RCMS RCMS Financial Crimes & Fraud Prevention 2 — Questions and Answers
Question 1: What does the 'fraud triangle' model identify as the three elements necessary for occupational fraud to occur?
- Pressure, opportunity, and rationalization (Correct answer)
- Motive, method, and means
- Intent, access, and concealment
- Risk, reward, and capability
Correct answer: Pressure, opportunity, and rationalization
The fraud triangle, developed by Donald Cressey, identifies pressure, opportunity, and rationalization as the three conditions that enable fraud.
Question 2: Which U.S. agency is primarily responsible for enforcing the FCPA's anti-bribery provisions against U.S. companies?
- Department of Justice (DOJ) (Correct answer)
- Federal Reserve Board
- Consumer Financial Protection Bureau (CFPB)
- Office of the Comptroller of the Currency (OCC)
Correct answer: Department of Justice (DOJ)
The DOJ holds primary responsibility for criminal enforcement of FCPA anti-bribery provisions, while the SEC handles civil enforcement for issuers.
Question 3: A company's compliance program should include a financial fraud risk assessment that is performed at minimum:
- Periodically and when significant organizational changes occur (Correct answer)
- Only during external audits
- Once at program inception
- Whenever an employee is terminated
Correct answer: Periodically and when significant organizational changes occur
Fraud risk assessments should be conducted periodically and updated whenever significant changes occur, such as mergers, new products, or leadership changes.
Question 4: Which financial statement fraud scheme involves recording revenue that has not been earned?
- Fictitious revenue scheme (Correct answer)
- Channel stuffing
- Lapping scheme
- Skimming
Correct answer: Fictitious revenue scheme
A fictitious revenue scheme records sales or income that never occurred, inflating financial results to mislead investors or lenders.
Question 5: What is the primary purpose of a 'hotline' in a financial crimes compliance program?
- To provide an anonymous channel for reporting suspected fraud or misconduct (Correct answer)
- To escalate customer complaints to senior management
- To facilitate communication between compliance and legal teams
- To report regulatory filings to government agencies
Correct answer: To provide an anonymous channel for reporting suspected fraud or misconduct
Hotlines give employees and third parties a confidential way to report suspected fraud, which is the most common method for detecting occupational fraud per the ACFE.
Question 6: Which of the following best describes 'lapping' as a fraud scheme?
- Stealing cash receipts and covering the shortage with subsequent customer payments (Correct answer)
- Falsifying payroll records to create ghost employees
- Inflating expense reports with fictitious receipts
- Diverting vendor payments to a personal account
Correct answer: Stealing cash receipts and covering the shortage with subsequent customer payments
Lapping involves stealing a payment from one customer and covering it with a later payment from another, creating a rolling shortage.
RCMS RCMS Financial Crimes & Fraud Prevention 2
What does the 'fraud triangle' model identify as the three elements necessary for occupational fraud to occur?