True or False
The majority of public companies investigated by the Securities and Exchange Commission (SEC) for fraud subsequently suffer a substantial (50 percent or more) decline in stock price.
True
True or False
It takes an average of 36 months for a fraud to be detected.
False - Average of 24 Months to be detected
True or False
Only 5 percent of large-organization executives say they have no documented investigative policies or procedures for fraud, and 50 percent have no incident response plan.
False - One third of large-organizations don't have a documented policy/procedure for fraud
True or False
Organizations that implement entity-wide fraud awareness training cut fraud losses by 52 percent.
True
Between 2005 and early 2009, the percentage of nonperforming real estate loans on the FDIC-insured institutions' books exploded from approximately:
A. 0.1 Percent to 0.9 Percent
B. 0.6 Percent to 1.4 Percent
C. 0.6 Percent to 2.8 Percent
D. 0.4 Percent to
B. 0.6 Percent to 1.4 Percent
In the mortgage industry, "stated-income" loans are synonomous with:
A. Adjustable-rate mortgages
B. Liar's loans
C. Brokerage Loans
D. Teaser Rate Mortgages
B. Liar's Loans (Borrowers state their income and are taken at their word).
A major reason mortgage lenders in the 1990s lowered the standards for approving mortgage applications was that:
A. Borrowers had high credit scores
B. Unemployment was very low
C. Home prices were expected to continue rising indefinitely
D. Interest rate
C. Home prices were expected to continue rising indefinitely
The most common types of fraud affecting the financial services industries include all EXCEPT:
A. Corruption
B. Theft of Cash
C. Fraudulent Financial Activities
D. Ponzi Schemes
D. Ponzi Schemes
Regardless of whose definition of fraud you accept, all incidents of financial wrongdoing fall into one or both of the following categories: theft and _____________.
Deception
In the area of payments transactions, the incidence of check fraud is much greater than that of ___________ fraud.
ACH (Direct deposit, payroll, vendor payments)
The most common form of employee-level fraud is __________ __________.
Billing Schemes
True or False
External fraudsters cannot be profiled easily because of their diverse demographics, varied social and business environments, and varied geographical locations.
True
True or False
Twenty percent of the employees in your organization will commit fraud only if provided the opportunity to do so.
False - Fence Sitters account for 60 percent of people within an organization and if given the opportunity may lean towards committing fraud. 20 percent are inherently dishonest and will definitely commit fraud.
True or False
Although committed with less frequency than employee-level fraud, virtually all management-level frauds result in much greater losses than those perpetrated at lower levels.
True
Management-level fraud is:
A. Committed more frequently than employee-level fraud
B. Committed less frequently than employee-level fraud
C. Results in lower financial losses than employee-level fraud
D. Results in about the same degree of losses as employ
B. Committed less frequently than employee-level fraud
Which of the following is NOT an element of the fraud triangle?
A. Opportunity
B. Greed
C. Rationalization
D. Pressure
B. Greed
Which of the following choices best fits the description of how high-level Wall Street executives justify portentially fraudulent activity:
A. "Doing the right thing"
B. "The end justifies the means"
C. "Whatever it takes"
D. Greed is good
C. "Whatever it takes
The rash of Wall Street mergers, acquisitions, and divestitures in the 1980s, 1990s, and early 2000s resulted in a shift away from:
A. Executive commitment to long-term building a business they were loyal to
B. Excessive concentration of financial power i
A. Executive commitment to long-term building of a business they were loyal to
The element that transforms the fraud triangle into a fraud diamond in the context of financial services is _________________.
Greed
During the trial of General Re insurance company for allegedly inflating insurance giant AIG's reserves by $500 million, former AIG chief Maurice "Hank" Greenberg was named a(n) _______________.
Unindicted coconspirator
(a person or entity that is alleged in an indictment to have engaged in conspiracy, but who is not charged in the same indictment.)
There is a(n) _________________ between the level of the organization at which fraud is committed and the amount of financial loss resulting from frauds at each level.
Inverse Ratio
People's Choice Bank was a prime example of ______________.
Subprime Lender
True or False
The savings and loan crisis resulted in deregulation of the banking industry.
False
True or False
A "Straw Buyer" in a fraudulent mortgage scheme is not a real person at all - just a name.
False- a person who buys something on behalf of someone else in order to circumvent legal restrictions or enable fraud.
True or False
Straw Buyer schemes are perpetuated by outside criminals, dishonest bankers, or both.
True
True or False
A dormant account is one that has been closed by the bank.
False - has had no activity for a long period of time, other than posting interest.
A reciprocal loan is where:
A. Two banks cooperate in making a loan to a mutual client
B. A lender has the borrower commit to referring a friend or relatice to the bank
C. One bank makes a loan to another in exchange for a similar transaction in reverse
D
C. One bank makes a loan to another in exchange for a similar transction in reverse
Linked financing involves:
A. Making a loan to a customer in exchange for the customer depositing a large sum of money at the bank
B. A loan linked to a specific interest rate
C. Lending to a customer who has used other services the bank offers
D. Providi
A. Making a loan to a customer in exchange for the customer depositing a large sum of money at the bank.
Asset-based loans typically are made using any of the following for collateral EXCEPT:
A. Inventory
B. Receivables
C. Floor-plan assets
D. Payroll account balances
D. Payroll account balances
A suspense account is one that:
A. Is controlled by the bank for special reasons
B. Is controlled by the federal regulators
C. Has been frozen due to suspected fraud
D. Is pledged to the bank by a borrower until a loan is closed
A. Is controlled by the bank for special reasons
Loans made to nonexistent or fictitious borrowers are called ____________ loans.
Phantom
Special accounts held by the bank in which funds are held temporarily due to insufficient documentation, pending closing of a loan, interdepartmental transfers, or wire transfers are referred to as __________ accounts.
Suspense
Loan applicants who are used by fraudsters to obtain home loans but who have no intention of occupying the home being "purchased" are known as ___________.
Straw Buyers
Separating job functions in a way that no single employee has sufficient authority to perpetrate a fraud single-handedly or with a collusive vendor, customer, or ex-employee is called __________.
Segregation of duties
True or False
Fee reversal fraud occurs when a bank customer service representative credits a fee challenged by a customer to his own account.
True
True or False
When ACH fraud occurs, the bank account likeliest to be targeted is your payroll account.
True
True or False
The top targets of confidential information thieves are retail companies, financial services institutions, and food and beverage companies.
True
True or False
Soft indicators of potential employee fraud point to specific types of illegal activity.
False
True or False
The most common way that employee fraud is brought to management's attention is by tips.
True
True or False
Unfolded invoices may be a red flag of billing fraud.
True
In bid-rigging schemes, bid pooling occur in which of the following phases of the bidding process?
A. Presolicitation
B. Solicitation
C. Submission
D. Postsubmission
B. Solicitation
All of the following are examples of potential T&E Fraud EXCEPT:
A. Submitting handwritten receipts
B. Making multiple expense claim submissions
C. Claiming reimbursement for parking a personal car at the airport during a business trip
D. Claiming expense
C. Claiming reimbursement for parking a personal car at the airport during a business trip
The most common form of payments fraud is:
A. ACH Fraud
B. Check Fraud
C. Consumer credit card fraud
D. Wire transfer fraud
B. Check Fraud
The most common form of payroll fraud is:
A. Stealing blank payroll checks
B. Counterfitting payroll checks
C. Adding "ghost" employees to the payroll
D. Time-card fraud
C. Adding "ghost" employees to the payroll
The term commonly used to describe cash theft by a teller is ____________.
Skimming
Traveler's checks, cashier's checks, and money orders are known as __________.
Consignment Items
Employees in the accounts payable department who are able to fraudulently alter existing vendors' addresses, add phony vendors, or delete legitimate ones do so by tampering with the bank's ___________.
Vendor Master File
_____________ __________ is a form of bid rigging designed to evade the competitive bidding process.
Bid splitting
Customer complaints about unauthorized use of their credit cards may be a sign of ____________ ____________.
Identity Theft
True or False
Overlooking certain qualifications for a loan for a company in which the loan officer has a direct financial interest is NOT a conflict of interest.
False
True or False
One of the main motives for top management to falsify financial reporting is to get bigger bonuses
True
True or False
Fraudulent revenue recognition is sometimes referred to as earnings manipulation
True
All of the following are forms of looting or embezzelment EXCEPT:
A. Skimming from the vault
B. Transferring funds from a customer's account to one's own
C. Tax evasion
D. Stealing and forging company checks
C. Tax evasion (illegal nonpayment or underpayment of taxes)
Corruption" is a term applying to which of the following:
1. Conflict of Interest
2. Bribery
3. Extortion
4. Breach of Fiduciary Duty
A. 1,2,3
B. 2,3,4
C. 1,3,4
D. 1,2,3,4
A. 1,2,3 (Conflict of interest, Bribery, Extortion)
The foreign Corrupt Practices Act (FCPA) makes it illegal to:
A. Accept gifts from foreign business executives
B. Purchase goods or services on discounted prices from foreign vendors
C. Pay bribes to foreign government officials
D. Pay bribes to foreign j
C. Pay bribes to foreign government officials
The top methods of committing frauds at financial institutions include:
1. Making inaccurate accounting estimates
2. Inacurate or misleading disclosure
3. Misclassification of financial information
4. Lack of detailed transaction records
A. 1,2,3
B. 1,3,4
D. 1,2,3,4
The following are preventive measures against check fraud EXCEPT:
A. Prohibiting check signatories from preparing checks
B. Prohibiting employees who approve invoices from preparing checks (or signing them)
C. Hardening physical security of check stock
D.
D. Not using positive pay (an automated fraud detection tool offered by the Cash Management Department of most banks.)
Which of the following are important measures to prevent insider trading?
1. Train all employees in the rules and restrictions on use of nonpublic information
2. Require acfcess persons to report personal securities holdings and transactions on a periodic
C. 1,2,4
One crime that Michael Milken was not convicted of was __________ _____________.
Insider trading
One key red flag of possible looting of customer accounts is ___________ from customers.
Complaints
Approving loans to oneself is an example of _______ _______.
Self-dealing
True or False
Falsely overstating property appraisal values is a form of mortgage fraud for profit.
True
True or False
Straw buyers are loan applicants who are used by fraudsters to obtain home loans and have no intention of occuying the home being purchased.
True
True or False
Straw buyer mortgage fraud schemes never involve unknowing collaboration by the buyer
False
True or False
Although the number of insider-perpetrated information security breaches has been relatively small, the average number of records lost to insdier attacks is approximately three times greater than those committed by outsiders.
True
True or False
Some sophisticated credit card frauds involve the sale of large batches of stolen credit card records to third parties, often organized crime rings located in Western Europe and Africa.
False
True or False
Sophisticated cyber-criminals have learned how to steal not only the debit card data but also the encrypted PIN data that goes along with the cards.
True
True or False
Prices on invoices from the same vendor that are plus or minus .3 percent of each other may indicate a billing fraud
False
True or False
Kickback schemes perpetrated by insiders have many of the same characteristics as those committed by external fraudsters.
True
True or False
It is almost always just as easy for a dishonest mortgage broker or borrower's attorney to doctor the asset or employment information on a mortgage application as it is for a mortgage loan officer to do so.
True
All of the following are examples of construction fraud EXCEPT:
A. Tools theft
B. Product substitution
C. Vehicle loan fraud
D. Employee ghosting
C. Vehicle Loan Fraud
One of the common ways that asset-based financing fraud is committed is by:
A. Cutting costs to make the company's financial condition appear better than it is
B. Creating false invoices to document bogus receivables
C. Hiring additional employees to crea
B. Creating false invoices to document bogus receivables
Most subprime mortgage frauds involve at least one of the following elements EXCEPT:
A. Indicating that the borrower will occupy a property when he or she is actually buying it as an investment
B. Having the appraiser falsely undervalue the actual value o
B. Having the appraiser falsely undervalue the actual value of the property
Which of the following is NOT an example of mortgage fraud for profit?
A. Chunking
B. Builder bailout schemes
C. Equity skimming
D. Falsification of personal assets, income, etc. on a mortgage application
D. Falsification of personal assets, income, etc. on a mortgage application
In the area of online banking fraud, the name of the software commonly planted on a victim's hard drive to record keystrokes is:
A. Spyware
B. Trojan Horse
C. Spam
D. Phising
B. Trojan Horse
In enforcing the Red Flags requirements of the FACT Act, bank regulatory agencies will be monitoring institutions to determine if they are complying with the act's requirement to perform a(n):
A. Covered accounts assesment
B. Identity theft risk review
C.
C. Enterprise-wide risk assesment
All of the following are possible red flags of employment-related mortgage application fraud EXCEPT:
A. Employer's address is a post office box, the property address, or applicant's current residence
B. Employment verification form contains whiting out, e
D. Applicant is self-employed and has his/her tax return prepared by a professional paid preparer
According to the U.S. Department of Justice's Computer Crime Section the most popular ways of perpetrating data breaches are: (Select all that apply)
A. War driving, where hackers penetrate wireless networks
B. Internet-based attacks
C. Malicious code
D.
A,B,C
Which of the following are potential red flags of appraisal fraud (select all that apply):
A. Owner is someone other than the seller indicated on the sales contract
B. Appraisal indicates that the transaction is a refinance, but other documentation reflec
A,B,D
Which of the following are potential red flags of check fraud? (Select all that apply)
A. Authorized signatures are missing or appear forged
B. Vendors or other payees complain about not receiving payments
C. Blank checks are missing
D. Cancelled checks h
A,B,C,D
Mortgage fraud has been around since the early days of American banking history. It did NOT begin with the _________ ____________ crises.
Subprime Mortgage
_________ _________ is a psychological tactic aimed at obtaining information needed to commit fraud.
Social Engineering
The crime of sending out thousands of phony e-mails to consumers urging them to click on a link that will enable them to "update" their bank account information is called __________.
Phising
Intentionally writing checks against accounts with insufficient funds and withdrawing cash before they bounce is a crime known as __________.
Kiting
A builder's overanxiousness to sell a property may be a red flag of a _________ ___________ _________.
Builder Bailout Scheme
True or False
Fraud risk assessments typically are conducted by an organization's external auditors, not its internal auditors.
True
True or False
FRAs often produce better results when internal auditors conduct them instead of external auditors because they are more familiar with the organization's internal workings.
False
True or False
The board of directors in most organizations delegates oversight of the FRA process to the governance committee.
False
True or False
An FRA is meant to guide executives in gathering evidence or potential fraud schemes and scenarios identified by the FRA.
False
Which of the following is NOT a critical member of the FRA team?
A. Finance Manager
B. Regional Audit Manager
C. Director of Procurement
D. Information Technology (IT) Director
B. Regional Audit Manager
Which of the following is NOT a risk level of fraud that is assigned to specific fraud risks identified by an FRA?
A. Remote
B. Extremely Likely
C. More than remote
D. Reasonably Possible
C. More than remote
One of the key exercises in an FRA is determining the ______________ of specific fraud schemes or scenarios occuring.
Risk
The ultimate objective of conducting an FRA is to optimize ____________ ____________.
Internal Controls
The appropriate exercise for identifying the organization's specific fraud risk is a _______________ session.
Brainstorming
The three generally accepted categories for ranking the materiality of a specific fraud risk are inconsequential, more than inconsequential, and ______________.
Material