ACCT 421 Quiz 3

Question 1

Check Tampering Schemes

Answer 1

A scheme in which an employee steals company funds by intercepting, forging or altering a check drawn on one of the organization’s bank accounts

Question 2

Checks

Answer 2

A contract to pay the holder the amount on the check

Question 3

Electronic Funds Transfer

Answer 3

electronic transfer of money from one bank account to another, either within a single financial institution or across multiple institutions, via computer based systems

Question 4

What are the common controls to prevent electronic payments fraud?

Answer 4

• Regularly review and reconcile accounts for unauthorized payments
• Have a dedicated computer to access the payment system
• Never use a link from another organization to access the payment or banking system
• Do not allow sharing of banking credentials
• Never open links or attachments from unsolicited emails

Question 5

What are the generic steps in check tampering?

Answer 5

In order to perpetuate this fraud, a check is needed along with an authorized signature that can be cashed or converted by the fraudster.

Question 6

Billing Schemes

Answer 6

Perpetrator uses false documentation to cause a payment to be issued for a fraudulent purpose. Perpetrated on the business through the accounts payable department.

Question 7

Examples of billing schemes

Answer 7

Bogus company-bill the bogus company for goods and services not provided and looks like any other vendor

Duplicate billings and invoice numbers

Selling at inflated prices (have someone at the vendor side)

Question 8

Payroll fraud

Answer 8

Occurs when the organization pays an employee who did not perform the defined service or a fictitious employee.

Question 9

Three categories of payroll fraud?

Answer 9

1. Ghost employee- may be an actual or fictitious person
2. Falsified hours worked including overtime
3. Commission fraud

Question 10

Warning signals of ghost employee?

Answer 10

High employee turnover

Numerous seasonal employees

Many foreign workers

Large organization with numerous remote locations

Question 11

Expense reimbursement scheme

Answer 11

Employees submit false claims to their employers for reimbursement for business related expenses

Question 12

Common Types of reimbursement schemes

Answer 12

Travel and entertainment employee reimbursement- when employees travel on business and when employees entertain clients, vendors, or guests for their business

Procurement cards-a company major credit card. Employees use for certain types and sizes of purchases. More efficient than purchasing via purchase orders

Overstate expense reimbursements-alter receipts or purchase two items. Return the expensive item, but use the expensive receipt for reimbursement

Mischaracterized expense reimbursement- characterize personal purchases as business

Multiple reimbursements- claim the same expense more than once

Fictitious expense reimbursements-create receipts for legitimate activities never done