Exam 2

Question 1

Perpetrator physically prepares the fraudulent check.

Answer 1

Check tampering schemes

Question 2

What are the 5 options of committing check tampering?

Answer 2

1. Forged maker
2. Forged endorsement
3. Altered payee
4. Concealed checks
5. Authorized maker

Question 3

A form of fraud with the highest median loss and frequency…

Answer 3

Check tampering

Question 4

An employee misappropriates a check and fraudulently affixes the signature of an authorized maker.

Answer 4

Forged maker schemes

Question 5

To whom is the fraudulent check made payable? (4 things)

Answer 5

1. Perpetrator
2. Accomplice
3. “Cash”
4. Vendors

Question 6

What are 4 ways to safeguarding check stock?

Answer 6

1. Lock and key
2. Sealed tape
3. Watermarked
4. Destroy voided checks

Question 7

What are 3 ways to forging a signature?

Answer 7

1. Free-handing
2. Photocopy
3. Automatic check-signing mechs.

Question 8

What are 2 options for forged makers schemes?

Answer 8

1. Conceal fraud
2. Convert check

Question 9

What are 3 ways to prevent and detect FORGED MAKER schemes?

Answer 9

1. Safeguard checks
2. Separation of duties
3. Rotate and limit signatures and stamps

Question 10

Employee intercepts a company check intended for a third party.

Answer 10

Forged endorsement schemes

Question 11

What are 3 reasons checks are intercepted before delivery?

Answer 11

1. Poor controls
2. Theft of returned checks
3. Rerouting delivery

Question 12

What are 4 ways to prevent and detect the theft of outgoing company checks?

Answer 12

1. Employees trained to look
2. Investigate concealed checks
3. Date all outgoing checks
4. Accounting system identify duplicate payments

Question 13

Employee intercepts and alters a company check intended for third party.

Answer 13

Altered payee schemes

Question 14

What are 2 ways a fraudster can prepare altered checks?

Answer 14

1. Erasable ink
2. Blank checks

Question 15

What are 3 ways to prevent and detect altered company checks?

Answer 15

1. Separation of duties
2. Check canceled checksagainst entries
3. Carbon copy checks

Question 16

An employee prepares a fraudulent check and submits it along with legitimate checks.

Answer 16

Concealed check schemes

Question 17

Employee with signatory authority writes a fraud check. (difficult to detect due to being seen as a control)

Answer 17

Authorized maker schemes

Question 18

What are 3 ways to prevent and detect check tampering by authorized makers?

Answer 18

1. Separation of duties
2. Require dual signatures
3. Maintain vendor lists

Question 19

What are 3 problems with concealing check tampering?

Answer 19

1. Bogus support docs
2. Reissued checks
3. Checks never sent to real payee

Question 20

An alternative to paper checks which enables a perpetrator to transmit funds electronically.

Answer 20

Electronic payment tampering

Question 21

What are 3 ways to prevent and detect electronic payment tampering?

Answer 21

1. Segregate bank accounts
2. Daily monitoring
3. Positive pay for ACH

Question 22

What are 4 payroll schemes?

Answer 22

1. Ghost employees
2. Commission schemes
3. Workers compensation
4. Falsified wages

Question 23

Occupational frauds in which a person who works for an organization causes that organization to issue a payment by making a false claim for compensation.

Answer 23

Payroll schemes

Question 24

Someone on the payroll who does not actually work for the victim company.

Answer 24

Ghost employees

Question 25

What are 4 steps to commit a ghost employee scheme?

Answer 25

1. Add fake employee 2. Collecting timekeeping info 3. Issue ghost's paycheck 4. Deliver check

Question 26

What are 4 ways to detect and prevent ghost employee schemes?

Answer 26

1. Personnel records independently maintained 2. Background/reference checks (hiring) 3. Keep signed checks secure 4. Compare payroll with schedules

Question 27

When there is an overpayment of wages, increased number of hours, manually prepared time cards, etc.

Answer 27

Falsified hours and salary

Question 28

What are 4 situations that lead to manually prepared timecards?

Answer 28

1. Forging supervisors signatures 2. Collusion with supervisor 3. Rubber stamp supervisor 4. Poor custody procedures

Question 29

What are 3 ways to prevent and detect falsified hours and salary schemes?

Answer 29

1. Only authorized over-time 2. Sick/vacation not granted without approval 3. Fund transfers handled independently

Question 30

What are 4 ways to test for fraudulent payroll activity?

Answer 30

1. Review employees for overtime 2. Actual vs. Budget 3. Report on large wage employees 4. Payroll matches return

Question 31

Pay based on an employee's output rather than hours worked or set a salary. (falsify sales)

Answer 31

Commission schemes

Question 32

What are 3 ways to detect commission schemes?

Answer 32

1. Test customers 2. Test commissions 3. Track uncollected sales

Question 33

What are 4 ways to commit expense reimbursement schemes?

Answer 33

1. Mischaracterized expenses 2. Overstated expenses 3. Fictitious expenses 4. Multiple reimbursements

Question 34

Employees are reimbursed for expenses paid on behalf of their employer. Fraudulently lie about expenses.

Answer 34

Expense reimbursement schemes

Question 35

Purpose of reimbursement request is misstated. Usually high-level employees.

Answer 35

Mischaracterized expense reimbursements

Question 36

What are 3 ways to prevent and detect mischaracterized expenses?

Answer 36

1. Descriptive & public policies 2. Establish controls 3. Compare dates on receipts

Question 37

Employee doctors a receipt or other supporting documentation to reflect higher cost.

Answer 37

Altered receipts

Question 38

Purchased 2 tickets for his business travel. Return expensive one but use receipt to get more reimbursement.

Answer 38

Overpurchasing

Question 39

Overstated expense schemes committed by someone else who handles/process expenses reports.

Answer 39

Overstated another employee's expenses

Question 40

True or false. Overstated expense reimbursements are rare and easy to detect.

Answer 40

False. Overstated expense reimbursements are very common, and very difficult to detect.

Question 41

What are 3 ways to prevent and detect overstated expense reimbursements?

Answer 41

1. Original receipts 2. Use company credit card 3. Expense reports

Question 42

What are 3 things used to create fictitious expenses?

Answer 42

1. Computers 2. Calculators 3. Cut and paste

Question 43

Least common reimbursement scheme according to ACFE research. Single expense submitted several times.

Answer 43

Multiple reimbursement schemes

Question 44

What are 3 ways to prevent and detect multiple reimbursement schemes?

Answer 44

1. No photocopies 2. Establish accepted documentation 3. Expenses timely submitted

Question 45

What are 2 ways to commit register disbursements?

Answer 45

1. False voids 2. False refunds

Question 46

Processed at the register when a customer returns an item of merchandise purchased from that store.

Answer 46

Refunds

Question 47

The process of a transaction as if customer returned merchandise, even though no return happened.

Answer 47

Fictitious refunds

Question 48

Fraudster overstates the amount of a legitimate refund and skims the excess money.

Answer 48

Overstated refunds

Question 49

Refunds appear as credits to the customer's credit card rather than as cash disbursements. Refunded to perpetrator's card.

Answer 49

Credit card refund schemes

Question 50

Copy of a customer's receipt is attached to slip and voided. Generates disbursement from register for perpetrator.

Answer 50

False voids

Question 51

When concealing register disbursements, there is a ___ step process. Includes crediting _______. Fraudster usually makes no effort to conceal ________.

Answer 51

1. two 2. inventory 3. shrinkage

Question 52

Below the manager's limit required for reviewing disbursements.

Answer 52

Small disbursements

Question 53

Employee has conceded that management will discover the theft. Last ditch effort when concealing fraud.

Answer 53

Destroy records

Question 54

What are 3 ways to prevent and detect register disbursement schemes?

Answer 54

1. Management approval 2. Guarded key/code 3. Original receipt stapled to void slip