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CFE FINACIAL TRANSACTIONS AND FRAUD SCHEMES > CFE > Flashcards

CFE Flashcards

1
Q

What are two types of Cash Receipts schemes

A

Skimming and Larceny

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2
Q

What is skimming?

A

The removal of cash from a victim entity before it is recorded in the victims organizations account.

Known as: OFF BOOK FRAUD.

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3
Q

What is a Lapping Scheme

A

Steal from various people to cover up theft. Robbing Peter to pay Paul

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4
Q

No disclosure agreement

A

Information learned must be kept confidential and not disclosed.

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5
Q

Non competition agreement.

A

Employee agrees to not work at a competing companies for X period of time or distance.

Used as-needed basis.

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6
Q

What is an advanced fee schemes

A

You Pay a fee to do work, they don’t do the work. Pay us $500 we’ll consolidate all your debt into one easy payment, then they don’t consolidate

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7
Q

What is a scavenger or revenge scheme

A

Call and ask if you were ripped off by ABC company… yes, pay us $500 with all the other victims to pay and hire an attorney to go after ABC

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8
Q

Affinity fraud

A

Someone known to you asks for investment.

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9
Q

What is the definition of a Ponzi scheme

A

Illegal business practice in which new investors money is used to make payments to earlier investors.

Key element is that initial investors are paid with subsequent investors money, with little or no legitimate commerce actually occurring.

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10
Q

Synthetic ID theft

A

Fraudster using fabricated personal information or a combination of real and fabricated information to create a new identity

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11
Q

The accounting equation

A

Assets= liabilities + Owners Equity

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12
Q

What is owners equity

A

Represents the investment of a company’s owners plus accumulated profits.

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13
Q

Cash based accounting vs accrual basis accounting

A

Cash based: records revenues and expenses when the company received or pays cash.

Accrual basis accounting: recording revenue when they are earned. Provides immediate feedback on expected cash inflows and outflows.

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14
Q

What is a balance sheet

A

A snap shot of a company’s financial situation at a specific point in time, generally the last day of the accounting period.

Assists on one side; liabilities and equity on the other.

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15
Q

What is an assets and long term assets. On a balance sheet

A

Anything owned that can be converted to cash within a year.

Long term assets.anything turned into cash that will TAKE LONGER than a year: land, buildings, patents

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16
Q

What are liabilities on a balance sheet.

A

Current Liabilities expected to be paid with one year: includes account payable and the portion of long term debts that will come due within the next year.

Long term liabilities: not due within a year. Bonds, notes, mortgage payables

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17
Q

What is owners equity. Two sources

A

Owner contributions: capital stock or paid in capitol.

Undistributed earnings: don’t pay myself invest in company.

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18
Q

Accounts receivables vs payables.

A

Receivables is what customers owe me.

Payable is what I owe venders

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19
Q

What is a income statement.

A

Revenue: net sales, minus what it cost to make item sold called. GROSS PROFIT OR GROSS MARGIN

Operating expenses: minus payroll, taxes, utilities.

Equals net income

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20
Q

What is net profit.

A

The amount after subtracting operating expenses from gross profit.

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21
Q

What is on a statement of cash flow. And what is it.

A

It reports the company’s sources and uses of cash during the accounting period.

Comprised of three main sections:
Cash flow for OPERATING activities: cash received from customers minus cash paid for merch.
For INVESTING activities: cash paid to purchase equipment. Minus net cash flow from investing
for FINANCING activities: cash received from owner investment. Cash from note: IE got a loan. Minus Cash paid on loan and cash dividends paid. Equals net cash flow from financing.

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22
Q

Difference between US GAAP and IFRS

A

US GAAP: RULES-BASED accounting framework.

International financial reporting standards: IFRS: PRINCIPLE BASED accounting frame work.

Publicly traded companies must adhere to the practices of their jurisdiction

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23
Q

Why would I want to depart from GAAP

A

Concern for overstatement of assists or income
Common practice
Substance better reflected by no following
Immaterial
Expected costs exceed the benefits of compliance.

Must notate departure in financial statement s

24
Q

Definition of financial statement fraud

A

The DELIBERATE MISREPRESENTATION of the financial condition of an enterprise accomplished through the INTENTIONAL MISS-STATEMENT OR OMISSION of accounts or disclosures in the financial statement to DECEIVE statement users

25
Q

Typical forms of financial statement fraud

A

Overstated assets and revenue

Understate liabilities and expenses

26
Q

What are the 5 classifications of financial statement schemes

A 
Fictitious revenues
Timing differences 
Improper asset valuations 
Concealed liabilities and expenses 
Improper disclosures
27
Q

Common methods for concealing liabilities.

A

Liability /expense omissions
Improperly capitalized costs
Failure to disclose or improper recording of warranty costs and product return liabilities

28
Q

What is a contingent liability

A

Potential obligation that will materialize only if certain events occur in the future. ( being sued).

Typical omission

29
Q

What are three types of accounting changes

A

Accounting principles
Estimates
Reporting entities

30
Q

Vertical analysis and horizontal

A

Vertical: relationships between income sheet, balance sheet or statement of cash flows during a accounting period by percentages.

Horizontal: analyzing the percentage change in financial statement from one period to the next

31
Q

Financial ratios definition

A

Means Of measuring the relationship between any two different financial statement amounts

Current ratio. Current assets divided by
Current liabilities
1.5 and up. Healthy

Quick ratio. Cash+ securities+ receivables devised by current liabilities.

32
Q

Types of fraudulent disbursement schemes

A 
Register disbursement schemes 
Electronic payment scheme 
Billing schemes 
Payroll schemes 
Expense reimbursement scheme
33
Q

What can you do to prevent electronic payment tampering. Other banking ideas

A

ACH blocks
ACH filters
Positive pay- provide list of know monthly ACH debits. If not on list contact customer

Other ideas. Have a spectate bank account for checks and ACH

34
Q

Billing schemes

A

Invoicing via shell company: employee creates she’ll company. Purchases usually for services rather than goods.

Invoicing via non accomplice vendors: purposely pay vendor twice, pocket refund from vendor. Or pay wrong vendor and pocket return.

Personal purchase with company funds: use business funds to buy personal stuff

35
Q

Pass through scheme

A

Actual goods or services purchased through shell company. Instead of buying direct from vendor. Company buys from shell company for more money

36
Q

Prevention of billing schemes.

A

Separation of duties
Fraud HOT LINES
competitive bidding

37
Q

What is social engineering

A

Tricking someone into giving you access.

Deceives victim into disclosing personal information or convinces them to commit acts that facilitates the attackers intended scheme

38
Q

Definition of Administrative security

A

Policies and awareness training
Separating of duties
Incident response plans.
Computer risk assessment.

39
Q

Def of corruption

A

The wrongful use of influence to procure a benefit for the actor or another person, contrary to the duty and rights of others

40
Q

4 types of corruption

A

Bribery
Kickback: payments made to obtain favorable treatment.
Illegal gratuities: things given to you
Economic extortion: demand for payment

41
Q

Methods for proving corrupt payments

A

Turn inside witness
Secretly infiltrate or record ongoing transaction
Identify and trace corrupt payments through audit steps

42
Q

Phases of procurement process

A

Pre-solicitation: needs, what we need
Solicitation: prepare and submit ion
Bid evaluation and award phase: evaluate and award bid
The post award and administrative phase: contracted parties do the work or give you the items.

43
Q

Schemes involving. Collusion among contractors: 4 types

A

Complementary bidding: competitors submit token bids
Bid rotation: take turns submitting the low bid.
Bid suppression: agree not to bid on certain jobs
Market division: agreee to only bid on jobs in a certain area.

44
Q

What are the three types of accounting changes.

A

Accounting principals.
estimates
Reporting entities.

Must be disclosed

45
Q

Debt to equity ratio

Assets turnover ratio

A

Debt to equity: total liabilities Divided by total equity

Assets turnover: net sales DIVIDED by AVERAGE total assets.

46
Q

What is an air loan

A

Typically done by mortgage brokers

Gets a loan for a non existent property.

47
Q

What is farming

What is smishing

A

Farming: Hijack domain name.
Smishing: send text fishing message.

48
Q

What is a false sale scheme

A

The employee- fraudster’s outside accomplice pretends to buy merchandise but the employee does not ring up the sale.

49
Q

Falsifying incoming shipment scheme

A

A person charged with receiving goods on the victim company’s behalf Such as a warehouse supervisor or receiving clerk falsifies the records of incoming shipments.

50
Q

What is physical padding.

A

Making it appear as though there are more assets present in the west house or stockroom than there actually are.

51
Q

How can a crook fix the problem of fictitious sales and accounts receivable.

A

Suspect will enter a debit to accounts receivable and a corresponding credit to the sales account so that it appears the missing goods have been sold.

52
Q

What is a clinical lab scheme

A

Doctors tells patient to get more testing when it’s not really needed

53
Q

What is data classification?

What is data minimization?

A

Placing data into different security levels based on their value and sensitivity.

Collecting and storing the minimal amount of information necessary to perform a task or function.

54
Q

What equation is the balance sheet?

A

Asset= liabilities + owners equity

55
Q

What is the equation for income statement?

A

Revenue- expenses = net profit.

Income statement is temporary. Go to zero at end of fiscal year.

Net sales ( minus returns and bad inventory) then minus costs of good to buy or make.

Then minus operating expenses: bills.

ROE

CFE FINACIAL TRANSACTIONS AND FRAUD SCHEMES (1 decks)

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