legitimate business expenses.
d. Incorrect. Failure to report income from fraud or bribes may be prosecuted as tax
evasion.
POINTS: 1
DIFFICULTY: easy
REFERENCES: Criminal Law
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER: Source: 6e revised
DATE CREATED: 2/9/2024 5:38 AM
DATE MODIFIED: 2/9/2024 5:40 AM
4. Which one of the following is NOT a characteristic of a criminal proceeding?
a. Criminal proceedings deal with offenses against society.
b. Consequences of criminal proceedings include restitution and damage payments.
c. Criminal proceedings involve a jury of 12 individuals.
d. In criminal proceedings, only one claim may be heard at a time.
ANSWER: b
FEEDBACK: a. Incorrect. A crime is considered an offense against society.
b. Correct. In a criminal proceeding, the consequences are jail and/or fines.
c. Incorrect. A criminal jury consists of 12 jurors.
d. Incorrect. Only one claim is heard at a time, whereas in a civil case many claims
may be joined into a single case.
POINTS: 1
DIFFICULTY: easy
REFERENCES: Criminal Law
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER: Source: 6e revised
DATE CREATED: 2/9/2024 6:36 AM
DATE MODIFIED: 2/9/2024 6:38 AM
Page 2
,Chapter 01 - The Nature of Fraud
5. Management fraud is often referred to as:
a. stockholder fraud.
b. financial statement fraud.
c. employee fraud.
d. investment fraud.
ANSWER: b
FEEDBACK: a. Incorrect. In its most common form, management fraud involves top
management's deceptive manipulation of financial statements.
b. Correct. In its most common form, management fraud involves top management's
deceptive manipulation of financial statements.
c. Incorrect. In its most common form, management fraud involves top
management's deceptive manipulation of financial statements.
d. Incorrect. In its most common form, management fraud involves top
management's deceptive manipulation of financial statements.
POINTS: 1
DIFFICULTY: easy
REFERENCES: Management Fraud
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER: Source: 6e revised
DATE CREATED: 2/9/2024 6:39 AM
DATE MODIFIED: 2/9/2024 6:43 AM
6. What is required to prove fraud, as opposed to error?
a. Negligence
b. Intent
c. Preponderance of the evidence
d. Confession from the perpetrator
ANSWER: b
FEEDBACK: a. Incorrect. Negligence does not constitute fraud because it lacks intent to gain
advantage over the victim through false pretenses.
b. Correct. To succeed in a criminal or civil prosecution, it is usually necessary to
show that the perpetrator acted with intent to defraud the victim.
c. Incorrect. Preponderance of the evidence is what is proven in any civil case and
is not specific to fraud.
d. Incorrect. Confession is not required to prove fraud. In fact, many perpetrators
never admit their guilt.
POINTS: 1
DIFFICULTY: moderate
REFERENCES: Criminal and Civil Prosecution of Fraud
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER: Source: 6e revised
DATE CREATED: 2/9/2024 6:43 AM
Page 3
, Chapter 01 - The Nature of Fraud
DATE MODIFIED: 2/9/2024 6:44 AM
7. Which of the following is the most common type of occupational fraud?
a. Management fraud
b. Mail fraud
c. Investment fraud
d. Employee embezzlement
ANSWER: d
FEEDBACK: a. Incorrect. Employee embezzlement is the most common type of occupational
fraud.
b. Incorrect. Employee embezzlement is the most common type of occupational
fraud.
c. Incorrect. Employee embezzlement is the most common type of occupational
fraud.
d. Correct. Employee embezzlement is the most common type of occupational
fraud.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Employee Embezzlement
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER: Source: 6e revised
DATE CREATED: 2/9/2024 6:45 AM
DATE MODIFIED: 2/9/2024 6:47 AM
8. Which of the following is NOT a characteristic of management fraud?
a. Top management deception
b. Manipulation of financial statements
c. Kickbacks or bribes
d. Hidden losses and fictitious revenues
ANSWER: c
FEEDBACK: a. Incorrect. Management fraud often involves top management's deceptive
manipulation. Management fraud is when the top management deceives
stockholders.
b. Incorrect. Management often uses the manipulation of financial statements to
commit fraud. This is one of the easiest ways to commit a large fraud.
c. Correct. These are examples of employee embezzlement. Management fraud
usually deals with financial statement manipulation.
d. Incorrect. In an effort to inflate reportable profit, managers may hide losses and
exaggerate revenues.
POINTS: 1
DIFFICULTY: easy
REFERENCES: Management Fraud
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
Page 4
Chapter 01 - The Nature of Fraud
1. One way that criminal law differs from civil law is that it:
a. provides remedies for violations of private rights.
All Chapters ✅
b. must yield a unanimous verdict.
c. can have a jury of fewer than 12 persons. Answers Included ✅
d. allows for various claims in one action.
ANSWER: b
FEEDBACK: a. Incorrect. The requirement to provide remedies for violations of private rights is a
characteristic of civil law; criminal law deals with crimes against society as a
whole.
b. Correct. Criminal trials must result in a unanimous verdict.
c. Incorrect. The requirement for a unanimous vote characteristic of civil law;
criminal trial juries must have 12 persons.
d. Incorrect. In inclusion of various claims in one action is a characteristic of civil
law; criminal law permits only one claim at a time.
POINTS: 1
DIFFICULTY: easy
REFERENCES: Criminal and Civil Prosecution of Fraud
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER: Source: 6e revised
DATE CREATED: 2/8/2024 7:10 AM
DATE MODIFIED: 2/8/2024 7:14 AM
2. Which of the following is NOT an common element of a Ponzi scheme?
a. Gaining other's confidence
b. Promising abnormally high returns
c. Investing collected money
d. Using part of the investment principle to pay previous investors
ANSWER: c
FEEDBACK: a. Incorrect. Gaining other’s confidence is one of the most important elements of the
“con.”
b. Incorrect. Promising abnormally high returns is how fraudsters lure in investors.
c. Correct. Investing collected money is very unlikely.
d. Incorrect. In Ponzi schemes, the original principle is often used to make interest
payments.
POINTS: 1
DIFFICULTY: moderate
REFERENCES: Types of Fraud
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER: Source: 6e , revised
DATE CREATED: 2/9/2024 5:11 AM
DATE MODIFIED: 2/9/2024 5:32 AM
Page 1
,Chapter 01 - The Nature of Fraud
3. The following are all elements of Title 26, U.S. Code Section 7201 EXCEPT:
a. not reporting bribe income may be grounds for being charged with tax evasion.
b. a tax filing that excludes income from fraud may be considered a false return.
c. bribes may be lawfully deducted as business expenses.
d. failure to report income from fraud may be grounds for being charged with tax evasion.
ANSWER: c
FEEDBACK: a. Incorrect. Not reporting bribe income may be grounds for being charged with tax
evasion.
b. Incorrect. Filing income tax that excludes income from fraud may be considered
an improper tax filing.
c. Correct. Bribes cannot be deducted as legitimate business expenses.
d. Incorrect. Failure to report income from fraud or bribes may be prosecuted as tax
evasion.
POINTS: 1
DIFFICULTY: easy
REFERENCES: Criminal Law
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER: Source: 6e revised
DATE CREATED: 2/9/2024 5:38 AM
DATE MODIFIED: 2/9/2024 5:40 AM
4. Which one of the following is NOT a characteristic of a criminal proceeding?
a. Criminal proceedings deal with offenses against society.
b. Consequences of criminal proceedings include restitution and damage payments.
c. Criminal proceedings involve a jury of 12 individuals.
d. In criminal proceedings, only one claim may be heard at a time.
ANSWER: b
FEEDBACK: a. Incorrect. A crime is considered an offense against society.
b. Correct. In a criminal proceeding, the consequences are jail and/or fines.
c. Incorrect. A criminal jury consists of 12 jurors.
d. Incorrect. Only one claim is heard at a time, whereas in a civil case many claims
may be joined into a single case.
POINTS: 1
DIFFICULTY: easy
REFERENCES: Criminal Law
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER: Source: 6e revised
DATE CREATED: 2/9/2024 6:36 AM
DATE MODIFIED: 2/9/2024 6:38 AM
Page 2
,Chapter 01 - The Nature of Fraud
5. Management fraud is often referred to as:
a. stockholder fraud.
b. financial statement fraud.
c. employee fraud.
d. investment fraud.
ANSWER: b
FEEDBACK: a. Incorrect. In its most common form, management fraud involves top
management's deceptive manipulation of financial statements.
b. Correct. In its most common form, management fraud involves top management's
deceptive manipulation of financial statements.
c. Incorrect. In its most common form, management fraud involves top
management's deceptive manipulation of financial statements.
d. Incorrect. In its most common form, management fraud involves top
management's deceptive manipulation of financial statements.
POINTS: 1
DIFFICULTY: easy
REFERENCES: Management Fraud
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER: Source: 6e revised
DATE CREATED: 2/9/2024 6:39 AM
DATE MODIFIED: 2/9/2024 6:43 AM
6. What is required to prove fraud, as opposed to error?
a. Negligence
b. Intent
c. Preponderance of the evidence
d. Confession from the perpetrator
ANSWER: b
FEEDBACK: a. Incorrect. Negligence does not constitute fraud because it lacks intent to gain
advantage over the victim through false pretenses.
b. Correct. To succeed in a criminal or civil prosecution, it is usually necessary to
show that the perpetrator acted with intent to defraud the victim.
c. Incorrect. Preponderance of the evidence is what is proven in any civil case and
is not specific to fraud.
d. Incorrect. Confession is not required to prove fraud. In fact, many perpetrators
never admit their guilt.
POINTS: 1
DIFFICULTY: moderate
REFERENCES: Criminal and Civil Prosecution of Fraud
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.5 - Understand the differences between criminal and civil fraud laws.
OTHER: Source: 6e revised
DATE CREATED: 2/9/2024 6:43 AM
Page 3
, Chapter 01 - The Nature of Fraud
DATE MODIFIED: 2/9/2024 6:44 AM
7. Which of the following is the most common type of occupational fraud?
a. Management fraud
b. Mail fraud
c. Investment fraud
d. Employee embezzlement
ANSWER: d
FEEDBACK: a. Incorrect. Employee embezzlement is the most common type of occupational
fraud.
b. Incorrect. Employee embezzlement is the most common type of occupational
fraud.
c. Incorrect. Employee embezzlement is the most common type of occupational
fraud.
d. Correct. Employee embezzlement is the most common type of occupational
fraud.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: Employee Embezzlement
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FRAU.ALBR.25.1.3 - Understand Different Types of Fraud.
OTHER: Source: 6e revised
DATE CREATED: 2/9/2024 6:45 AM
DATE MODIFIED: 2/9/2024 6:47 AM
8. Which of the following is NOT a characteristic of management fraud?
a. Top management deception
b. Manipulation of financial statements
c. Kickbacks or bribes
d. Hidden losses and fictitious revenues
ANSWER: c
FEEDBACK: a. Incorrect. Management fraud often involves top management's deceptive
manipulation. Management fraud is when the top management deceives
stockholders.
b. Incorrect. Management often uses the manipulation of financial statements to
commit fraud. This is one of the easiest ways to commit a large fraud.
c. Correct. These are examples of employee embezzlement. Management fraud
usually deals with financial statement manipulation.
d. Incorrect. In an effort to inflate reportable profit, managers may hide losses and
exaggerate revenues.
POINTS: 1
DIFFICULTY: easy
REFERENCES: Management Fraud
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
Page 4
