Chapter 6 MC solutions
SOLUTIONS FOR MULTIPLE‑CHOICE QUESTIONS
6.24 a. Correct Risk is high when the company always estimates the inventory but never takes a complete physical count.
b. Incorrect Risk is low when the petty cash box is always locked in the desk of the custodian.
c. Incorrect Risk is low when management has published a company code of ethics and sends frequent communication newsletters about it.
d. Incorrect Risk is low when the board of directors reviews and approves all investment transactions.
6.25 a. Incorrect An airtight control system of checks and supervision is not possible because of collusion and management override.
b. Incorrect This is a positive step but not the best long‑run way to stop fraud.
c. Incorrect Dedicated “hotline” telephones are a great idea, but you wouldn’t want to put them on walls around the workplace where anonymity is impaired.
d. Correct Since “people” are essential to a fraud prevention program, Practice management “of the people and for the people” to help them share personal and professional problems is the best long‑run way to stop fraud.
6.26 a. Correct Problems due to debt, addictions, or family problems motivate employees to commit frauds. Establishing an employee assistance program addresses these issues and ultimately may reduce the motivation to commit fraud for some employees. b. Incorrect A fidelity bond reduces the risk to the employer for theft because this is a form of insurance. It also provides a background check on employees. Neither of these issues addresses the fundamental issue of employee motivation. c. Incorrect Reconciliations are methods of detecting problems that have occurred. While these are good controls and may reduce the opportunities for employees to steal, reconciliations do not address employee motivation to commit fraud. d. Incorrect Audits may detect fraud and even provide deterrence for fraud, but they do not address the employees’ motivation to commit fraud.
6.27 a. Incorrect An
6.24 a. Correct Risk is high when the company always estimates the inventory but never takes a complete physical count.
b. Incorrect Risk is low when the petty cash box is always locked in the desk of the custodian.
c. Incorrect Risk is low when management has published a company code of ethics and sends frequent communication newsletters about it.
d. Incorrect Risk is low when the board of directors reviews and approves all investment transactions.
6.25 a. Incorrect An airtight control system of checks and supervision is not possible because of collusion and management override.
b. Incorrect This is a positive step but not the best long‑run way to stop fraud.
c. Incorrect Dedicated “hotline” telephones are a great idea, but you wouldn’t want to put them on walls around the workplace where anonymity is impaired.
d. Correct Since “people” are essential to a fraud prevention program, Practice management “of the people and for the people” to help them share personal and professional problems is the best long‑run way to stop fraud.
6.26 a. Correct Problems due to debt, addictions, or family problems motivate employees to commit frauds. Establishing an employee assistance program addresses these issues and ultimately may reduce the motivation to commit fraud for some employees. b. Incorrect A fidelity bond reduces the risk to the employer for theft because this is a form of insurance. It also provides a background check on employees. Neither of these issues addresses the fundamental issue of employee motivation. c. Incorrect Reconciliations are methods of detecting problems that have occurred. While these are good controls and may reduce the opportunities for employees to steal, reconciliations do not address employee motivation to commit fraud. d. Incorrect Audits may detect fraud and even provide deterrence for fraud, but they do not address the employees’ motivation to commit fraud.
6.27 a. Incorrect An