Sec. 1 Criminology Pages # Quest. I. Understanding Human Behavior ………………

Sec. 1 Criminology Pages # Quest. I. Understanding Human Behavior ………………. 2 9 II. Theories of Crime Causation... ……………..….. 4 18 III. White collar Crime ...……………….…………. ...9 18 IV. Organizational Crime ……………..…….……... 14 24 V. Occupational Crime ..……………………...... 21 20 VI. Responsibility for Fraud Prevention...……….... 27 9 VII. Corporate Sentencing Guidelines ………...... 30 20 VIII. Fraud Prevention Policy .. ….………..………... .35 16 IX. Punishment ……....…………….……………...... 40 13 X. Criminal Justice System ……...………….....…...44 22 XI. Ethics for Fraud Examiners …...…...……...…...51 29 XII. ACFE Code of Ethics ………...…………….…...59 27

______Sec. 1 - Criminology 0 / 66 I. Understanding Human Behavior______

1. Incentives programs and task-related bonuses are reinforcement strategies that can be successfully utilized in the workplace.

A. True

B. False

When managers are faced with disgruntled employees, they can modify these emotional circumstances, not just with "image" work, but with adequate compensation and by recognizing workers' accomplishments. Incentives programs and task-related bonuses follow this principle, assuming that employees who feel challenged and rewarded by their jobs will produce more work at a higher quality, and are less likely to violate the law.

2. Criminological research has generally concluded that punishing a person for a crime helps deter that person from committing other crimes in the future.

A. True

B. False

Behavioral studies, such as those conducted by Skinner, show that punishment is the least effective method of changing behavior. Punishing brings "a temporary suppression of the behavior," but only with constant supervision and application. In repeated experiments, Skinner found that punishment-either applying a negative stimulus, or taking away a positive one-effectively extinguished a subject's behavior, but that the behavior returned "when the punishment was discontinued and eventually all responses came out" again.

3. According to this theory, people obey the law because they fear punishment:

A. Normative Perspective

B. Instrumental Perspective

C. Voluntary Compliance

D. Legitimacy

According to the theory of Instrumental Perspective, people obey the law because they fear punishment.

4. According to Skinner, the most effective way to modify a persons behavior is through:

A. Positive reinforcement

B. Negative reinforcement

C. Punishment

D. None of the above

Skinner concludes that behavior is most effectively modified by managing and modifying desires through reinforcement; he wants to replace destructive behaviors with productive ones, instead of trying to punish an already existing impulse.

5. When a detective searches for a suspect's motive, the detective is using behaviorist methods of analysis.

A. True

B. False ______Sec. 1 - Criminology 1 / 66 When a detective searches for a suspect's motive, the detective is using behaviorist methods of analysis. The suspect, it is assumed, was stimulated by some arrangement of factors. Many courses in criminology are built around the fundamental premise that crimes are particular sorts of behavior and best understood as the product of operant conditioning.

6. Behavioral studies show that punishment is the least effective method of changing behavior.

A. True

B. False

7. Punishment is the most effective method for changing criminal behavior.

A. True

B. False

Behavioral studies, such as those conducted by Skinner, show that punishment is the least effective method of changing behavior. Punishing brings "a temporary suppression of the behavior," but only with constant supervision and application. In repeated experiments, Skinner found that punishment--either applying a negative stimulus, or taking away a positive one--effectively extinguished a subject's behavior, but that the behavior returned "when the punishment was discontinued and eventually all responses came out" again.

8. Behavioral studies show that ______is the least effective method of changing behavior.

A. Punishment

B. Conditioning

C. Rewards

D. Positive reinforcement

9. Altering citizens' behavior by manipulating access to valued resources or threatening to impose sanctions is known as social control.

A. True

B. False

Altering citizens' behavior by manipulating access to valued resources or threatening to impose sanctions is known as social control. Once again, the concept is that reward and punishment are what cause people to obey the law. People maximize their personal gain and comply based on deterrence.

______Sec. 1 - Criminology 2 / 66 II. Theories of Crime Causation______

10. Freud defines biological urges and wants as:

A. Id

B. Ego

C. Superego

D. None of the above

Freud identified a three-part structure to human personality: the id (the drive for food, sex, and other life-sustaining things), the superego (the conscience which develops when learned values become incorporated into a person's behavior), and the ego (the "I" or the product of the interaction between what a person wants and what his conscience will allow him to do to achieve what he wants).

11. In the United States, the best-known explanation regarding crime causation is:

A. The theory of differential association

B. The theory of operant-utilitarianism

C. The theory of differential reinforcement

D. None of the above

The theory of differential association is undoubtedly the best-known among all explanations offered in the United States to account for crime, though it too has been widely criticized on the grounds that it is just about impossible to test. The theory first appeared as a systematic formulation in 1939 in the third edition of Edwin H. Sutherland's Principles of Criminology. Later, Sutherland would make his best-known contribution to criminology by coining the phrase white-collar crime and writing a monograph on the subject.

12. Which early pioneer in criminology developed the theory of the "criminal man"?

A. Logoni

B. Beccaria

C. Bentham

D. Lombroso

The foundations of biological theory were laid by Cesare Lombroso, an Italian doctor, who insisted that there were "born" criminals, people who were atavistic, that is throwbacks to more primitive human types. Lombroso spent his career measuring the bodies of offenders and concluded that they were marked by a high degree of asymmetry, with such things as sloping foreheads and other "anomalies." Later critics would point out that Lombroso used no control group-that is he did not measure people who were not criminals, and if he had done so he would have found that they shared equally in those kinds of traits that Lombroso presumed were indicative of criminal propensities.

13. The differential reinforcement theory is a combination of the work of sociologists Edwin Sutherland and B. F. Skinner.

A. True

B. False

______Sec. 1 - Criminology 3 / 66 Differential reinforcement theory is another attempt to explain crime as a type of learned behavior. It is a revision of Sutherland's work that incorporates elements of psychological learning theory popularized by B. F. Skinner and social learning theory. The theory was summarized by Ronald Akers in his 1977 work, Deviant Behavior: A Social Learning Approach.

14. According to the social control theory, the more important that social relationships are to a person, the less likely it is that the person will commit crimes.

A. True

B. False

The social control theory suggests that persons confronted with the possibility of behaving in a law-violative manner are likely to ask of themselves: "What will my wife-or my mother and father -think if they find out?" To the extent that persons believe that other people whose opinions are important to them will be disappointed or ashamed, and to the extent that they care deeply that these persons will feel so, they will be constrained from engaging in the sanctioned behavior.

15. According to the social control theory, there is an important relationship between an individual's social class and that person's proclivity to commit a crime.

A. True

B. False

Hirschi insists that there is no important relationship between social class and delinquency and crime; thus, a person in any class-lower, middle, or upper-who defaults on liaisons with the important formative agencies in our society will be more apt to find himself or herself on a path that ends in crime.

16. Social control theory asserts that institutions of every social system press its individuals into social conformity.

A. True

B. False

17. According to the differential reinforcement theory, behavior is reinforced when positive rewards are gained or punishment is avoided.

A. True

B. False

According to the differential reinforcement theory, people learn social behavior by operant conditioning, behavior controlled by stimuli that follow the behavior. Behavior is reinforced when positive rewards are gained or punishment is avoided (negative reinforcement). It is weakened by negative stimuli (punishment) and loss of reward (negative punishment). Whether deviant or criminal behavior is begun or persists depends on the degree to which it has been rewarded or punished and the rewards or punishments attached to its alternatives. This is the theory of differential reinforcement.

18. Social control theory asserts that the farther an individual strays from the norms of a society, the more likely he or she is to commit a crime. ______Sec. 1 - Criminology 4 / 66 A. True

B. False

Essentially, control theory argues that the institutions of the social system train and press those with whom they are in contact into patterns of conformity. Schools train for adjustment in society, peers press the ethos of success and conventional behavior, and parents strive to inculcate law-abiding habits in their youngsters even, Hirschi stresses, parents who themselves play fast and loose with the rules. The theory rests on the thesis that to the extent a person fails to become attached to the variety of control agencies of the society, his or her chances of violating the law are increased. This doctrine edges very close to being self-evident in its insistence that close affiliation with law-abiding people, groups, and organizations is predictive of law-abiding behavior, but it is notably rich with subordinate statements, some of them far from obvious.

19. The theory of differential association is used frequently to explain white-collar criminality. Which of the following is NOT one of the assertions or principles of differential association?

A. Criminal behavior is learned

B. Criminal behavior is learned by a process of absorption

C. Differential association may vary in frequency

D. All of the above are principles of differential association

The theory of differential association was developed by criminologist Edwin Sutherland. It states that: (1) criminal behavior is learned; (2) it is learned from other people in a process of communication; (3) criminal behavior is acquired through participation with intimate personal groups; (4) the learning process includes the shaping of motives, drives, rationalizations and attitudes; (5) motives are learned from definitions of legal codes as being favorable or unfavorable; (6) a person becomes criminal because of an excess of definitions favorable to violation of the law over definitions unfavorable to violation of the law; (7)differential association may vary in frequency, duration, priority, and intensity; (8) learning criminal behavior involves all the mechanisms of other learning; (9) learning differs from pure imitation; and (10) while criminal behavior is an expression of general needs and values, it is not explained by these needs and values.

20. The aspects of affiliation addressed by the social control theory include:

A. Involvement

B. Attachment

C. Belief

D. All of the above

Four aspects of affiliation are addressed by the social control theory: * Attachment * Commitment * Involvement * Belief

21. ______theories hold that criminality is a function of individual socialization and the social-psychological interactions people have with the various organizations, institutions, and processes of society.

A. Social Process

B. Routine Activities

______Sec. 1 - Criminology 5 / 66 C. Social Structure

D. Biological

Social process theories hold that criminality is a function of individual socialization and the social-psychological interactions people have with the various organizations, institutions, and processes of society.

22. Essentially, control theory argues that the institutions of the social system train and press those with whom they are in contact into patterns of ______.

A. Criminality

B. Mindlessness

C. Conformity

D. Psychopathy

Essentially, control theory argues that the institutions of the social system train and press those with whom they are in contact into patterns of conformity. Schools train for adjustment in society, peers press the ethos of success and conventional behavior, and parents strive to inculcate law-abiding habits in their youngsters. The theory rests on the thesis that to the extent a person fails to become attached to the variety of control agencies of the society, his or her chances of violating the law are increased. This doctrine edges very close to being self-evident in its insistence that close affiliation with law-abiding people, groups, and organizations is predictive of law-abiding behavior, but it is notably rich with subordinate statements, some of them far from obvious.

23. According to Freud, the learned dictates of the social system are called:

A. Id

B. Superego

C. Ego

D. None of the above

24. Some criminologists think that crime rates are relatively stable; that is, the motivation to commit crime and the supply of willing offenders is fairly constant. This theory of crime is called the:

A. Stable crime theory

B. Constant supply theory

C. Deterrence theory

D. Routine activities theory

A variation of the classical theory, routine activities theory holds that both the motivation to commit crime and the supply of willing offenders is constant; there always will be a certain number of people motivated by greed, lust, and other pro-crime forces. The determining factor in predatory crimes (violent and theft-related crimes) is the activities of the potential victims. There are purportedly three variables: * Availability of suitable targets * Absence of capable guardians (such as homeowners) ______Sec. 1 - Criminology 6 / 66 * Presence of motivated offenders (such as unemployed teenagers)

25. Some criminologists hold that fraud offenders have certain psychological characteristics such as psychopathy. Who is responsible for the early development of psychoanalytical theories?

A. Dollard

B. Freud

C. Eysenck

D. Quay

Theories rooted in psychology are based on the view that criminal behavior is the product of mental processes. The psychoanalytical ideas of Sigmund Freud focus on early childhood development and on unconscious motivations, that is, motivations of which the offender himself is not aware.

26. Many critics today claim that one reason for significant white-collar crime is its "mild" punishment. Which philosophy claims that offenders will calculate potential gains and losses before they decide to disobey the law?

A. Routine activities theory

B. Conditioning theory

C. Utilitarianism

D. None of the above

Utilitarianism, first developed by English philosopher Jeremy Bentham, remains a much-favored approach to crime, with its assumption that offenders will calculate potential gains and losses before they decide to disobey the law. The U.S. Sentencing Commission proposals are based almost totally on this idea, mandating that monetary penalties be calculated at a level that will induce companies to conclude that breaking the law is not fiscally appealing.

27. According to the differential reinforcement theory, the extent that criminal behavior is perpetrated by a person depends on the degree to which that person has been either rewarded or punished for behavior.

A. True

B. False

______Sec. 1 - Criminology 7 / 66 III. White Collar Crime______

28. According to research, most embezzlers decide to commit their crimes because:

A. They are essentially dishonest

B. They have drug problems

C. They are living beyond their means

D. None of the above

Donald R. Cressey found in a 1953 study of embezzlers that most of those he examined "had lived beyond their means for some time before deciding to embezzle." Later authors have extended this statement more generally, remarking, "The most interesting fact about the white-collar offenders' aggregate financial status is not the value of their assets but the extent of their liabilities." Offenders often "have the material goods associated with successful people but may barely be holding their financial selves together." These people have assembled a structure of respectability, but it is often built on the sands of debt.

29. The typical white-collar crime offender is a white male with a moderate social status.

A. True

B. False

The wide array of crimes called "white-collar"-from antitrust and securities violations to bank embezzlement and credit fraud-makes assembling a profile of the typical offender difficult, but not impossible. Most defendants are white males, with a moderate social status. They are slightly more likely than the general population to have a high school diploma (78 percent versus 69 percent), or a college degree (24.7 percent versus 19 percent for the general public).

30. White-collar crime defendants are more likely to receive bail than "common criminals."

A. True

B. False

White-collar defendants receive bail rather easily: just one person in eight spends any time incarcerated before trial, and for the generally high-status antitrust defendants, the figure is fewer than one in 20. By comparison, in a control group of "common criminals"-i.e., people convicted of the "nonviolent economic crimes" of postal theft or postal fraud-at least 1/3 of the defendants spent time in jail before going to trial.

31. According to criminologist Herbert Edelhertz, white-collar crime offenses can be divided into how many categories?

A. Two

B. Four

C. Ten

D. Twenty

Criminologists offer an array of breakdowns of white-collar offenses, each one providing some analytical advantages, and each failing to meet the more rigorous scientific standards of precise categorization. One of the better known is that by Herbert Edelhertz, a onetime federal prosecutor. Edelhertz divides the offenses into four major types: * Ad hoc violations: committed for personal profit on an episodic basis, for example tax cheating ______Sec. 1 - Criminology 8 / 66 * Abuses of trust: committed by people in organizations against organizations, for example, embezzlement, bribery, and kickbacks * Collateral business crime: committed by organizations in furtherance of their business interests, for example, false weights and measures, antitrust violations, and environmental crimes * Confidence games: offenses committed to cheat clients, for example, fraudulent land and bogus securities sales

32. Studies indicate that white-collar offenses are seen by the public to be as serious if not more serious than traditional kinds of crime.

A. True

B. False

Studies indicate that, at least in the abstract, white-collar offenses, particularly those that inflict physical harm, are seen by the public to be as serious if not more serious than more traditional kinds of crime, those offenses that, as one early criminologist noted, carry a "brimstone smell."

33. According to the authors of "Crimes of the Middle Classes," all of the following factors have contributed to the rising problem of economic crime EXCEPT:

A. The American economy's increased reliance on credit

B. The continued pressures of an economic system that rewards affluence and success

C. The overwhelming dependence on foreign trade

D. The increased opportunity for wrongdoing as a result of advancing information technologies

The authors of "Crimes of the Middle Classes" posit several factors which have contributed to the rising problem of economic crime: * America's economy increasingly runs on credit, which often means rising personal debt. The offenders in the sample often showed serious discrepancies "between their resources and their commitments." * New information technologies mean that the opportunity for wrongdoing is growing, and many of the techniques are not widely comprehended by businesses or individuals. * Government programs distributing large amounts of money make an enticing target for defalcations. * The importance of credentials in a professionalized society may influence individuals "to inflate the credentials, or to make them up when they do not exist." This tendency involves everything from cheating on school entrance exams to falsifying credit applications. * Most broadly, the authors observe an American culture based on affluence and ever-higher levels of success. "The continued pressure of a value system that rewards economic affluence or its visible by-products has its effects on the broad middle of American society." Television, and advertising in general, promise that no one has to settle for second best, prompting those who find themselves running behind to fudge the difference, crossing ethical and sometimes legal lines.

34. According to modern criminological studies, ______is/are the determinant aspect(s) of white-collar crime.

A. Social status

B. Financial constraints

C. Organizational opportunity

D. None of the above

Of all factors, organizational opportunity remains the determinant aspect of white-collar crime. Against Sutherland's emphasis on an elite group running high-class sting operations, later studies show that organization and complexity make a larger difference than the offender's social status. ______Sec. 1 - Criminology 9 / 66 35. Donald R. Cressey's 1953 study of embezzlers discovered that most offenders appeared outwardly successful but were often mired in debt.

A. True

B. False

36. According to Reiss and Biderman, ______violations are those violations of law to which penalties are attached that involve the use of a violator's position of economic power, influence, or trust in the legitimate economic or political institutional order for the purpose of illegal gain, or to commit an illegal act for personal or organizational gain.

A. Organized crime

B. Environmental crime

C. Violent crime

D. White-collar crime

Though there is no consensus within the scholarly community, one definition today of white-collar crime is that proposed by Albert J. Reiss, Jr. and Albert Biderman: White-collar crime violations are those violations of law to which penalties are attached that involve the use of a violator's position of economic power, influence, or trust in the legitimate economic or political institutional order for the purpose of illegal gain, or to commit an illegal act for personal or organizational gain.

37. One criminologist studied embezzlers and found that many had been living beyond their means for some time before they started embezzling. This criminologist is:

A. Cressey

B. Braithwaite

C. Geis

D. None of the above

38. In white-collar crime cases, the higher an offender's status, the more likely that person is to be imprisoned.

A. True

B. False

Considering all white-collar crime offenders, the higher an individual's status, the more likely the person was to be imprisoned: All else being equal, doctors will have about a 30 percent greater likelihood of being imprisoned for a ______Sec. 1 - Criminology 10 / 66 white-collar crime than truck drivers and almost a 13 percent greater likelihood than managers. Judges seem to find persons of higher prestige more at fault, or in other words, more blameworthy, in the commission of their crimes.

39. According to the authors of "Crimes of the Middle Classes," tightening restrictions on credit cards and loans will have little effect on economic crimes.

A. True

B. False

Furthermore, like many analysts these days, the "Crimes..." team believes it is far too easy to acquire money and goods on credit. Tightening the restrictions on credit cards and loans would directly address the role that debt plays in many schemes.

40. Which of the following is considered one of the broad categories of white-collar crime?

A. Abuses of trust

B. Ad hoc violations

C. Collateral business crimes

D. All of the above are broad categories

Criminologists offer an array of breakdowns of white-collar offenses, each one providing some analytical advantages, and each failing to meet the more rigorous scientific standards of precise categorization. One of the better known models was prepared by Herbert Edelhertz, a onetime federal prosecutor. Edelhertz divides the offenses into four major types: * Ad hoc violations: committed for personal profit on an episodic basis, for example tax cheating * Abuses of trust: committed by people in organizations against organizations, for example, embezzlement, bribery, and kickbacks * Collateral business crime: committed by organizations in furtherance of their business interests, for example, false weights and measures, antitrust violations, and environmental crimes * Confidence games: offenses committed to cheat clients, for example, fraudulent land and bogus securities sales

41. White-collar criminals are more likely to be fined than to face prison terms as punishment.

A. True

B. False

More often than prison, the punishment of choice for white-collar criminals is the imposition of fines. Whereas six percent of the "common criminals" in one notable survey received fines, all of the antitrust violators did.

40. "Social status" or "class" plays no role in the commission of white-collar crime.

A. True

B. False

What is loosely called "class" or "social status" does have an effect on crimes. For example, one defendant used his position as chairman of a local bank board to set up loans for his ailing wood chip company. The loans would never have been approved without the chairman's influence, and he never reported them in his proxy statement to the bank's shareholders.

42. White-collar defendants are less likely to insist on a trial than other offenders.

A. True ______Sec. 1 - Criminology 11 / 66 B. False

White-collar defendants are more likely to insist on a trial than other offenders. In at least 90 percent of federal cases, defendants will plead guilty, avoiding the expense and effort of a trial. But, over 18 percent of defendants in one notable study (as opposed to the usual 10 percent) pled "Not Guilty." In cases like bank embezzlement, usually "simple cases with clear evidence," plea bargains are easily negotiated and "prosecutors may actively seek guilty pleas."

43. According to the authors of "Crimes of the Middle Classes," television and advertising influence economic crimes by promising that no one has to settle for second best.

A. True

B. False

The authors of "Crimes of the Middles Classes" observe an American culture based on affluence and ever-higher levels of success. "The continued pressure of a value system that rewards economic affluence or its visible by- products has its effects on the broad middle of American society." Television, and advertising in general, promise that no one has to settle for second best, prompting those who find themselves running behind to fudge the difference, crossing ethical and sometimes legal lines.

43.1. The term "white-collar crime" was first coined by ______in December 1939 during an address to the American Sociological Society.

A. Edwin H. Sutherland

B. Immanuel Kant

C. Donald R. Cressey

D. None of the above

Since the term first was used there have been constant disputes regarding what is (or should be) the definition of white-collar crime. The designation was coined by Edwin H. Sutherland in December l939 during his presidential address in Philadelphia to the American Sociological Society.

43.2 One criminologist studied embezzlers and found that many had been living beyond their means for some time before they started embezzling. This criminologist is:

A. Braithwaite

B. Cressey

C. Geis

D. None of the above

______Sec. 1 - Criminology 12 / 66 IV. Organizational Crime______

44. White-collar offenses are usually punished by:

A. Administrative and/or civil penalties

B. Civil penalties

C. Criminal penalties

D. Administrative penalties

Organizational crime occurs in the context of complex relationships. White-collar crime is distinguished from lower socio-economic crimes in terms of the structure of the violation and the fact that administrative and civil penalties are more likely to be used as punishment than are criminal penalties.

45. The existence of many specialized departments within a company generally decreases the overall risk of fraud by the organization

A. True

B. False

Specialization tends to hide illegal activities, especially where a firm's tasks are kept separate and unrelated. Employees cannot garner knowledge about all the particulars of how a firm works. This protects a company from the effects of personnel turnover and leaks of information, because no one can offer much more than a piece of the jigsaw puzzle that paints the overall company picture. The same secrecy, however, raises the chances for misconduct.

46. According to a study by Clinard and Yeager, about what percentage of Fortune 500 companies have at least one white-collar violation?

A. 30%

B. 60%

C. 10%

D. None of the above

In a comprehensive study of corporate law-breaking, Marshall Clinard (a recipient of the Association's Donald Cressey Award) and Peter Yeager found that l,553 white-collar crime cases had been filed against the 562 Fortune 500 businesses whose records they scrutinized for a two-year period. Some 60 percent of the firms had at least one case against them; for those companies the average number of violations was 4.4. The oil, pharmaceutical, and motor vehicle industries were the most likely to be charged for wrongdoing, a matter that may be a function of enforcement priorities or a true reflection of their activities.

47. Clinard and Yeager believe corporate crimes are increasingly difficult to detect because:

A. Violations are more complex

B. Accounting techniques are more sophisticated

C. Criminals are smarter

D. None of the above

______Sec. 1 - Criminology 13 / 66 Clinard and Yeager believe that corporate violations are increasingly difficult to discover, investigate, or prosecute successfully because of their growing complexity and intricacy. This is particularly true, they believe, of antitrust cases, foreign payoffs, computer fraud, and illegal political contributions.

48. According to Robert K. Merton, two key elements of cultural structure are goals and norms. When goals receive more emphasis than norms, the norms lose their power to regulate behavior. This produces a state called:

A. Validated norms

B. Cultural deviance

C. Anomie

D. None of the above

The sociologist Robert K. Merton first theorized that social structures provide motivation for misconduct. He also states that the interplay between cultural structure and social structure produces deviance. Two key elements of cultural structure are the goals deemed worthy for all members of a society, and the norms that spell out how those goals may be legitimately achieved. When goals receive more emphasis than norms, Merton states, the norms will lose their power to regulate behavior. This produces a state of "anomie," or normlessness -- an important concept in sociology that is said to lead to lawlessness.

49. In a complex organizational structure, it is less likely that misbehavior will be detected and punished than in a simple organizational structure.

A. True

B. False

Complex companies provide a structure that can foster misbehavior. They provide many settings where misconduct is possible. They isolate those settings in departments and in locations around a city, the country, or the world. The isolation, in turn, means that information about what one part of a company is doing may be unknown in another part. All this reduces the risk that misbehavior will be detected and punished. The larger a company grows, the more specialized its sub-units tend to become. An internally diversified company may have few employees who fully understand the detailed workings.

50. One sociological theory holds that the nature of transactions prevents an organization from discriminating in its decision-making. As a result, companies employ "signals" and "indexes" in making decisions. This theory is called:

A. Signal indexing

B. Market signaling

C. Index marketing

D. None of the above

Michael Spence's "market signaling" theory holds that the nature of transactions prevents an organization from discrimination in its decision-making. Companies employ signals and indexes in making decisions on transactions involving uncertainties. "Signals" are observable, alterable characteristics such as education, grades in school, or job skills. "Indexes" are observable, unalterable characteristics such as race or age. Fraud can result when signals are falsified and an organization's monitoring systems allow the falsification to pass unnoticed. The key elements are: a transaction between organizations; a decision maker and a pool of applicants; product uncertainty; and high observation costs that spur reliance on signals and indexes.

51. An important concept in sociology that is used to explain lawlessness is called "anomie." The two components of anomie are:

______Sec. 1 - Criminology 14 / 66 A. Rituals and goals

B. Goals and norms

C. Norms and rituals

D. None of the above

The sociologist Robert K. Merton first theorized that social structures provide motivation for misconduct. He also states that the interplay between cultural structure and social structure produces deviance. Two key elements of social structure are the goals deemed worthy for all members of a society, and the norms that spell out how they may be legitimately achieved. When the goals receive more emphasis than the norms, Merton states, the norms will lose their power to regulate behavior. This produces a state of "anomie," or normlessness, an important concept in sociology that is said to lead to lawlessness.

52. Two criminologists conducted a comprehensive study of Fortune 500 companies. They discovered that 60 percent of the firms had at least one white-collar crime case filed against them in the two-year period of the study. These two criminologists are:

A. Weisburd and Bode

B. Clinard and Yeager

C. Hagan and Nagel

D. Albonetti and Wheeler

53. In the area of criminological theory, ______is the theory that tries to prevent a crime before it occurs by using the threat of criminal sanctions.

A. Deterrence

B. Punishment

C. Prevention

D. None of the above

As a strategy to control crime, deterrence is designed to detect law violations, determine who is responsible, and penalize offenders in order to deter future violations. Deterrence systems try to control the immediate behavior of individuals, not the long-term behaviors targeted by compliance systems. Deterrence theory assumes that humans are rational in their behavior patterns. Humans seek profit and pleasure while they try to avoid pain. Deterrence assumes that an individual's propensity toward lawbreaking is in inverse proportion to the perceived probability of negative consequences.

54. Many sociologists think a company's size contributes to organizational crimes. One of the reasons is that the large company becomes too unwieldy for executives to manage. This concept is called:

A. Organizational distancing

B. Authority leakage

C. Departmental distancing ______Sec. 1 - Criminology 15 / 66 D. Communication degeneration

Vaughan writes that organizational growth naturally leads to a progressive loss of control over departments. Executives cannot hope to keep track of all the units of a large company, and must rely on subordinates to carry out policy. Vaughn states that when the distance between top executives and subordinate units grows to a sufficient level, "authority leakage" results. Such leakage allows subsidiaries, company researchers, accountants or other departments to engage in misconduct since there are inadequate internal controls to check the behavior.

55. In a study of corporate crime, Clinard and Yeager found small companies are more prone to commit financial violations than large ones.

A. True

B. False

In their study of corporate criminality, Clinard and Yeager found that large corporations were far more likely to commit violations than small corporations. Large corporations also bear a disproportionate share of sanctions for serious or moderate violations.

56. Complex organizational structures can lead to fraud. A ______problem can occur when the language, rules, procedures, and recording systems of two organizations diverge to the point where the differences inhibit, rather than promote, a transaction.

A. Signal index

B. System interface

C. Transactional interpretation

D. None of the above

A "system interface problem" occurs when the language, rules, procedures, and recording systems of two organizations diverge to the point where the differences inhibit, rather than promote, a transaction. If one or both organizations is unwilling or unable to resolve the problem through legitimate means, the transaction system itself may become the avenue for illegal activity. In that case, the complicated nature of the transaction encourages lawlessness, with perpetrators figuring the chances of detection are small.

57. Transactions between complex organizations sometimes can be an avenue for corporate misconduct or organizational crimes. Vaughn identified four distinguishing characteristics of transactions. Which of the following is NOT one of them?

A. Specific monitoring procedures

B. Reliance on trust

C. Formalization

D. Complex processing and recording methods

Transactions between complex organizations can add to the potential for misconduct by offering legitimate means of pursuing scarce resources unlawfully and by providing an opportunity to hide unlawful behavior. Vaughan identified four characteristics of transactions: formalization, complex processing and recording methods, reliance on trust, and general rather than specific monitoring procedures.

58. Sociologist Edward Gross has asserted that all organizations are inherently criminogenic, that is, prone to committing fraud.

______Sec. 1 - Criminology 16 / 66 A. True

B. False

Sociologist Edward Gross has asserted that all organizations are inherently criminogenic (that is, prone to committing crime), though not necessarily criminal. Gross makes this assertion because of the reliance on "the bottom line." Without necessarily meaning to, organizations can invite fraud as a means of obtaining goals. Criminologist Oliver Williamson noted that because of a department's concern with reaching its goals, managers might well tend to maximize their department's own interests to the detriment of the organization.

59. Clinard and Yeager, in their studies, found that illegal behavior by a corporation is most often suppressed by consumer pressure.

A. True

B. False

If illegal behavior resulted in decreased patronage or even consumer boycotts, consumer pressure would be an effective tool in the control of illegal corporate behavior. However, say Clinard and Yeager, it appears to not be very effective. Consumers often are unaware when a corporation's products are unsafe or when it has been violating antitrust laws or polluting the environment. Without organized behavior, a consumer's withdrawal of individual patronage generally is ineffective.

60. There are two primary strategies to control corporate criminal behavior. They are:

A. Enforcement and compliance

B. Deterrence and enforcement

C. Compliance and deterrence

D. None of the above

Enforcement strategies include two main theories: compliance and deterrence. Compliance hopes to achieve conformity to the law without having to detect, process, or penalize violators. Compliance systems provide economic incentives for voluntary compliance to the laws and use administrative efforts to control violations before they occur. As a strategy to control crime, deterrence is designed to detect law violations, determine who is responsible, and penalize offenders in order to deter future violations. Deterrence systems try to control the immediate behavior of individuals, not the long-term behaviors targeted by compliance systems.

61. Several interrelated factors can cause a corporation to engage in illegal behavior. According to McCaghy, ______is the single most compelling factor behind deviance by industry.

A. Poor communication

B. Profit pressure

C. Lack of ethics

D. None of the above

McCaghy says profit pressure is "the single most compelling factor behind deviance by industry, whether it be price fixing, the destruction of competition or the misrepresentation of a product," such as making a shoddy product that will wear out and need to be replaced. Clinard and Yeager say certain industries, such as the drug and chemical businesses, have such severe competition and strong profit drives due to demands for continual development of new products that they may feel pressured to falsify test data, market new products before their full effects are known, or engage in unethical sales techniques that can have disastrous effects on human beings and the environment.

______Sec. 1 - Criminology 17 / 66 62. Edward Gross and other criminologists have asserted that organizations are inherently:

A. Criminogenic

B. Exploitative

C. Criminal

D. None of the above

Edward Gross has asserted that all organizations are inherently "criminogenic" (prone to committing crime), but not necessarily criminal. Without necessarily meaning to, organizations can invite fraud as a means of obtaining goals. Gross makes this assertion because of the reliance on the "bottom line."

63. As a strategy to control crime, ______is designed to detect law violations, determine who is responsible, and penalize the offender to deter future violations.

A. Prevention

B. Deterrence

C. Compliance

D. None of the above

As a strategy to control crime, deterrence is designed to detect law violations, determine who is responsible, and penalize offenders in order to deter future violations. Deterrence theory assumes that people are rational in their behavior patterns. People seek profit and pleasure while they try to avoid pain. Deterrence assumes that an individual's propensity toward lawbreaking is in inverse proportion to the perceived probability of negative consequences.

64. Clinard and Yeager, in their studies, found that mass media publicity was the most feared consequence of sanctions imposed on a corporation.

A. True

B. False

Clinard and Yeager found that mass media publicity about law violations probably represents the most feared consequence of sanctions imposed on a corporation.

65. Sociologists maintain that complex organizational transactions can lead to unlawful corporate conduct. As organizations increase in complexity, the likelihood that they will engage in informal transactions generally increases.

A. True

B. False

Transactions between complex organizations can add to the potential for misconduct by offering legitimate means of unlawfully pursuing scarce resources. As organizations become more complex, the likelihood that they will engage in informal transactions diminishes. Exchanges between companies which are formal, complex and impersonal are likely themselves to be formal, complex and impersonal. This can lead to conditions ripe for misconduct.

66. Efforts to control corporate crime follow three approaches. Which of the following is/are included?

A. Voluntary changes in corporate attitudes

______Sec. 1 - Criminology 18 / 66 B. Consumer action

C. State intervention

D. All of the above are approaches

Efforts to control corporate crime follow three approaches: voluntary change in corporate attitudes and structure; strong intervention by the state to force changes in corporate structure, accompanied by legal measures to deter or punish; or consumer action. Voluntary changes would involve the development of stronger business ethics and organizational reforms. Government controls may involve federal corporate chartering, deconcentration and divestiture, larger and more effective enforcement staffs, stiffer penalties, wider use of publicity as a sanction, and possibly the nationalization of corporations. Consumer group pressures may be exerted through lobbying, selective buying, boycotts, and the establishment of large consumer cooperatives.

67. Clinard and Yeager found six main types of illegal corporate behavior. Which of the following is NOT one of the classifications they listed?

A. Compliance violations

B. Financial violations

C. Administrative violations

D. All of the above are listed

Clinard and Yeager found six types of violations common to corporations: administrative, environmental, financial, labor, manufacturing, and unfair trade practices. Certified Fraud Examiners are most familiar with financial violations.

______Sec. 1 - Criminology 19 / 66 V. Occupational Crime______

68. Unfair trade practices are one kind of white-collar offense. Which of the following is generally considered one of the classifications of unfair trade practices?

A. Vertical combinations

B. Misrepresentation

C. Monopolization

D. All of the above are unfair trade practices

Unfair trade practices involve abuses of competition. Examples include monopolization, price discrimination, credit violations, misrepresentation, vertical and horizontal combinations, price fixing, bid rigging, illegal mergers, illegal interlocking directorships, and agreements among competitors to allocate markets, jobs, customers, accounts, sales and patents.

69. The criminologist responsible for the introduction of the "Fraud Scale" model is ______.

A. Donald R. Cressey

B. Dr. Steve Albrecht

C. Edwin H. Sutherland

D. None of the above

To explain his concept, Dr. Steve Albrecht developed the "Fraud Scale," which included the components of situational pressures, perceived opportunities, and personal integrity. When situational pressures and perceived opportunities are high and personal integrity is low, occupational fraud is much more likely to occur than when the opposite is true.

70. One researcher found that embezzlers were likely to have three factors accounting for their crimes: immediate financial need, perceived opportunity, and rationalization. The person responsible for this theory of embezzlement is:

A. Edwin H. Sutherland

B. Donald R. Cressey

C. William R.R. Parnell

D. None of the above

Over the years, Cressey's hypothesis has become more well known as the "fraud triangle." One leg of the triangle represents a perceived unsharable financial need. The second leg is for perceived opportunity, and the final is for rationalization. The role of the nonsharable problem is important. Cressey said, "When the trust violators were asked to explain why they refrained from violation of other positions of trust they might have held at previous times, or why they had not violated the subject position at an earlier time, those who had an opinion expressed the equivalent of one or more of the following quotations: (a) 'There was no need for it like there was this time.' (b) 'The idea never entered my head.' (c) 'I thought it was dishonest then, but this time it did not seem dishonest at first.'"

71. According to Clinard and Yeager, such actions as commercial domestic bribery, illegal domestic political contributions, and payments to foreign officials are classified as ______violations.

A. Financial

______Sec. 1 - Criminology 20 / 66 B. Labor

C. Environmental

D. Administrative

Financial violations, according to Clinard and Yeager, involve illegal payments or failure to disclose such violations. Examples include commercial domestic bribery, illegal domestic political contributions, payments to foreign officials, the conferring of illegal gratuities, and benefits and violations of foreign currency laws. Examples of securities-related violations are false and misleading proxy materials, misuse of nonpublic material information, and the issuance of false data.

72. No model--not even Cressey's "fraud triangle"--will fit every fraudulent situation.

A. True

B. False

Cressey's classic fraud triangle helps explain the nature of many-but not all-occupational offenders. For example, although academicians have tested his model, it has still not fully found its way into practice in terms of developing fraud prevention programs. Common sense dictates that no one model--not even Cressey's--fits every situation.

73. The term "occupational crime" covers at least four types of white-collar offenses. Which of the following is one of those types?

A. Crimes by professionals

B. Crimes by individuals

C. Crimes by organizations

D. All of the above are types

Gary Green, in honing the white-collar crime concept, uses the term "occupational crime," which he defines as "any act punishable by law which is committed through opportunity created in the course of an occupation which is legal." Green further delineates occupational crime into four categories: * Crimes for the benefit of an employing organization (organizational occupational crime) * Crimes by officials through exercise of their state-based authority (state authority occupational crime) * Crimes by professionals in their capacity as professionals (professional occupational crime) * Crimes by individuals as individuals

74. According to a study conducted by Dr. Steve Albrecht, college graduates are more likely than non-college graduates to spend the proceeds of an occupational crime on luxuries, such as extravagant vacations or expensive automobiles.

A. True

B. False

According to Dr. Steve Albrecht, perpetrators who were interested primarily in "beating the system" committed larger frauds. However, perpetrators who believed their pay was not adequate committed primarily small frauds. Lack of segregation of responsibilities, placing undeserved trust in key employees, imposing unrealistic goals, and operating on a crisis basis were all pressures or weaknesses associated with large frauds. College graduates were less likely to spend the proceeds of their loot to take extravagant vacations, purchase recreational property, support extramarital relationships, and buy expensive automobiles. Finally, those with lower salaries were more likely to have a prior criminal record.

______Sec. 1 - Criminology 21 / 66 75. Criminologist Donald Cressey divided occupational crime offenders into three categories. Which of the following is one of those categories?

A. Independent businessmen

B. Long-term violators

C. Absconders

D. All of the above are categories

For further analysis, Cressey divided the subjects into three groups: independent businessmen, long-term violators, and absconders. He discovered that each group had its own types of rationalizations.

76. According to the 2006 Report to the Nation on Occupational Fraud and Abuse, frauds committed by owners and executives had a lower median loss than those committed by rank-and-file employees.

A. True

B. False

Generally speaking, the level of authority a person holds within an organization will tend to have the most significant impact on the size of the loss in a fraud scheme. The more authority an individual has, the greater that individual's access to organizational resources, and the more ability that person has to override controls in order to conceal the fraud.

Respondents were asked to classify the principal perpetrator in each scheme in one of three categories: (1) employee; (2) manager; or (3) owner/executive. Most of the perpetrators were either employees (41.2%) or managers (39.5%). Owner/executives made up less than one-fifth of the perpetrators, but they accounted for the largest losses by far. The median loss in a scheme committed by an owner or executive was $1 million. This was nearly five times more than the median loss in a scheme committed by a manager ($218,000) and almost 13 times as large as the median loss caused by employees ($78,000).

77. According to "The Fraud Scale," occupational fraud is more likely to occur when:

A. Perceived opportunities are high

B. Personal integrity is low

C. Situational pressures are high

D. All of the above

Dr. Steve Albrecht developed the "Fraud Scale," which included the components of situational pressures, perceived opportunities, and personal integrity that were introduced by Donald Cressey. The Fraud Scale shows that when situational pressures and perceived opportunities are high and personal integrity is low, occupational fraud is much more likely to occur than when the opposite is true.

78. According to criminologist Donald Cressey, which of the following is NOT essential to the commission of fraud?

A. Technical skill

B. Information about company funds

C. Absence of controls

D. All of the above are essential ______Sec. 1 - Criminology 22 / 66 In Cressey's view, there were two components of the perceived opportunity to commit a trust violation: general information and technical skill. General information is simply the knowledge of how the employee's position of trust could be violated. Technical skill refers to the ability to commit the violation.

79. According to a study conducted by Dr. Steve Albrecht, occupational crime perpetrators who were interested primarily in "beating the system" committed larger frauds.

A. True

B. False

80. According to criminologist Donald Cressey, one nonsharable problem which may lead to occupational crime is poor employer-employee relationships.

A. True

B. False

Finally, Cressey described problems resulting from employer-employee relationships. The most common, he stated, was an employed person who resents his status within the organization in which he is trusted. The resentment can come from perceived economic inequities, such as pay, or from the feeling of being overworked or underappreciated. Cressey said this problem becomes nonsharable when the individual believes that making suggestions to alleviate his perceived maltreatment will possibly threaten his status in the organization. There is also a strong motivator for the perceived employee to want to "get even" when he feels ill treated.

81. According to a study conducted by Dr. Steve Albrecht, occupational crime perpetrators who believed their pay was not adequate committed primarily large frauds.

A. True

B. False

82. In the area of sanctions, criminologists have found that condemnation of family and friends is actually more of a deterrent to crime than going to prison for most people.

A. True

B. False

Social control in the workplace, according to Hollinger and Clark, consists of both formal and informal social controls. The former control can be described as external pressures through both positive and negative sanctions; the ______Sec. 1 - Criminology 23 / 66 latter, the internalization by the employee of the group norms of the organization. These researchers, along with a host of others, have concluded that-as a general proposition-informal social controls provide the best deterrent. "These data clearly indicate that the loss of respect among one's acquaintances was the single most effective variable in predicting future deviant involvement." Furthermore, "in general, the probability of suffering informal sanction is far more important than fear of formal sanctions in deterring deviant activity."

83. According to Richard C. Hollinger and John P. Clark, employees steal primarily as a result of workplace conditions.

A. True

B. False

In 1983, Richard C. Hollinger of Purdue University and John P. Clark of the University of Minnesota published federally funded research involving surveys of nearly 10,000 American workers. Their book, "Theft by Employees," reached a different conclusion than Cressey. They concluded that employees steal primarily as a result of workplace conditions, and that the true costs of the problem are vastly understated: "In sum, when we take into consideration the incalculable social costs . . . the grand total paid for theft in the workplace is no doubt grossly underestimated by the available financial estimates."

84. Cressey found that embezzlers often experienced a sense of physical isolation.

A. True

B. False

The fourth category of nonsharable problems Cressey described is physical isolation, in which the person in financial straits is isolated from the people who can help him.

85. Donald R. Cressey developed a hypothesis that has come to be known as the "fraud triangle." One leg of the triangle represents a perceived unsharable financial need. The second leg is for perceived opportunity, and the final is for ______.

A. Immediate financial resources

B. Rationalization

C. Perceived acquiescence

D. None of the above

86. The criminologist responsible for the well-known hypothesis of the "fraud triangle" is:

A. Marshall B. Clinard

B. Donald R. Cressey

C. Immanuel Kant

D. None of the above ______Sec. 1 - Criminology 24 / 66 Over the years, Donald R. Cressey's hypothesis has become more well known as the "fraud triangle." One leg of the triangle represents a perceived unsharable financial need. The second leg is for perceived opportunity, and the final is for rationalization. The role of the nonsharable problem is important. Cressey said, "When the trust violators were asked to explain why they refrained from violation of other positions of trust they might have held at previous times, or why they had not violated the subject position at an earlier time, those who had an opinion expressed the equivalent of one or more of the following quotations: (a) 'There was no need for it like there was this time.' (b) 'The idea never entered my head.' (c) 'I thought it was dishonest then, but this time it did not seem dishonest at first.'"

87. The criminologist responsible for the well-known hypothesis of the "fraud triangle" is:

A. Marshall B. Clinard

B. Donald R. Cressey

C. Immanuel Kant

D. None of the above

Over the years, Donald R. Cressey's hypothesis has become more well known as the "fraud triangle." One leg of the triangle represents a perceived unsharable financial need. The second leg is for perceived opportunity, and the final is for rationalization. The role of the nonsharable problem is important. Cressey said, "When the trust violators were asked to explain why they refrained from violation of other positions of trust they might have held at previous times, or why they had not violated the subject position at an earlier time, those who had an opinion expressed the equivalent of one or more of the following quotations: (a) 'There was no need for it like there was this time.' (b) 'The idea never entered my head.' (c) 'I thought it was dishonest then, but this time it did not seem dishonest at first.'"

88. Hollinger and Clark found in their research on employee misconduct that property violations were two to three times more common than production deviance.

A. True

B. False

Hollinger and Clark found that production deviance was two to three times more common than property violations.

______Sec. 1 - Criminology 25 / 66 VI. Responsibility for Fraud Prevention______

89. The Treadway Commission, formed in 1987 with the purpose of defining the responsibility of the auditor in preventing and detecting fraud, made which of the following recommendations?

A. A Written Company Charter

B. Adequate Audit Resources and Authority

C. A Mandatory Independent Audit Committee

D. All of the above are Treadway recommendations

The Treadway Commission made four major recommendations that, in combination with other measures, are designed to reduce the probability of fraud in financial reports: * Mandatory Independent Audit Committee. Every board of directors should have an audit committee made up of outside directors. * Written Charter. Companies should develop a written charter which sets forth the duties and responsibilities of the audit committee. * Resources and Authority. The audit committee should have adequate resources and authority to carry out its responsibilities. * Informed, Vigilant, and Effective Audit Committees. The audit committee members must be informed, vigilant, and effective.

90. The existence of a thorough control system is essential to fraud prevention.

A. True

B. False

Fraud prevention requires a system of rules, which, in their aggregate, minimize the likelihood of fraud occurring while maximizing the possibility of detecting any fraudulent activity that may transpire. The potential of being caught most often persuades likely perpetrators not to commit the fraud. Because of this principle, the existence of a thorough control system is essential to fraud prevention.

91. COSO identified five interrelated components of internal control. The report also states that the effectiveness of internal controls can be determined from an assessment of whether these five components are in place and functioning effectively.

A. True

B. False

COSO identified five interrelated components of internal control. The effectiveness of internal controls can be determined from an assessment of whether these five components are in place and functioning effectively. The five components are control environment, risk assessment, control activities, information and communication, and monitoring.

92. According to the COSO report, there are five interrelated components of a company's internal control. Which of the following are NOT among COSO's components?

A. Executives' Authority

B. Monitoring

C. Risk Assessment

D. Control Activities ______Sec. 1 - Criminology 26 / 66 COSO identified five interrelated components of internal control. The effectiveness of internal controls can be determined from an assessment of whether these five components are in place and functioning effectively. The five components are control environment, risk assessment, control activities, information and communication, and monitoring.

93. Corporations and other organizations cannot be held liable for the criminal acts of their employees.

A. True

B. False

Corporations and other organizations can be held liable for criminal acts committed as a matter of organizational policy. Fortunately, most organizations do not expressly set out to break the law. However, corporations and other organizations may also be held liable for the criminal acts of their employees if those acts are done in the course and scope of their employment and for the ostensible purpose of benefiting the corporation.

94. A corporation cannot be held criminally liable for the actions of its employees if management had no knowledge or participation in the criminal events.

A. True

B. False

95. A company can avoid liability for the acts of its employees by claiming that it did not know what its employee was engaged in.

A. True

B. False

A company cannot seek to avoid vicarious liability for the acts of its employees by simply claiming that it did not know what was going on. Legally speaking, an organization is deemed to have knowledge of all facts known by its officers and employees. That is, if the government can prove that an officer or employee knew of conduct that raised a question as to the company's liability, and the government can show that the company willfully failed to act to correct the situation, then the company may be held liable, even if senior management had no knowledge or suspicion of the wrongdoing.

96. COSO recommends that corporations engage in background checks of managerial employees in particular.

A. True

B. False

One of the easiest ways to establish a strong moral tone for an organization is to hire morally sound employees. Too often, the hiring process is conducted in a slipshod manner. Organizations should conduct thorough background checks on all new employees, especially managers. In addition, it is important to conduct thorough interviews with applicants to ensure that they have adequate skills to perform the duties that will be required of them.

97. The commission formed in 1987 with the purpose of defining the responsibility of the auditor in preventing and detecting fraud is known as the:

A. Gephart Commission ______Sec. 1 - Criminology 27 / 66 B. Treadway Commission

C. Klaas Commission

D. None of the above

The National Commission on Fraudulent Financial Reporting (commonly known as the Treadway Commission) was established in 1987 with the purpose of defining the responsibility of the auditor in preventing and detecting fraud. The commission was formed by the major professional auditing organizations-the American Institute of CPAs, the Institute of Internal Auditors, and the National Association of Accountants.

______Sec. 1 - Criminology 28 / 66 VII. Corporate Sentencing Guidelines______

98. A fraud prevention program will generally not be effective if a company does not punish employees who violate the program.

A. True

B. False

Enforcing a compliance program means adhering to a system of disciplinary actions for rulebreakers. Employees must know that if they violate the company's compliance policy, they will be punished. The opportunity to commit fraud is psychologically more acceptable when employees believe fraud normally goes undetected and unprosecuted. New employees should be advised of the compliance program at the time of hire, and should sign an annual statement acknowledging their understanding of it. The range of possible punishments for violations of the policy should be spelled out.

99. Which of the following is a good method of discovering internal fraud?

A. Surprise audits

B. Requiring employees to take vacation time

C. Rotating employee duties

D. All of the above are methods

Proactive fraud policies are generated from the top of the operation. A proactive policy means that the organization will aggressively seek out possible fraudulent conduct, instead of waiting for instances to come to its attention. This can be accomplished by several means, including the use of analytical procedures, fraud assessment questioning, enforcement of mandatory vacations, job rotation, and surprise audits where possible.

100. Most experts agree that it is much easier to detect fraud than it is to prevent it.

A. True

B. False

Most experts agree that it is much easier to prevent than detect fraud. To prevent fraud, we should understand something about the mind of the potential perpetrator. Increasing the perception of detection might be the most effective fraud prevention method. Controls, for example, do little good in forestalling theft and fraud, if those at risk do not know of the presence of possible detection.

101. Most experts do not believe that offering rewards in exchange for information about criminal events is an effective fraud prevention technique unless the reward exceeds $5,000.

A. True

B. False

Some companies have a policy of rewarding information that leads to the recovery of merchandise, property, or money. Others offer rewards upon the criminal conviction of the person(s) involved. If a reward policy exists, strict criteria should establish reward payments, and such proposed policies should be reviewed and approved by counsel. The amount of reward paid by companies varies from fixed fees to a percentage of the recovery. Studies indicate that rewards should not exceed a few thousand dollars. Crime Stoppers recommends rewards not exceeding $1,000.

102. An excellent method for uncovering fraud within an organization is to ask the organization's employees about possible fraudulent activities.

______Sec. 1 - Criminology 29 / 66 A. True

B. False

Fraud Assessment Questioning is a nonaccusatory interview technique used as a part of a normal audit. It operates on the theory that employees' attitudes are a good indicator of potential problems, and that one of the most effective ways to deal with fraud is to ask about it.

103. Which of the following types of personnel can potentially bind a corporation through their own misconduct?

A. Low-level employees

B. Independent contractors

C. Executive officers and directors

D. All of the above

The corporate compliance policy should be communicated to everyone who can potentially bind a corporation through their own misconduct. This includes the following: * Executive officers and directors * Managers and supervisors * Low-level employees * Independent contractors

104. It is generally not a good idea to ask employees in your organization whether or not they believe fraud is occurring because it gives the impression that management is unaware of the fraud risks of the organization.

A. True

B. False

105. According to the Corporate Sentencing Guidelines, a corporate policy that mitigates the effect of an occurrence of fraud can reduce an organization's fine by as much as 95%.

A. True

B. False

Fines are based on two factors: the seriousness of the offense and the level of culpability by the organization. The seriousness of the offense determines the base fine to be imposed. This figure can be quite high. The organization's culpability is a measure of the actions taken by the organization which either mitigated or aggravated the situation. Depending on the culpability of the organization, the base fine can be increased by as much as 400% or reduced by as much as 95%.

106. The Corporate Sentencing Guidelines provide several possible punishments for an organization that is found liable for an offense. Which of the following is NOT an option?

A. Restitution

B. Prison Sentences

C. Fines

______Sec. 1 - Criminology 30 / 66 D. All of the above

If an organization is found liable for an offense, the guidelines provide for four types of remedies: fines, restitution, remedial orders, and probation. Individual perpetrators may, however, face prison sentences.

107. Under the Corporate Sentencing Guidelines, a corporation convicted of a felony is required to serve a probation between:

A. Five and ten years

B. One and five years

C. One and ten years

D. One and three years

Where the offending organization has committed a felony, probation must run for at least one year. In no case may probation run for more than five years.

108. The board of directors does not necessarily have to be knowledgeable about the implementation of an organization's compliance and ethics program if they have delegated that responsibility to a compliance officer.

A. True

B. False

The Guidelines require that the company's "governing authority" shall be knowledgeable about the content and operation of the compliance and ethics program and shall exercise reasonable oversight with respect to the implementation and effectiveness of the program. "Governing authority" is defined as the board of directors, or if the organization does not have a board of directors, the highest-level governing body of the organization. Although day-to-day operations of the program can be delegated, the duties outlined above cannot.

109. The Federal Sentencing Guidelines require an organization to consider which of the following factors when designing an effective compliance and ethics program?

A. Size of organization

B. Recurrence of similar conduct

C. Industry size and practice

D. All of the above

The Federal Sentencing Guidelines require an organization to consider the following factors when designing an effective compliance and ethics program: 1. Applicable industry size and practice - An organization's failure to incorporate and follow industry practice or the standards called for by any applicable government regulation weighs against a finding that the program is effective. 2. Size of the organization - Large organizations are expected to devote more formal operations and greater resources to meeting the requirements than are small organizations. For example, smaller organizations may use available personnel rather than employ separate staff to carry out ethics and compliance. 3. Recurrence of similar misconduct - The recurrence of a similar event creates doubt as to whether the organization took reasonable steps to meet the requirements.

110. The United States Sentencing Commission was formed to address the belief in Congress that:

A. Prisoners were being released too early

B. A great disparity existed in penalties for similar crimes ______Sec. 1 - Criminology 31 / 66 C. The Department of Justice was soft on crime

D. Fraud was rampant in American business

Congress, in the Comprehensive Crime Control Act of 1984, mandated the uniform sentencing guidelines. The act also established the United States Sentencing Commission (USSC) which began studying sentences for individuals soon after the passage of the act. It was widely held in Congress that there was a great disparity of penalties for similar crimes committed by individuals. After three years of study, the USSC announced Sentencing Guidelines for Individuals. In November of 1987, these guidelines were applied in the 94 Federal Courts of the United States.

111. In order for its compliance program to be considered effective under the Federal Sentencing Guidelines, the organization must communicate its program to all its employees. Although training regarding the program is encouraged, it is not required by the Guidelines.

A. True

B. False

Under the Sentencing Guidelines, organizations MUST conduct "effective training programs." Organizations are also required to periodically and appropriately communicate the program's compliance requirements and procedures to all employees affected by the program, including upper-level personnel. These programs should be designed to inform employees about the company's stance on corporate compliance. They should also inform employees about what kinds of acts and omissions are prohibited by the law and by the organization.

112. Under the Corporate Sentencing Guidelines, if an offending organization violates its probation, the penalties can include any of the following options EXCEPT:

A. Resentencing

B. New trial

C. The imposition of more restrictive conditions

D. None of the above

If an offending organization violates its probation, this may result in: * Resentencing * The terms of probation being extended * The imposition of more restrictive conditions

113. The Federal Sentencing Guidelines require that a compliance and ethics program be reasonably designed, implemented, and enforced so that it is generally effective in preventing and detecting criminal conduct.

A. True

B. False

The Guidelines require that a compliance and ethics program be reasonably designed, implemented, and enforced so that it is generally effective in preventing and detecting criminal conduct. However, this section further provides that the failure to prevent or detect the offense in question does not necessarily mean that the program is ineffective.

114. Under the Corporate Sentencing Guidelines, courts are required to impose probation on offending organizations under all of the following circumstances EXCEPT:

A. In the instance that the sentence did not include any fine

B. If the organization has not previously committed similar misconduct ______Sec. 1 - Criminology 32 / 66 C. To secure payment of restitution

D. All of the above are mandatory probation situations

Courts are required to impose probation on offending organizations under the following circumstances: * To secure payment of restitution, enforcement of a remedial order, or to ensure completion of community service * To safeguard the organization's ability to pay a monetary penalty that was not fully paid at the time of sentencing * When an organization with at least 50 employees did not have an effective program to detect and prevent violations of law * When the organization was adjudicated within the past five years to have committed misconduct similar to any part of the misconduct of the instant offense * When such an order is necessary to ensure changes are made to reduce the likelihood of future criminal conduct * When the sentence does not include a fine * When such an order is necessary in order to accomplish one or more purposes of sentencing set forth in 18 U.S.C., Section 3553(a)(2)

115. Under the Corporate Sentencing guidelines, an organization's base fine is the lowest of three numbers: * The monetary loss suffered by the victim, * The pecuniary gain received by the defendant, or * An amount ranging from $5,000 to $72,500,000 as set forth in the Offense Level Scale Individual Guidelines. This is a table of preset penalties based on the seriousness of possible offenses.

A. True

B. False

Under the Corporate Sentencing guidelines, an organization's base fine is the highest of three numbers: * The monetary loss suffered by the victim, * The pecuniary gain received by the defendant, or * An amount ranging from $5,000 to $72,500,000 as set forth in the Offense Level Scale Individual Guidelines. This is a table of preset penalties based on the seriousness of possible offenses.

116. According to the Corporate Sentencing Guidelines, the payment of full restitution to victims of crime is considered an adequate form of punishment.

A. True

B. False

The guidelines require that, whenever possible, the organization must pay full restitution to the victims of the crime. Restitution is not viewed as a form of punishment in the guidelines, but rather as a means of remedying the harm caused by the offense.

117. According to the Corporation Sentencing Guidelines, the presence of an effective program to prevent and detect fraud within a company can lead to more lenient sentences in the event of criminal activity.

A. True

B. False

The introductory commentary to the Guidelines clearly states that they are designed to provide incentives for organizations to maintain internal mechanisms for preventing, detecting, and reporting criminal conduct. Among other things, the Guidelines suggest a substantial reduction of fines for organizations that have effective compliance programs.

______Sec. 1 - Criminology 33 / 66 VIII. Fraud Prevention Policy______

118. A multi-million dollar fraud has occurred at the XYZ company. A mid-level manager inflated revenue figures in order to meet quarterly targets. The officers and directors of XYZ did not know the fraud was occurring; therefore, the company cannot be held criminally liable for the fraud.

A. True

B. False

The corporation can be held criminally responsible even if those in management had no knowledge or participation in the underlying criminal events and even if there were specific policies or instructions prohibiting the activity undertaken by the employees. The acts of any employee, from the lowest clerk on up to the CEO, can impute liability upon a corporation. In fact, a corporation can be criminally responsible for the collective knowledge of several of its employees even if no single employee intended to commit an offense. Thus, the combination of vicarious or imputed corporate criminal liability and the new Sentencing Guidelines for Organizations creates an extraordinary risk for corporations today.

119. As a general proposition, increasing the perception of detection is the single most effective method of fraud prevention.

A. True

B. False

Increasing the perception of detection may well be the most effective fraud prevention method. Controls, for example, do little good in forestalling internal theft and fraud if their presence is not known by those at risk. In the audit profession, this means letting employees, managers, and executives know that auditors are actively seeking out information concerning internal theft.

120. Unless specific unacceptable conduct is detailed in a fraud prevention policy, there can be legal problems in discharging a dishonest employee.

A. True

B. False

Many companies have learned that it is best to spell out specific unacceptable conduct. If the type of conduct that is considered unacceptable is not accurately detailed, there might be legal problems in discharging a dishonest employee. Check with your counsel regarding any legal considerations with respect to a fraud policy. One of the most important legal considerations is to ensure everyone and every allegation is handled in a uniform manner.

121. Which of the following affects the ethical decisions of employees?

A. Social pressures

B. Industry and organizational ethical codes

C. The law and other government regulations

D. All of the above

The collection of a person's beliefs and morals makes up a set of principles known as ethics. Ethics are the judgments about right and wrong or, more specifically, a person's moral obligations to society that determine a person's actions. Determining ethical rights and wrongs is complicated by the fact that moral standards and generally accepted social behavior change with time. In addition, different groups in the same society may have conflicting ideas of right and wrong. These values and ethics of an individual are reflected in their actions as employees. There are four factors that generally affect the ethical decisions of employees: ______Sec. 1 - Criminology 34 / 66 * The law and other government regulations * Industry and organizational ethical codes * Social pressures * Tension between personal standards and organizational needs

122. As long as a company has a detailed fraud policy in place, there is little need to communicate the policy to employees.

A. True

B. False

It obviously does little good to have a fraud or ethics policy if it is not communicated to the employees. This communication can be accomplished in several ways. The communication of the policy should be presented in a positive, nonaccusatory manner.

123. A detailed fraud prevention policy can give management legal grounds to investigate and punish violators.

A. True

B. False

An "action constituting fraud" section in a fraud prevention policy sets forth in detail what actions constitute fraudulent conduct. This is important as it gives management the legal grounds to investigate and punish violators. The actions listed can include: * Any dishonest or fraudulent act * Forgery or alteration of documents * Misapplication of funds or assets * Impropriety with respect to reporting financial transactions * Profiting on insider knowledge * Disclosing securities transactions to others * Accepting gifts from vendors * Destruction or disappearance of records or assets * Any similar or related irregularity

124. A million dollar fraud has occurred at the ABC company. Which of the following conditions could make ABC criminally responsible for the acts of its employees?

A. Management knew of the events

B. Collective knowledge of the fraud by employees

C. Management actively participated

D. Any of the above

125. Which of the following are considered fraud prevention methods?

A. Rewards

______Sec. 1 - Criminology 35 / 66 B. Reporting programs

C. Hotlines

D. All of the above are methods

Increasing the perception of detection may well be the most effective fraud prevention method. Controls, for example, do little good in forestalling theft and fraud if their presence is not known by those at risk. This means letting employees, managers, and executives know that auditors are actively seeking out information concerning internal theft. This can be accomplished in several ways, such as: employee education, reporting programs, hotlines, rewards, and proactive audit policies.

126. Which of the following should be emphasized in an employee reporting program? I. Fraud, waste, and abuse occur in only a few companies. II. The company actively encourages employees with information to come forward. III. The employee's name must be disclosed. IV. The report need not be made to one's immediate supervisor

A. II. and III.

B. I., II., III. and IV.

C. I., II., and IV.

D. II. and IV.

Each employee in the company should know where to report suspicious, unethical, or illegal behavior. A reporting program should emphasize that * Fraud, waste, and abuse occurs in nearly all companies * Such conduct costs the company jobs and profits * The company actively encourages any employee with information to be able to come forward * The employee can come forward and provide information anonymously and without fear of recrimination for good faith reporting * There is an exact method for reporting; i.e., a telephone number, name, or other information * The report need not be made to one's immediate superiors.

127. Which of the following is one of the factors that affects the ethical decisions of employees?

A. The law and other government regulations

B. Industry and organizational ethical codes

C. Tension between personal standards and organizational needs

D. All of the above are factors

The collection of a person's beliefs and morals makes up a set of principles known as ethics. Ethics are the judgments about right and wrong or, more specifically, a person's moral obligations to society that determine a person's actions. Determining ethical rights and wrongs is complicated by the fact that moral standards and generally accepted social behavior change with time. In addition, different groups in the same society may have conflicting ideas of right and wrong. These values and ethics of an individual are reflected in their actions as employees. There are four factors that generally affect the ethical decisions of employees: * The law and other government regulations * Industry and organizational ethical codes * Social pressures * Tension between personal standards and organizational needs

128. Most experts agree that it is easier to prevent frauds than to detect them.

A. True

______Sec. 1 - Criminology 36 / 66 B. False

Most experts agree that it is much easier to prevent than detect fraud. To prevent fraud, the fraud examiner should understand something about the mind of the potential perpetrator. Increasing the perception of detection might be the most effective fraud prevention method. Controls, for example, do little good in forestalling theft and fraud if those at risk do not know of the presence of possible detection.

129. Which of the following is NOT considered a part of a proactive audit policy?

A. Fraud assessment questioning

B. Decreased use of analytical review

C. Enforced mandatory vacations

D. Surprise audits

Proactive fraud policies are generated from the top of the operation. A proactive policy simply means that the companies will aggressively seek out possible fraud, instead of waiting for instances to be otherwise uncovered. This can be accomplished by several means, including: (1) increased use of analytical review, (2) fraud assessment questioning, (3) enforcement of mandatory vacations, (4) job rotation, and (5) surprise audits where feasible.

130. If an action is legal it is also ethically correct.

A. True

B. False

A common fallacy in discussions about ethics is "If it's legal, it's ethical." A common defense to charges of unethical behavior is to invoke the law. This legalistic approach to ethics mistakenly implies that actions that are not explicitly prohibited by the law are ethical. The main error in this approach is that legal standards do not establish ethical principles. Although abiding by the law is a part of ethical behavior, laws themselves do not describe how an ethical person should behave. One can be dishonest, unprincipled, untrustworthy, unfair, and uncaring without breaking the law.

131. Given all of the following fraud prevention methods within organizations, which one is probably the most effective?

A. Reducing rationalization

B. Increasing the perception of detection

C. Having an open-door policy

D. Screening employees

132. According to the Federal Sentencing Guidelines, a corporation cannot be held responsible for the criminal acts of its employees.

A. True

B. False

______Sec. 1 - Criminology 37 / 66 Corporations and other organizations can be held liable for criminal acts committed as a matter of organizational policy. Fortunately, most organizations do not expressly set out to break the law. However, corporations and other organizations may also be held liable for the criminal acts of their employees if those acts are done in the course and scope of their employment and for the ostensible purpose of benefiting the corporation. An employee's acts are considered to be in the course and scope of his employment if the employee has actual authority or apparent authority to engage in those acts.

133. Two selling points of a fraud prevention program are fraud's potentially negative impact on a company's profits and public image.

A. True

B. False

One of the best ways to sell management on fraud prevention is by showing the impact on the bottom line. Fraud impacts net sales dollar for dollar. For example, if a company nets 20 percent on sales, they must sell five items at regular prices to recover losses from the theft of one item. Fraud can be very expensive. Additionally, many corporate executives are more sensitive to adverse publicity than almost any other issue. Certainly, one way to convince management of the logic of fraud prevention is to point out that negative publicity, even in small cases, can have a devastating impact on the bottom line. This negative impact can be eliminated or reduced by a proactive fraud prevention program.

______Sec. 1 - Criminology 38 / 66 IX. Punishment______

134. When a criminal is sentenced to imprisonment, the length of the term is always left to the judge's discretion.

A. True

B. False

There are a variety of sanctions available to the judge and, when they are charged with imposing sentences, the jury as well. Among others, there is pretrial diversion, probation, and incapacitation or incarceration. If the sentence is imprisonment, it may be made under rules that dictate a determinate sentence (such as five years) or an indeterminate sentence (such as five to ten years). There are some offenses where the sentence is mandatory, dictated by a set of guidelines which typically allow for a decrease or increase of the stipulated amount of time to be served if certain other circumstances are present (for instance, whether the offender was armed).

135. In the area of criminal justice, ______specify the sentence for a criminal for a fixed number of years, usually set by the legislature, to be served upon conviction of a certain offense.

A. Determinate sentences

B. Indeterminate sentences

C. Split sentences

D. None of the above

A determinate sentence is one of a fixed number of years, usually set by the legislature, to be served upon conviction of a certain offense. In so-called "flat" determinate sentences, the offender must serve the entire time in prison, say five years for a fraud violation. More often (though decreasingly so in many jurisdictions) the flat sentence can be reduced, usually by as much as one-third, for "good behavior." This carrot is considered important by some prison administrators because it offers a reward for conforming to institutional rules beyond the avoidance of punishments meted out within the walls, such as solitary confinement.

136. The majority of prison inmates were using drugs at the time of their offense.

A. True

B. False

More than four-fifths of prison inmates have a record of prior criminal offenses. Two-thirds are incarcerated for violent behavior, and more than half were using drugs at the time of their offense, with most of the drug use being on a daily basis. African Americans account for nearly half of the inmates in prisons, while 46 percent of all inmates are between the ages of 25 and 34. Prior to incarceration, the median income of inmates was lower than $l0,000 a year. Today, the growth in prison populations has been particularly pronounced. In l985, there were 313 incarcerated persons in the U.S. per l00,000 population. That figure rose to 470 inmates per l00,000 persons in 2001. The growth largely was fueled by the imprisonment of drug offenders. At the end of June l996, there were l,630,940 people in federal and state prisons and local jails. This represents a rise of 4.4 percent over the previous year, though the rate of increase is a decline from the average 7.8 percent annual growth during the previous decade. There is something of a paradox in the rise in imprisonment since all reports indicate a falling off in the amount of crime since l992. At the end of 2001, there were 1,962,220 people in federal and state prisons and local jails. By September 2004, this number jumped 1.9 percent to 2,147,947.

137. Baker, a convicted fraud offender, was found to be a compulsive gambler. Before trial, he was put into a treatment program. If he completes the program successfully, he will not be tried for his fraud. This type of criminal justice sanction is called:

A. Optional prosecution

______Sec. 1 - Criminology 39 / 66 B. Pretrial diversion

C. Diverted sentence

D. None of the above

While not truly a sentence, since it is not the consequence of a trial or a plea, pretrial diversion is often used at the local level for offenders who seem suited to what it has to offer. Under its terms, selected individuals, after they have been arrested but before further proceedings, will be placed into some form of treatment program. If it is assumed, for instance, that their troubles with the criminal law were fundamentally related to alcoholism, they may be ordered to attend Alcoholics Anonymous meetings a certain number of times each week for a specified period. Other offenders, particularly juveniles, might be diverted to different kinds of counseling programs or placed in a remedial education group. Referrals to employment services might also be mandated.

138. Over the last twenty years, prison populations have generally declined.

A. True

B. False

The total number of people in jail and prisons in the United States has tripled over the last twenty years as politicians have pressed for tougher sentencing laws and have built more prisons to seek to assuage public fears about violent crime.

139. In the area of criminal justice, ______is the planned release and community supervision of incarcerated offenders before the actual expiration of their prison sentence.

A. Pardon

B. Probation

C. Community release

D. Parole

Parole (from the French, and meaning "word" as in "word of honor") is the planned release and community supervision of offenders before the expiration of their sentence. Under most state laws, an offender is eligible for parole after serving one-third of his sentence. Parole decisions usually are made by a board or a commission, based on its members' conclusion regarding whether the offender will remain at liberty without violating the law. There is pressure on parole board members to be notably conservative in their actions, because any repetition of an offense by someone they release, particularly if the offense is heinous, will trigger community outrage against the board. On the other hand, overcrowded prison conditions dictate early release to make room for newcomers.

140. In the criminal justice system, which of the following sanctions are available to the courts?

A. Pretrial diversion

B. Incapacitation

C. Probation

D. All of the above are options

______Sec. 1 - Criminology 40 / 66 dictated by a set of guidelines which typically allow for a decrease or increase of the stipulated amount of time to be served if certain other circumstances are present (for instance, whether the offender was armed).

141. In the area of criminal justice sanctions, probation is frequently used for first-time fraud offenders. Probation usually requires certain conditions. Which of the following is a typical condition of probation?

A. Steady employment

B. Meet family responsibilities

C. Restitution of loss

D. All of the above are typical conditions

Probation implies a contract between the offender and the criminal justice system. Most probation rules require that the offender adhere to some or all of the following conditions: * Maintain steady employment. * Make restitution to the victim for losses or damages. * Cooperate with the probation officer. This involves, among other matters, showing up for appointments, notifying the officer of change of address, intention to marry, a new job, or similar developments. * Meet family responsibilities. * Obey all laws. Many jurisdictions will incarcerate a probationer as a violator if they believe that he has committed another offense. They revoke his probation status, and thereby avoid the difficulties of a court proceeding. The probationer can fight this disposition, and request a hearing, but few are likely to do so successfully.

142. Prison populations nearly doubled between 1985 and 1996 because of a drastic increase in the crime rate.

A. True

B. False

Today, the growth in prison populations has been particularly pronounced. In l985, there were 313 incarcerated persons in the U.S. per l00,000 population. That figure rose to 470 inmates per l00,000 persons in 2001. The growth largely was fueled by the imprisonment of drug offenders. At the end of June l996, there were l,630,940 people in federal and state prisons and local jails. This represents a rise of 4.4 percent over the previous year, though the rate of increase is a decline from the average 7.8 percent annual growth during the previous decade. There is something of a paradox in the rise in imprisonment since all reports indicate a falling off in the amount of crime since l992. At the end of 2001, there were 1,962,220 people in federal and state prisons and local jails. By September 2004, this number jumped 1.9 percent to 2,147,947.

143. There are two general types of pardons. They are:

A. Political and general

B. Full and absolute, and conditional

C. General and unconditional

D. None of the above

A person may apply for a pardon that, if granted, releases that person from further punishment and restores the civil rights that are forfeited upon conviction. These rights include the right to vote, serve on a jury or hold public office. There are two types of pardons: "full and absolute" and "conditional." Full and absolute pardons are usually granted only after conviction and upon showing that the offender was, in fact, innocent. The full and absolute pardon President Nixon received from President Ford before impeachment proceedings began was a rare exception to this rule. A conditional pardon usually implies guilt and for this reason may be rejected by the beneficiary. The grant of any pardon or other clemency is usually a prerogative of the Executive Branch and may not be compelled by the petitioner. ______Sec. 1 - Criminology 41 / 66 144. Most major prosecutions for white-collar crimes are generated by ______agencies.

A. Federal

B. State

C. Local

D. None of the above

Most major prosecutions for white-collar offenses are generated by federal agencies, in part because the majority of laws which proscribe white-collar crime are federal statutes and rules of federal regulatory agencies. Also, most state and local authorities are more than willing to yield jurisdiction to police and prosecutors who have larger personnel pools that specialize in complex white-collar crime cases.

145. ______correctional programs emphasize the use of neighborhood residential centers, halfway houses, and pre-release centers.

A. Parole

B. Community-based

C. Probation

D. None of the above

To ease overcrowding, community-based correctional facilities have become commonplace. While some persons might be sentenced directly to such programs, they typically house individuals who have completed some time inside institutional walls. Community-based programs emphasize the use of neighborhood residential centers, halfway houses, pre-release centers, and furlough programs.

146. In the area of criminal justice sanctions, ______is a sentence imposed prior to (and instead of) incarceration.

A. Pretrial diversion

B. Parole

C. Probation

D. None of the above

Many laypersons confuse probation with parole. Parole refers to the status of an offender after he has been released from prison or jail and is placed under supervision in the community. Probation typically is a sentence imposed prior to (and instead of) incarceration. Some judges, however, favor what is called "shock probation." They insist that the offender serve a brief time-perhaps only a week-in a penal institution in order to get a taste of what can be in store for them if they do not adhere to the law and to the probation conditions that are imposed upon them.

______Sec. 1 - Criminology 42 / 66 X. Criminal Justice System______

147. In criminology, there is a direct correlation between age and crime. At what age do arrests for violent crime peak?

A. 21

B. 18

C. 25

D. 15

The most obvious factor that plays into the amount of crime that will be manifest is the birth rate. The number of street crimes rises when a baby boom generation reaches adolescence, and it declines when that generation "ages out" of the early crime-prone years. Peaks and valleys in the number of people in different age groups will cause corresponding changes in crime rates. As America's population ages, however, it is anticipated that there will be a rise in white-collar crime because such offenses most often are committed by older persons who have worked themselves into positions of power and responsibility. While youths from l5 to l8 make up only about 6 percent of the American population, they account for about 25 percent of all arrests for Part I offenses. The peak age for property crime is about l6 years, while for violent crime the high point is about l8 years.

148. In the area of criminal justice, a(n) ______is one in which a person is sentenced to a fixed number of years for committing a crime, such as a five year sentence.

A. Determinate sentence

B. Split sentence

C. Indeterminate sentence

D. None of the above

149. ______of the suspects arrested for violent crime are women.

A. One-tenth

B. One-fifth

C. One-half

D. None of the above

It has been said that the solution to the crime problem in the United States, indeed, throughout the world, is really quite simple: just turn males into females, or at least get men to behave as women do. Women account for only one- quarter of arrests for property crimes (and these tend to be the less serious offenses, such as shoplifting) and but one- tenth of the arrests for violent crime. It has been maintained that as the feminist movement breaches the walls of patriarchy, the female crime rate would begin to approximate that of males, but this has not happened, at least not to date. There has been, however, some increase in the number of arrests of women for fraud as greater numbers of females move into the workplace.

______Sec. 1 - Criminology 43 / 66 150. One of the biggest differences between the police function in the United States and Europe is that in the United States:

A. Police operate with local autonomy

B. Police operate on a national basis

C. Police are much less educated

D. Police are much better educated

Law enforcement in the United States differs in important regards from that in countries such as France and Great Britain. Most notably, European forces tend to be national, so that coordination amongst them is likely to be better than in America. There also is less likelihood of corruption. In Britain, for instance, officers generally are recruited from places other than where they will work, so that they will not bring to the job prior personal relationships that may hinder their effectiveness. In the United States, there has been a constant parade of corruption scandals that involve the police in the country's larger cities, often in connection with vice operations, matters such as numbers gambling, prostitution, and narcotics.

151. All information that influences a decision-maker in reaching decisions is known as:

A. Data

B. Information

C. Evidence

D. None of the above

Evidence can be defined as all the information that influences a decision-maker in reaching decisions. This evidence may take the form of a report, a set of recommendations, or similar items. Evidence may be quantitative or qualitative; it may be objective or it may have subjective qualities; it may be absolutely compelling to a decision or it may only be mildly persuasive.

152. The information contained in the Uniform Crime Reports is taken from:

A. Police departments

B. Public surveys

C. Court filings

D. All of the above

The Federal Bureau of Investigation (FBI) compiles statistics on the extent of crime in the United States in a document called the Uniform Crime Report (UCR). The report is put together on the basis of information voluntarily submitted by more than l5,000 law enforcement departments. This includes virtually every significant public policing agency in the country.

153. The Uniform Crime Reports divide crimes into Part I and Part II offenses. All of the following are Part I offenses EXCEPT:

A. Larceny

B. Aggravated assault

C. Murder

______Sec. 1 - Criminology 44 / 66 D. Forgery

The UCR divides crimes into Part I and Part II offenses. Part I offenses are murder and non-negligent manslaughter, forcible rape, robbery, aggravated assault, burglary, larceny, arson, and auto theft. While most persons would agree that these categories appear to incorporate most serious criminal behavior, the somewhat arbitrary nature of the categories should not be overlooked.

154. Among countries with heavy urbanization, advanced technological development, and a relatively high standard of living, the United States has a very low crime rate.

A. True

B. False

Two facts dominate any review of American crime statistics: * The United States demonstrates a strikingly high rate of crime compared to other countries which share most of its characteristics, that is, heavy urbanization, advanced technological development, and a relatively high standard of living. * While American crime rates remain high in terms of international comparisons, there has been a dramatic decrease in the U.S. crime rate during the past six years.

155. The Uniform Crime Reports are compiled and issued by the Federal Bureau of Investigation.

A. True

B. False

156. Baker, a CFE, was involved in the investigation of a criminal fraud case where the suspect was not permitted to plea bargain. In which state is plea bargaining not allowed?

A. Maine

B. Alaska

C. North Dakota

D. Montana

In the plea bargain process, the defendant's attorney works out a deal with the prosecutor. Generally the charge is reduced in exchange for a guilty plea. Plea bargaining is endemic in American criminal justice, although it is not allowed in Alaska, where a state-operated court system and a relatively small number of cases permit the system to function without it.

157. Since the beginning of the feminist movement, the female crime rate has begun to approximate that of males.

A. True

B. False

Women account for only one-quarter of arrests for property crimes (and these tend to be the less serious offenses, such as shoplifting) and but one-tenth of the arrests for violent crime. It has been maintained that as the feminist movement breaches the walls of patriarchy, the female crime rate would begin to approximate that of males, but this

______Sec. 1 - Criminology 45 / 66 has not happened, at least not to date. There has been, however, some increase in the number of arrests of women for fraud as greater numbers of females move into the workplace.

158. About how many law enforcement agencies exist in the United States?

A. 50,000

B. 20,000

C. 5,000

D. None of the above

There are approximately 20,000 law enforcement agencies in the United States. The majority-about 13,600-are municipal police departments. Local jurisdictions also maintain more than l,000 special police units, including park rangers, harbor police, transit police, and campus security forces. At the county level, there are some 3,000 sheriff's departments. In addition, almost every state maintains either a state police force or a highway patrol unit. Altogether, there are nearly one million persons employed in law enforcement-between 500,000 and 700,000 sworn officers or uniformed personnel and l50,000 civilian employees.

159. Which of the following surveys involve interviews of crime victims?

A. National Crime Survey

B. National Victim Survey

C. Uniform Crime Reports

D. All of the above

The National Crime Survey (NCS) is a statistical study carried out by the Bureau of the Census that annually conducts interviews with 136,000 individuals in 60,000 households about experiences of crime victimization. It shows the Uniform Crime Reports (UCR) seriously underreporting; that is, the persons interviewed report a much greater amount of crime than that which figures in the UCR.

160. Studies indicate that in as many as half of the homicides in the United States one or both parties had been using which drug right before the time of the killing?

A. Marijuana

B. Heroin

C. Alcohol

D. Cocaine

Criminals may use heroin, cocaine, marijuana, methamphetamine (speed), among other drugs, to obtain pleasure or relaxation. These drugs typically reduce inhibitions and, for those that are expensive, they create a need to obtain money for their purchase.

Alcohol, another drug, though a legal one, also is closely tied to criminal behavior, particularly crimes of violence. Studies indicate that in as many as half of the homicides in the United States one or both parties had been drinking heavily right before the time of the killing.

161. Which of the following is NOT classified by the Uniform Crime Reports as a Part I offense (major crime)?

A. Fraud

______Sec. 1 - Criminology 46 / 66 B. Robbery

C. Burglary

D. Arson

The UCR focuses on eight offenses (Part I), which it defines as major crimes, and uses them to calculate "index rates" of serious lawbreaking. The eight index crimes are: murder, robbery, rape, aggravated assault, burglary, larceny, automobile theft, and arson. Fraud is not indexed by itself, although it is commonly included in larceny prosecutions.

162. Which of the following does NOT appear on the Uniform Crime Reports Part I index of serious crimes?

A. Kidnapping

B. Aggravated assault

C. Arson

D. Robbery

163. Which of the following is a Part I index crime?

A. Burglary

B. Robbery

C. Automobile theft

D. All of the above are index crimes

164. In crime trends in the United States, one factor is considered by most criminologists to be the most significant. It is:

A. Economics

B. Birth rate

C. Sex

D. Race

______Sec. 1 - Criminology 47 / 66 165. In the area of street crime, a great deal of the offenses are committed by a small core of career criminals. Which of the following is NOT one of the generally recognized traits of career criminals?

A. Unemployment

B. Prior incarcerations

C. Cocaine use

D. All of the above are recognized traits

Researchers have found that offenders can roughly be divided into two major groups: those who occasionally commit crimes and a much smaller group made up of chronic offenders. A Philadelphia study determined that 52 percent of all street crimes were committed by 6 percent of the offenders. This group accounted for between 70 and 80 percent of all offenses in the area. Career criminals, the research suggests, have the following characteristics: * They have been incarcerated for more than half of the two-year period preceding their most recent arrest * They had a juvenile conviction prior to the age of l6 * They abused heroin or barbiturates during the two-year period prior to their current arrest, or had a pattern of such use as juveniles * They had held a job for less than half of the two-year period preceding their arrest

166. There is no correlation between street crime and the criminal's socioeconomic condition.

A. True

B. False

The greatest amount of street crime is committed by persons in the lower socioeconomic strata in society. In two studies-one of active burglars and the second of robbers-Richard Wright and Scott Decker determined that offenders typically commit their crimes when they see themselves in immediate need of money, often for drugs and partying, sometimes for rent and food. To take a job offers no particular hope of resolving what for them has been allowed to become a pressing problem. Most of the offenders understand that they are likely to get caught sooner or later, but they regard that prospect resignedly as part of the price they must pay to get those things that are of immense importance to them at the time they want them.

167. Haghighi and Sornesen cite numerous studies showing that: (1) people with low incomes, and (2) ______view police departments negatively.

A. Whites with advanced schooling

B. Far-right conservatives

C. People from southern states

D. None of the above

Bahram Haghighi and Jon Sorensen cite numerous studies showing that: (1) people with low incomes, and (2) whites with advanced schooling view police departments negatively. These two types of people go against the general grain in their disapproval of police. It's intriguing, then, to note that the people most likely to commit fraud in the workplace are white men with executive status and advanced college degrees. This suggests that the willingness to commit fraud-like the willingness to hold up a Quicky Picky-has a great deal to do with the perpetrator's attitude toward the law. Simply put, those with the most negative attitudes about law enforcement are more likely to commit crimes. (This may seem axiomatic, but consider how useful this knowledge could be in evaluating and distinguishing among several suspects.)

168. In the United States, people charged with a crime can make bail under certain conditions. About what percentage of criminal defendants jump bail?

______Sec. 1 - Criminology 48 / 66 A. 60%-70%

B. 10%-20%

C. 40%-50%

D. None of the above

A large majority of defendants released on bail return for trial. A study of eight state jurisdictions found that l5% jumped bail; in a federal study, this figure dropped to l0%. Those who jumped bail tended to: * Be on bail for a longer period of time * Have a serious prior record * Be a drug user * Have a poor work record * Be disproportionately young, male, and nonwhite

______Sec. 1 - Criminology 49 / 66 XI. Ethics for Fraud Examiners______

169. Wheelwright (1959) defined three key elements of ethics. Which of the following is NOT one of them?

A. Legislative background

B. Values

C. Decision problems

D. All of the above are elements

Wheelwright defined ethics as: "that branch of philosophy which is the systematic study of reflective choice, of the standards of right and wrong by which it is to be guided, and of the goods toward which it may ultimately be directed."

This definition contains three key elements: 1) Ethics involves questions requiring reflective choice (decision problems) 2) Ethics involves guides of right and wrong (moral principles) 3) Ethics is concerned with values (goods) inherent in ethical decisions

170. Ethical behavior has been described as behavior which produces the greatest ______.

A. Adherence

B. Personal happiness

C. Moral impact

D. None of the above

There are two standard answers to what constitutes ethical behavior: (1) ethical behavior is that which produces the greatest good; and (2) ethical behavior is that which conforms to moral rules and moral principles. The most difficult problem situations arise when two or more rules conflict or when a rule and the criterion of the "greatest good" conflict.

171. One of the key elements of ethics is a concept called reflective choice.

A. True

B. False

One of the key elements in ethics is reflective choice. Ethical problems almost always involve projecting yourself into a future in which you have to live with your decisions. Professional ethics decisions usually turn on these questions: "What written and unwritten rules govern my behavior?" and "What are the possible consequences of my choices?"

172. Blue, a Certified Fraud Examiner, had a moral dilemma. The lowest level of reference for moral decisions is:

A. Philosophical principles

B. Individual standards

C. The law

D. None of the above

______Sec. 1 - Criminology 50 / 66 When faced with an ethics-related problem, it is tempting and appropriate to begin the analysis of a possible action by asking: "Is it legal?" The law deals with actions that are permitted and prohibited. With all due respect to the law, it is nevertheless the lowest level of reference for moral decisions. It happens, for example (though not frequently) that a law may permit an action that is prohibited by a profession's code of ethics.

173. In the realm of ethics, values are the means of analysis and principles are the criteria for good and evil.

A. True

B. False

There is a great difference between values and principles in moral thinking. Principles are the means of analysis -- the ways of thinking about moral problems. In this regard a theory (principle) in ethics is a theory about the nature and basis of morality and the standards for moral judgment, which arises out of the moral perplexities of everyday life. Values, on the other hand, are the criteria for good and evil. To a certain extent, people can exercise moral thinking using a principled approach. In the end, however, values necessarily enter into the process.

174. One philosophical principle of ethics maintains that a decision should be made without trying to predict whether an action will probably cause the greatest balance of good over evil. This school of thought is called the:

A. Utilitarian principle

B. Generalization principle

C. Imperative principle

D. None of the above

The imperative principle directs a decision-maker to act according to the requirements of an ethical rule. Strict versions of imperative ethics maintain that a decision should be made without trying to predict whether an action will probably create the greatest balance of good over evil. Ethics in the imperative sense is a function of moral rules and principles and does not involve any calculation of the consequences. Example: "Lying is wrong."

175. Under the imperative principle of ethics, lying cannot be justified.

A. True

B. False

Under the imperative principle of ethical philosophy, the rules of conduct are fairly absolute. There are, however, certain exceptions. For example, it is moral to lie in situations involving self-defense. To Kant, the reasons to break his strict moral code include self-defense, extortion, or malicious misuse.

176. Ethical issues are common for fraud examiners. Two aspects of ethics operate in the professional environment. These two aspects are:

A. General ethics and professional ethics

B. Specific ethics and general ethics

C. Professional ethics and specific ethics

D. None of the above

Two aspects of ethics operate in the professional environment -- general ethics (the spirit) and professional ethics (the rules). Mautz and Sharaf (1961) have contributed the following thoughts to the association of general ethics and professional ethics: "The theory of ethics has been a subject of interest to philosophers since the beginnings of recorded thought. Because philosophers are concerned with the good of all mankind, their discussions have been ______Sec. 1 - Criminology 51 / 66 concerned with what we may call general ethics rather than the ethics of small groups such as the members of a given profession. We cannot look, therefore, to their philosophical theories for direct solutions to our special problems. Nevertheless, their work with general ethics is of primary importance to the development of an appropriate concept in any special field. Ethical behavior in auditing or in any other activity is no more than a special application of the general notion of ethical conduct devised by philosophers for men generally."

177. Under the imperative principle of ethics, it is morally acceptable to lie in certain circumstances.

A. True

B. False

178. This principle maintains that the ultimate criterion of an ethical decision is the balance of good consequences (pleasure and avoidance of pain) over evil consequences (displeasure and pain) produced by an action:

A. The Generalization Principle

B. The Utilitarian Principle

C. The Imperative Principle

D. None of the above

The Utilitarian Principle maintains that the ultimate criterion of an ethical decision is the balance of good consequences (pleasure and avoidance of pain) over evil consequences (displeasure and pain) produced by an action. The Imperative Principle directs a decision maker to act according to the requirements of an ethical rule. The Generalization Principle states that "if all relevantly similar persons acting under relevantly similar circumstances were to act in a certain way and the consequences would be undesirable, then no one ought to act in that way without reason."

179. Most codes of professional ethics for organizations (including the Code of Professional Ethics for the Association of Certified Fraud Examiners) have characteristics of the imperative theory.

A. True

B. False

Most professional codes of ethics have characteristics of the imperative theory. As a general matter, professionals are expected to act in a manner consistent with their self-imposed rules. However, public critics frequently question not only conduct itself but the rules upon which it is based. Some critics, for example, argue that many of the ethical rules by professionals are designed to be self-serving

180. The foremost advocate of the imperative school of ethics was:

A. William R.R. Parnell

B. Marcus Singer

C. John Stuart Mill

D. Immanuel Kant

______Sec. 1 - Criminology 52 / 66 The philosopher Immanuel Kant (1724-1804) was perhaps the foremost advocate of the imperative school. Kant was unwilling to rely solely upon decision-makers' inclinations and values for decisions in various circumstances. He strongly preferred rules without exceptions.

181. The generalization principle asks which of the following questions?

A. "What is the best outcome from this situation?"

B. "What would happen if everyone acted in a certain way?"

C. "How can my personal needs best be served?"

D. "What would Jesus do?"

The generalization principle, developed by modern-day philosopher Marcus G. Singer, argues that: "If all relevantly similar persons acting under relevantly similar circumstances were to act a certain way and the consequences would be undesirable, then no one ought to act in that way without a reason." Stated succinctly, "What would happen if everyone acted in that certain way?"

182. Who is generally credited with developing the utilitarian principle of ethics?

A. Marcus G. Singer

B. Immanuel Kant

C. Donald Cressey

D. John Stuart Mill

John Stuart Mill (1806-1873) is known as the apostle of the principle of utilitarianism, originated earlier by Jeremy Bentham. This principle maintains that the ultimate criterion for an ethical decision is the balance of good consequences (pleasure and avoidance of pain) over evil consequences (displeasure and pain) produced by an action.

183. The two forms of utilitarian principles of ethics are:

A. Use-utilitarianism and act-utilitarianism

B. Act-utilitarianism and rule-utilitarianism

C. Rule-utilitarianism and use-utilitarianism

D. None of the above

Utilitarian philosophy generally advocates balancing the consequences of good over evil. In act-utilitarianism, the center of attention is the individual act as it is affected by the specific circumstances of a situation. The ethical question is: "What effect will my doing this act in this situation have on the general balance of good over evil?" Rule-utilitarianism, on the other hand, emphasizes the centrality of rules for ethical behavior, while still maintaining the criteria of the greatest universal good. The question is not which action has the greatest utility, but which rule. In other words, "what effect will everyone's doing this kind of act in this kind of situation have on the general balance of good over evil?"

184. ______are the personal and social criteria that are learned and internalized through a wide variety of influences-family, social status, peer groups, national origin, and the like.

A. Principles

B. Values

______Sec. 1 - Criminology 53 / 66 C. Ethics

D. Morals

Values are the personal and social criteria that are learned and internalized through a wide variety of influences- family, social status, peer groups, national origin, and the like.

185. John lost his job and his unemployment benefits were exhausted. He asked his friend Judy, a Certified Fraud Examiner and former co-worker, to look the other way while he stole food from the plant's commissary. Judy knew the act would be illegal, but she was looking for moral justification to help. The ethical principle that would most likely be used to justify this act would be the:

A. Generalization principle

B. Utilitarian principle

C. Imperative principle

D. None could be used to justify the act

The utilitarian principle states that the ultimate criterion for an act is the balance of good consequences over evil ones. The imperative principle would not allow Judy to assist, since it believes a decision must be made within the requirements of a strict ethical rule -- certainly helping someone steal, no matter how honorable the purpose -- would violate those rules. Under the generalization principle, "if all relevantly similar persons acting under relevantly similar circumstances would act in a certain way and the consequences would be undesirable, then no one ought to act in that way without a reason." Regardless of Judy's good motives, her conduct would violate the Certified Fraud Examiner's Code of Professional Ethics.

186. Which of the following is a key element of ethics? I. Ethics involves questions requiring reflective choice (decision problems) II. Ethics involves guides of right and wrong (moral principles) III. Ethics is concerned with values (goods) inherent in ethical decisions

A. II. and III. Only

B. I. and III. Only

C. I. and II. Only

D. I., II., and III.

This definition contains three key elements: I. Ethics involves questions requiring reflective choice (decision problems) II. Ethics involves guides of right and wrong (moral principles) III. Ethics is concerned with values (goods) inherent in ethical decisions

187. In ethics, the saying "When in Rome, do as the Romans do" is an example of the concept of:

A. Social valuism

B. Moral relativism

C. Ethical realism

______Sec. 1 - Criminology 54 / 66 D. None of the above

Discussions about values often leads to "moral relativism," commonly translated: "When in Rome, do as the Romans do." Moral relativism denies the existence of absolute values that have not changed over time and among cultures.

188. Which philosophy(ies) of ethics could be summarized as "the end justifies the means?"

A. Both the utilitarian and generalization principles

B. The utilitarian principle

C. The generalization principle

D. The imperative principle

The utilitarian principle maintains that the ultimate criterion of an ethical decision is the balance of good consequences over evil consequences produced by an action. The emphasis of one form of utilitarianism, known as act-utilitarianism, is on the consequences of an action rather than the logical consistency of following a rule. In other words, the end justifies the means.

189. The ______principle asks, "What would happen if everyone acted in that certain way?"

A. Imperative

B. Generalization

C. Utilitarian

D. None of the above

190. Under the generalization theory of ethics, if arbitrary times, places, or measures can be inserted into the decision-making process in such a way as to make the decision nonsense, this is called:

A. Invertibility

B. Reiterability

C. Veribility

D. None of the above

The generalization argument is reiterable when arbitrary times, places, or measures can be inserted into the ethical decision in such a way as to make a decision to be nonsense. Marcus Singer, who developed the generalization theory, illustrated reiterability with this example: "If everyone ate at six o'clock there would be no one to perform certain essential functions ... with the net result that no one would be able to eat at six o'clock or any other time, and with various other undesirable consequences."

191. When confronted with undeniable evidence of his fraud, Bob says, "My son was sick and I took the money to pay for his medical care. I did what I had to do, and I would do it again if I needed to." Bob's attitude toward his wrongdoing is an example of which of the following?

A. The imperative principle ______Sec. 1 - Criminology 55 / 66 B. Both the utilitarian and generalization principles

C. The utilitarian principle

D. The generalization principle

192. When the choice of alternative actions affects the well-being of others, either individually or collectively, and the right choice is not absolutely clear, this is called a(n):

A. Moral dilemma

B. Ethical problem situation

C. Problem situation

D. None of the above

A problem situation exists when you must make a choice among alternative actions and the right choice is not absolutely clear. An ethical problem situation is a problem situation in which the choice of alternative actions affects the well-being of other people, whether individually or collectively.

193. The generalization principle of ethics was developed by:

A. Marcus G. Singer

B. William R.R. Parnell

C. John Stuart Mill

D. Immanuel Kant

Marcus G. Singer is a modern philosopher. His "Generalization in Ethics" dealt with the basic problems of moral philosophy. Two main components of his argument are: (1) if all relevantly similar individuals acting under relevantly similar circumstances were to act in a certain way and the consequences would be undesirable, then no one ought to act that way without a reason, and (2) what is right for one person must be right for any relevantly similar person in the relevantly same or similar circumstances. These features are thought to provide the needed flexibility to consider the many variations that arise from real problem situations. It is criticized, not surprisingly, for being too vague and hard to interpret.

194. Most codes of professional ethics for organizations (including the Code of Professional Ethics for the Association of Certified Fraud Examiners) have characteristics of the ______theory.

A. Utilitarian

B. Imperative

C. Generalization

D. None of the above

Most professional codes of ethics have characteristics of the imperative theory. As a general matter, professionals are expected to act in a manner consistent with their self-imposed rules. However, public critics frequently question not ______Sec. 1 - Criminology 56 / 66 only conduct itself but the rules upon which it is based. Some critics, for example, argue that many of the ethical rules by professionals are designed to be self-serving.

195. The three main explanations for moral principles have withstood time, scrutiny, criticism, and scholarly commentary. Which of the following is NOT one of the three main explanations for moral principles?

A. The imperative principle

B. The categorical principle

C. The utilitarian principle

D. The generalization principle

The three principle views of moral philosophy which have withstood time, scrutiny, criticism, and scholarly commentary include the imperative principle (Immanuel Kant), the utilitarian principle (John Stuart Mill), and the generalization principle (Marcus G. Singer).

196. The generalization argument is ______when (a) both doing something and not doing something would be undesirable, and (b) when both everyone and not everyone doing something would be undesirable.

A. Reiterable

B. Invertible

C. Conflictable

D. None of the above

Under the generalization principle, it asks the question, "What would happen if everyone acted in that certain way?" The generalization argument is invertible when: (a) both doing something and not doing something would be undesirable, and (b) when both everyone and not everyone doing something would be undesirable. For example, if everyone in the world were to become a fraud examiner, it would be undesirable: There would be no food. If no one became a fraud examiner, that would be undesirable too, since there would be no one to help control fraud. This dichotomy creates the principle of invertibility.

197. Professional organizations including the Association of Certified Fraud Examiners, have codes of ethics because:

A. They assist in enforcing standards of conduct

B. They assist in disciplining members

C. Direct solutions to professional ethical dilemmas may not exist under general ethical principles

D. All of the above

Why does an individual or a group need a code of ethical conduct? While it has been said that a person should be upright and not be kept upright, a code serves a useful purpose as a reference and a benchmark. A code makes explicit some of the criteria for conduct peculiar of a profession, and in this way codes of professional ethics are able to provide some direct solutions that might not be available from general ethics theories. Furthermore, an individual is better able to know what the profession expects. From the viewpoint of an organized profession, a code is a public declaration of principled conduct, and it is a means of facilitating enforcement of standards of conduct. Practical enforcement and profession-wide internal discipline would be much more difficult if members were not first put on notice of the standards.

______Sec. 1 - Criminology 57 / 66 XII. ACFE Code of Ethics______

198. Materiality in a CFE's report is determined by the perceptions and conclusions of the report's user.

A. True

B. False

Evidence and conclusions are material if knowledge of them would affect a client's decisions based on a CFE's report. Materiality is a user-oriented concept. If matters omitted from the report were known to the users, and their own perceptions and conclusions would be different in light of this knowledge, the omitted information is material. CFEs are placed in the difficult position of determining not what they consider important and material, but what they think the users will consider important and material.

199. During the course of a fraud examination, White, an employee of the ABC Corp., approaches Blue, a Certified Fraud Examiner, and tells Blue that he wishes to furnish information in confidence. Blue also is employed by the ABC Corp. The Certified Fraud Examiner should:

A. Not agree to the request for confidentiality

B. Agree to the request for confidentiality

C. Tell White that the information will be held in confidence, even though White knows it will not be

D. None of the above

Fraud examiners must remember that the confidentiality relationship runs first to the client or employer, and the promise of confidentiality is understood to exist without being spoken. In the case of the employee/informant, the Certified Fraud Examiner does not have an understood or unspoken promise of confidentiality. The Certified Fraud Examiner should tell White that he will try to keep the information as confidential as possible, but it would be unethical for Blue to promise confidentiality to the employee; his first obligation is to the employer.

200. A CFE generally would not be able to accept an assignment to uncover fraud in a company in which he or she has a major interest.

A. True

B. False

A Certified Fraud Examiner does not have the same responsibilities as a Certified Public Accountant. A CPA generally would not be able to express an audit opinion on a company in which he or she held a major financial interest. In the case of this Certified Fraud Examiner, he would be able to accept such an assignment under most conditions, since the goal of the Certified Fraud Examiner is to gather facts regarding a potential fraud, not express an opinion. The examiner should, however, make appropriate disclosures regarding his ownership. Article II of the Certified Fraud Examiner Code of Professional Ethics states: "A CFE shall not engage in any illegal or unethical conduct, or any activity which would constitute a conflict of interest."

201. A Certified Fraud Examiner accepts an assignment to conduct a fraud examination of the cash function of a business. Because the Certified Fraud Examiner was in a hurry to complete the job, she overlooked key items of evidence and failed to uncover a major fraud. This examiner may have violated the Certified Fraud Examiner Code of Ethics.

A. True

B. False

______Sec. 1 - Criminology 58 / 66 This action would be in violation of Article I of the Certified Fraud Examiner Code of Professional Ethics. This article states that: "A CFE shall at all times demonstrate a commitment to professionalism and diligence in the performance of his or her duties."

202. The Certified Fraud Examiner Code of Professional Ethics does not presume a privileged status for information provided by a client.

A. True

B. False

"Privileged information" is information that cannot be demanded, even by a court. Common-law privileges exist for husband-wife and attorney-client relationships, and physician-patient and priest-penitent relationships have obtained the privilege through state statutes. In all the recognized privileged relationships, the professional person is obligated to observe the privilege, which can be waived only by the client, patient, or penitent. Likewise, the Certified Fraud Examiner's client or employer is the holder of the confidence. Certified Fraud Examiners, like CPAs and similar professionals, do not have protected privileges in common-law or statute.

203. Jones, a Certified Fraud Examiner, obtained a confession from Smith, who committed internal fraud. Jones is permitted to express an oral but not written opinion on the guilt of Smith.

A. True

B. False

The Certified Fraud Examiner Code of Professional Ethics does not distinguish between written or oral opinions. Certified Fraud Examiners are absolutely prohibited from expressing opinions regarding guilt or innocence. Article V of the Certified Fraud Examiner Code of Professional Ethics states: "A CFE in conducting examinations, will obtain evidence or other documentation to establish a reasonable basis for any opinion rendered. No opinion shall be expressed regarding the guilt or innocence of any person or party."

204. Blake, a Certified Fraud Examiner, accepted a complicated assignment which he felt was beyond the scope of his professional expertise. The assignment turned out badly, and the client complained to the Board of Regents of the Association of Certified Fraud Examiners who referred the matter to their Board of Review. Blake probably violated the Certified Fraud Examiner Code of Professional Ethics.

A. True

B. False

Blake might have violated Article III of the Certified Fraud Examiner Code of Professional Ethics. This article states: "A CFE shall, at all time, exhibit the highest level of integrity in the performance of all professional assignments, and will accept only assignments for which there is a reasonable expectation that the assignment will be completed with professional competence."

205. There are five principal characteristics which distinguish professional fields from other vocations. Which of the following is NOT one of them?

A. A specialized body of knowledge

B. Standards of conduct governing professional relationship

C. All members must have earned advanced degrees

D. Recognition and acceptance by society

The five principal characteristics that differentiate professional fields of endeavor from other vocations are: (1) a body of specialized knowledge acquired through formal education; (2) admission to the profession governed by ______Sec. 1 - Criminology 59 / 66 standards of professional qualifications; (3) a concomitant pair: recognition and acceptance by society of professional status, and concurrent recognition and acceptance of social responsibility by the professional; (4) standards of conduct governing relationships of the professional with clients, colleagues, and the public; and (5) a national organization devoted to the advancement of the social obligations of the professional group.

206. A profession such as fraud examination must have a body of knowledge unique to itself.

A. True

B. False

A fraud examiner's work involves specialized knowledge derived from several other fields -- accounting, auditing, criminology, investigation, and law -- to name a few. A profession may not have a body of knowledge truly unique unto itself, but it should have one that requires study, comprehension, and practice over and above the everyday abilities every other person may possess.

207. Sue, a Certified Fraud Examiner, is hired by a client to conduct a fraud examination. She found nothing amiss. A year later, she was subpoenaed by the local district attorney's office to provide the client's file. Under the Certified Fraud Examiner Code of Professional Ethics, she will not be able to respond to the subpoena.

A. True

B. False

Two articles cover the action by Sue. Article IV of the Certified Fraud Examiner Code of Professional Ethics states: "A CFE will comply with lawful orders of the courts, and will testify to matters truthfully and without bias or prejudice." Article VI says: "A CFE shall not reveal any confidential information obtained during an engagement without proper authorization." In this particular situation, the Certified Fraud Examiner must comply under Article IV, even though Article VI seems to be at odds. The latter states "... without proper authorization." It does not state that the authorization has to come from the client. A subpoena is proper authorization under the Code of Professional Ethics.

208. Black, a Certified Fraud Examiner, was hired to conduct a fraud examination. He did not find fraud, but in Black's opinion, the controls he examined were deficient. Under the Certified Fraud Examiner Code of Professional Ethics, Black is not permitted to express his opinion on the deficient controls.

A. True

B. False

Article V of the Certified Fraud Examiner Code of Professional Ethics states: "A CFE, in conducting examinations, will obtain evidence or other documentation to establish a reasonable basis for any opinion rendered. No opinion shall be expressed regarding the guilt or innocence of any person or party." Opinions, under Article V, may be given if there is a reasonable basis for it. The only opinions strictly not allowed are those regarding the guilt or innocence of any person or party.

209. Lane, a Certified Fraud Examiner, conducted an examination of the Blue Corp. Betty was a prime suspect in the disappearance of money, but Lane could not prove it. Later, he discovered Betty had been recently hired by the Red Corp., another client of his. Under the Certified Fraud Examiner Code of Professional Ethics, Lane must:

A. Inform the Red Corp.

B. Not inform the Red Corp.

C. Inform the Red Corp. if the evidence is clear and convincing

D. None of the above

______Sec. 1 - Criminology 60 / 66 Article VI says that: "A CFE shall not reveal any confidential information obtained during a professional engagement without proper authorization." Under this scenario, the Certified Fraud Examiner may not disclose the fact of Betty's employment at the Blue Corp., or that she was a suspect in the disappearance of money without the authorization of the Blue Corp. However, even if that authorization was received, the Certified Fraud Examiner is limited as to what can be disclosed. Betty was a suspect; she did not confess nor was she convicted of a crime. If the Certified Fraud Examiner does disclose this information, he or she could run the risk of serious legal problems.

210. Professional competence demands attention to three forces which may damage independence and the quality of work. Which of the following is NOT one of these forces?

A. Predication

B. Programming

C. Reporting

D. Investigation

Professional competence demands attention to three forces that can damage the independence and quality of the work. The three forces are: programming, investigation, and reporting. Fraud examiners must remain free from interference by managers who try to restrict, specify, or modify the procedures they need to perform (programming). Certified Fraud Examiners must have the cooperation of managers and others without any attempt to control access to books, records, correspondence, and other evidence (investigation). Client or employer managers should not be allowed to overrule the Certified Fraud Examiner's judgment on the appropriateness of the content of a report (reporting).

211. If a Certified Fraud Examiner engaged in an illegal activity not knowing at the time that the activity was illegal, Article II of the Certified Fraud Examiner Code of Professional Ethics will protect the examiner, as it states that "A CFE may not knowingly engage in illegal or unethical conduct."

A. True

B. False

Some rules for other professions insert the word "knowingly" in relation to illegal activities, saying "One should not knowingly be a party to an illegal activity." The Certified Fraud Examiner Code of Professional Ethics does not include this way out. The article states: "A CFE shall not engage in any illegal or unethical conduct ...." Certified Fraud Examiners generally are not entitled to claim ignorance of the law. They are expected to know a considerable amount about the law in connection with investigations, and they are expected to know when to consult a lawyer.

212. A Certified Fraud Examiner conducted a fraud examination that resulted in the dismissal of Warren, Chief Financial Officer. Numerous internal control deficiencies permitted Warren to commit the fraud. But since the examiner was not hired to evaluate controls, he did not mention the internal control deficiencies in his report to management. According to the Certified Fraud Examiner Code of Professional Ethics, the CFE knows he can only discuss information he was hired to investigate.

A. True

B. False

Article VII of the Certified Fraud Examiner Code of Professional Ethics states: "A CFE shall reveal all matters discovered during the course of an examination, which, if omitted, could cause a distortion of the facts." Although the examiner was not hired to evaluate controls, his or her professional responsibilities would require the disclosure of any information which could cause a distortion of the facts.

213. Article V of the Certified Fraud Examiner Code of Professional Ethics prohibits Certified Fraud Examiners from expressing opinions on the guilt or innocence of any person or party. The reason for this Article, in part, is to protect the examiner from: ______Sec. 1 - Criminology 61 / 66 A. Defamation

B. Libel

C. Slander

D. All of the above

Defamation is composed of the torts of libel and slander. The former are written statements, while the latter is spoken statements. In order to be defamatory, a statement must: (1) injure the person's reputation, (2) be communicated orally or in writing to others, (3) cause damages, and (4) be untrue. Expressing opinions regarding the guilt or innocence of any person or party runs the risk of defamation if the person is subsequently not found guilty of the offense.

214. A report by a Certified Fraud Examiner is privileged from discovery by anyone other than the client.

A. True

B. False

215. A Certified Fraud Examiner was hired to investigate a company. After he carefully examined the company, he issued a report that stated, in part, "... in my opinion, this operation is free of material fraud." Such an opinion is permitted under the Certified Fraud Examiner Code of Professional Ethics.

A. True

B. False

Fraud examiners must always perform their work with skepticism, beginning with the belief that something is wrong or someone is committing a fraud. This attitude may make fraud examinations extensive and expensive. Opinions or attestations of a fraud-free environment are prohibited for Certified Fraud Examiners. This is for the protection of the Certified Fraud Examiner -- we only know for sure that fraud exists when some event or transgression causes it to be uncovered.

216. Martin conducted a fraud examination which led to a valid confession of Rutledge, an embezzler. In Martin's report, he stated that, in his opinion, "Rutledge is guilty of embezzlement." Martin has just violated the Certified Fraud Examiner Code of Professional Ethics.

A. True

B. False

The guilt or innocence of any person or party is the sole judgment of the jury, and not of the Certified Fraud Examiner. Article V states that: "A CFE, in conducting examinations, will obtain evidence or other documentation to establish a reasonable basis for any opinion rendered. No opinion shall be expressed regarding the guilt or innocence of any person or party."

217. Article V of the Certified Fraud Examiner Code of Professional Ethics states in part that, "No opinion should be expressed regarding the guilt or innocence of any person or party." During an accusatory interview of Black, a Certified Fraud Examiner accused Black of having committed a fraud. This examiner is in violation of Article V. ______Sec. 1 - Criminology 62 / 66 A. True

B. False

Article V of the Certified Fraud Examiner Code of Professional Ethics states: "A CFE, in conducting examination, will obtain evidence or other documentation to establish a reasonable basis for any opinion rendered. No opinion shall be expressed regarding the guilt or innocence of any person or party." Although it does not specifically state such, the above Article really applies to statements made to third parties. If the Certified Fraud Examiner was interviewing a suspect whose guilt was highly probable, the Code would not prohibit the examiner from making accusations. The admission-seeking process, used extensively by Certified Fraud Examiners, requires accusations be made of the probable guilty party. As long as these accusations are not communicated to third parties, the Certified Fraud Examiner would not be in violation of the Code.

218. A Certified Fraud Examiner is required, at a minimum, to maintain the average of 20 hours of continuing professional education annually. At least half of that education must relate directly to the detection or deterrence of fraud. If a Certified Fraud Examiner fails to do so, he or she will be in violation of the Certified Fraud Examiner Code of Professional Ethics.

A. True

B. False

Article VIII of the Certified Fraud Examiner Code of Professional Ethics states "A CFE shall continually strive to increase the competence and effectiveness of professional services performed under his or her direction." If the Certified Fraud Examiner fails to maintain the required continuing professional education, he or she is in violation of Article VIII of the Code.

219. Gray, an independent Certified Fraud Examiner, was hired by Green, president of the ABC Corporation, to investigate a routine embezzlement case. Gray learns during the investigation that Green is involved in an unrelated fraud. Under the Certified Fraud Examiner Code of Professional Ethics, Gray should:

A. Resign the engagement

B. Not disclose the information about Green

C. Tell the Board about Green

D. None of the above

Certified Fraud Examiners must be very careful. In this particular case, the Board should probably be advised. In general, Certified Fraud Examiners are not obligated to blow the whistle on clients or employers. However, circumstances may exist where the Certified Fraud Examiner is morally and legally justified in making disclosures to appropriate outside parties. Such circumstances include: (1) when a client or employer has intentionally involved a Certified Fraud Examiner in its illegal conduct, or (2) where a client or employer has distributed misleading reports based on the Certified Fraud Examiner's work. Although the examiner could theoretically resign, such action would be tantamount to allowing the conspiracy or fraud to continue without anyone's being aware of the fraud. Certified Fraud Examiners would not be able to justify doing nothing.

220. How many years of professional experience are required in order to be awarded the Certified Fraud Examiner designation?

A. One

B. Four

C. Two

______Sec. 1 - Criminology 63 / 66 D. Three

One can sit for the Certified Fraud Examiner examination the last semester in college. However, to be awarded the designation, one must have a minimum of two years experience in a field related to fraud detection or deterrence before being certified.

221. How many sections are there to the Certified Fraud Examiner Code of Professional Ethics?

A. Eight

B. Ten

C. Nine

D. None of the above

There are eight sections to the Certified Fraud Examiner Code of Professional Ethics. They are summarized as follows: * I. Commitment to professionalism * II. Illegal or unethical conduct * III. Professional competence of assignments * IV. Lawful orders of the courts * V. Basis for opinions * VI. Confidential information * VII. Reveal material matters * VIII. Increase professional competence

222. Certified Fraud Examiners are permitted to "double count" some continuing professional education hours earned with certain other designations, such as CPA.

A. True

B. False

People who become Certified Fraud Examiners must accrue 20 hours of continuing professional education annually. Certified Fraud Examiners are permitted to "double count" continuing education received from other certifications as long as they also meet the criteria for fraud examination continuing education. At least half of the hours earned, however, must relate directly to the detection or deterrence of fraud.

223. Certified Fraud Examiners are required under the Code of Professional Ethics to maintain continuing professional education. On an annual basis, Certified Fraud Examiners are required to obtain an average of how many hours of continuing professional education?

A. 20 hours

B. 40 hours

C. 30 hours

D. None of the above

Continuing professional education is required of a Certified Fraud Examiner under Article I of the Code which states: "A CFE shall continually strive to increase the competence and effectiveness of professional services performed under his or her direction." Certified Fraud Examiners currently are required to have 20 hours of continuing professional education annually. Half of this amount must relate directly to the detection or deterrence of fraud.

______Sec. 1 - Criminology 64 / 66 224. All certification programs must be licensed by the state.

A. True

B. False

Certification programs may or may not be regulated by state statute. Some, like CPAs, doctors, and lawyers, are regulated. Others, like the Certified Fraud Examiner and Certified Internal Auditor, are self-regulating.

______Sec. 1 - Criminology 65 / 66