Question

Financial statement fraud is complex because it often involves collusion.

True

False

High net worth individuals are likely to use private banks.

True

False

The three legs of the fraud triangle are opportunity, perceived benefit, and rationalization.

True

False

Money and ego are the two most commonly observed motivations for fraud and abuse.

True

False

When discussing the costs of fraud and other litigations, by the time a formal investigation is launched and the allegations are addressed within the legal arena, the parties have already incurred substantial cost.

True

False

In general, increasing the perception of detection may be the best way to deter employee theft, while increasing the sanctions that are imposed on occupational fraudsters will have a limited effect.

True

False

Answer 1

Sol.

1. True, financial statement fraud is complex because of collusion as it provides false confirmation to the auditor.

2. True, high net worth individuals are likely to use private banks because these banks helps in all banking and wealth management needs.

3. False, as three legs of fraud triangle consists of Pressure (or Motive), Opportunity and Rationalization.

4. True, Money and ego are two most commonly observed motivations for fraud as it enlist from M.I.C.E (Money, Ideology, Coercion, Ego).

5. True, fraud investigation involves substantial cost because it requires broader investigation and affects the financial position as well as reputation of the company.

6. True, as prevention and deterrence are the best medicines to prevent fraudulent activities.