4-5 Flashcards
Billing scheme
A scheme in which a fraudster causes the victim
organization to issue a fraudulent payment by submitting
invoices for fictitious goods or services, inflated invoices, or
invoices for personal purchases.
Collusion
A situation in which two or more employees work together to commit fraud by overcoming a well-designed internal control system.
Pass-through scheme
A subcategory of a shell company scheme in which actual goods or services are sold to the victim company, with the fraudster acting as a middleman and inflating the prices of the goods or services.
Pay-and-return scheme
A fraud in which an employee intentionally mishandles payments that are owed to legitimate companies, then steals the excess payments when they are returned by the vendor.
Personal purchases scheme
A category of billing scheme in which an employee simply buys personal items with his company’s funds, credit card, or purchasing card.
Shell company
A fictitious entity created for the sole purpose of committing fraud.
Check tampering
A type of fraudulent disbursement that occurs when an employee converts an organization’s funds by either (I) fraudulently preparing a check drawn on the organization’s account for his own benefit or (2) intercepting a check drawn on the organization’s account that is intended for a third party, and converting that check to his own benefit.
Forgery
The signing of another person’s name to a document (such as a check) with fraudulent intent, or the fraudulent alteration of a genuine instrument.
Maker
The person who signs a check.
Forged maker scheme
A check tampering scheme in which an employee misappropriates a check and fraudulently affixes the signature of an authorized maker thereon.
Forged endorsement scheme
A check tampering scheme in which an employee intercepts a company check intended for a third party and converts the check by signing the third party’s name on the endorsement line of the check.
Forced reconciliation
A method of concealing a check tampering scheme by manipulating the bank reconciliation so that the bank balance and the book balance match.
Altered payee scheme
A check tampering scheme in which an employee intercepts a company check intended for a third party and alters the payee designation so that the check can be converted by the employee or an accomplice.
Concealed check scheme
A check tampering scheme whereby an employee prepares a fraudulent check and submits it, usually along with legitimate checks, to an authorized maker who signs it without a proper review.
Authorized maker scheme
A check tampering scheme in which an employee with signatory authority on a company account writes fraudulent checks for his own benefit and signs his own name as the maker.
