Chapter 15 – Conducting Investigations and Report Writing

1. A company may need to undertake an internal investigation into alleged employee

fraud for which of the following reasons?
a. To mitigate the company’s vicarious liability for the wrongful conduct
b. To determine the source and amount of loss
c. To guard against wrongful termination accusations
d. All of the above

2. Officers and directors of companies are bound by the duties of _________ and
_________ in overseeing the operations of their companies.
a. loyalty; reasonable care
b. due process; loyalty
c. reasonable care; imputed practice
d. loyalty; implicit care

3. The failure to adequately investigate an allegation of employee fraud may be a

violation of legal and regulatory requirements.
a. True
b. False

4. When choosing a fraud examination team, it is important to include as many parties

as possible to ensure that all investigatory perspectives are covered.
a. True
b. False

5. In most cases, which of the following parties should be primarily responsible for
directing a fraud examination?
a. The external auditors
b. The head of the security department
c. The company’s legal counsel
d. The human resources manager

6. Fraud examination teams should be broken down into two segregated groups: one that
focuses on the financial side of the investigation and one that performs the
investigatory field work.
a. True
b. False

7. Which of the following factors should be considered when determining whether to

employ outside consultants during a fraud examination engagement?
a. Company politics
b. The degree of expertise required for specific tasks
c. Potential threats of retaliation against internal investigators
d. All of the above
8. Which of the following statements is true regarding the use of undercover operations
as part of a fraud examination?
a. Undercover operations are never legal and should not be used in fraud
examinations.
b. Undercover operations should be used only if there is sufficient probable
cause that a crime has been committed.
c. There are no restrictions governing the use of undercover operations as part of
fraud investigations.
d. None of the above

9. Able is a fraud examiner who works for XYZ, a private company. While
investigating an allegation of employee embezzlement, Able calls Baker, a suspected
co-conspirator, and pretends to be a member of the local police force. Able tells
Baker that if he turns over his financial records to Able, that he will be provided
immunity from prosecution. Is Able’s use of impersonation in this situation legally
acceptable?
a. Yes
b. No

10. _____________ involves obtaining information through the use of falsehoods or

deception.
a. Pretexting
b. Subject manipulation
c. Forensic investigation
d. Surveillance

11. While investigating an alleged conflict of interest scheme, Green, an internal

investigator, is contacted by the ex-wife of Brown, the primary suspect. After calling
her ex-husband some unsavory names and telling Green that Brown hasn’t paid a
dime of his court-ordered alimony, the jilted former spouse informs Green that she
has some dirt on Brown. She tells Green that she’d be more than happy to spill the
beans about Brown’s misdeeds if Green can ensure that she receives half of any
money recovered as a result of the investigation. Because Brown’s ex-wife is clearly
seeking a financial reward for supplying information, Green should discontinue
speaking with her and should not rely on any information she provides.
a. True
b. False

12. Baker, CFE, is on a stakeout at the home of Potter, the prime suspect in a large false
billing scheme. When Baker arrives at Potter’s street, she notices Potter’s garbage has
been placed on the curb for pickup. Baker believes she could obtain much of the
information she needs by going through Potter’s garbage. In order to legally sift
through Potter’s trash and seize discarded documents to be used as evidence, Baker
must:
a. Obtain a search warrant
b. Obtain a subpoena duces tecum
 c. Obtain Potter’s consent
d. None of the above

13. To be valid, a search warrant must be issued by a judge and must be served by a law
enforcement official.
a. True
b. False

14. Lloyd, CFE, has asked Betsy for access to her bank records as part of an investigation
into an alleged embezzlement scheme. If Betsy agrees, her consent must be written,
signed, and dated in order for it to be binding.
a. True
b. False

15. Which of the following statements about handling and storing documentary evidence
is not true?
a. Documents received should be initialed and dated by the fraud examiner.
b. The original document should be preserved for forensic examinations.
c. Photocopied documents should be stored in transparent plastic envelopes.
d. Documents should never be stapled or paper-clipped.

16. _________________ refers to establishing how and when a piece of evidence was
received; how it was maintained or stored while in each person’s possession; what
changes, if any, it underwent in that person’s custody; and how it left that person’s
custody.
a. Authentication
b. Forensic examination
c. Chain of custody
d. None of the above

17. If, during the handling of a piece of documentary evidence, an investigator

inadvertently holds the document with bare hands and leaves fingerprints on it, the
document should be destroyed and a new copy should be obtained.
a. True
b. False

18. Of the following, which is the preferred method of organizing documentary evidence?
a. Chronological order
b. Alphabetical order
c. By witness
d. Order received

19. When organizing documentary evidence, it is recommended that investigators keep

which of the following?
a. Chronologies
b. To-do lists
 c. A separate file for key documents
d. All of the above

20. Jackson, CFE, is investigating a suspected embezzlement by one of XYZ Corp.’s

employees. As part of this investigation, she is assembling a financial profile of the
suspect. Among other things, she wants to know if the suspect has made any
significant real estate purchases since the embezzlement scheme began. Information
on real estate transactions such as deeds, grants, transfers, and mortgages is located:
a. With the county recorder
b. With the state tax assessor
c. With the secretary of state
d. With the U.S. Department of Land Management

21. Which of the following information is typically not included in a corporate

registration?
a. The location of the corporation’s principal office
b. The tax returns and quarterly reports for the corporation
c. The names of the corporation’s directors and officers
d. The date of incorporation

22. Information concerning a corporation’s name, ownership, stock value, initial

shareholders, directors, and officers is registered and maintained at which of the
following levels?
a. Federal
b. State
c. Municipal
d. County

23. McCloud, an internal investigator for a private company, has reason to believe that
LaRue, the company’s controller, has been embezzling cash and living the high life
on the company’s dime. McCloud has just discovered that LaRue bought a mansion
on the edge of town last year and McCloud wants to find out more about the
purchase. Information about whether LaRue took out a mortgage on the property may
be found by searching:
a. LaRue’s income tax return
b. County real property records
c. LaRue’s bank account transactions
d. All of the above

24. To obtain information about an auto loan, such as where and when the loan originated
and the current address of the debtor, an investigator should search the Uniform
Commercial Code documents filed with the Secretary of State.
a. True
b. False
25. To find the names of the parties who have an interest in the estate of a deceased
individual, an investigator should search the records of which court?
a. County civil court
b. U.S. District court
c. Probate court
d. None of the above

26. Fraud examinations conclude with:

a. A conviction of the guilty party
b. A report of the investigation findings
c. A confession from the suspect
d. An opinion on the guilt or innocence of the implicated party

27. A well-written, accurate, and understandable investigation report will:

a. Convey all pertinent evidence
b. Add credibility to the investigation
c. Accomplish the objectives of the case
d. All of the above

28. When preparing an investigative report, the fraud examiner should assume that it will
be read by outside parties.
a. True
b. False

29. Bob Taylor, CFE, is writing a report on his findings from an investigation into an
alleged inventory larceny scheme. During his investigation, he was unable to
accurately quantify the amount of the loss to the victim company, but he assumes that
the loss falls between $100,000 and $200,000. In the report, Bob should report the
amount of the loss as $200,000 so that the company can recoup as much money as
possible from the perpetrator.
a. True
b. False

30. In which section of the standard fraud examination report should the investigator
discuss the identity and background information obtained about the individuals
implicated in the matter under investigation?
a. Summary
b. Introduction
c. Body
d. Results

31. In a written fraud examination report, the fraud examiner’s conclusions about how the
fraud occurred should be explicitly stated.
a. True
b. False