The fraud risk factor that may be mitigated by internal controls is
Answer (D) is correct. The opportunity for individuals to perpetrate a fraud can be mitigated by proper controls. Examples are appropriate oversight, segregation of duties, and the audit process itself.
In the fraud risk model, rationalization relates to
Answer (C) is correct. Rationalization relates to the person’s ability to justify the commission of a fraud. Auditors should assume that anyone has this ability.
The term or expression most associated with misappropriation of assets is
Answer (B) is correct. Misappropriation of assets results from theft, embezzlement, or an action that causes payment for items not received. It is an act of stealing by employees.
Most employee fraud cases involve
Answer (D) is correct. Most employee fraud cases involve financial or vice-related pressures. Employees often have an actual or a perceived need for money.
Who is responsible for minimizing the opportunity to misappropriate assets in an organization?
Answer (D) is correct. Management is expected to create systems and procedures to mitigate exposure to fraud and to cope with it effectively when discovered.
Rationalization of a fraud by an employee may be in the form of all the following except
Answer (A) is correct. Pressure from one’s spouse is a motive for the misappropriation of assets.
Which of the fraud risk factors related to employee fraud can be effectively controlled by the organization?
Answer (D) is correct. Opportunity is mitigated by internal controls, which can be effectively designed and implemented by the organization.
Fraudulent financial reporting is most often committed by
Answer (A) is correct. Fraudulent financial reporting is committed by management in an attempt to deceive financial statement users.
Public record searches may be effective in certain instances. Which of the following is a limitation on public record searches?
Answer (D) is correct. Records for early periods may be limited or nonexistent.
Based on the fraud risk model, which of the following is the most likely motive for employee fraud?
Answer (A) is correct. An employee’s actual or perceived need for assets, for example, from gambling losses, can create the motivation to commit fraud.