Exam 2 Flashcards
Perpetrator physically prepares the fraudulent check.
Check tampering schemes
What are the 5 options of committing check tampering?
- Forged maker
- Forged endorsement
- Altered payee
- Concealed checks
- Authorized maker
A form of fraud with the highest median loss and frequency…
Check tampering
An employee misappropriates a check and fraudulently affixes the signature of an authorized maker.
Forged maker schemes
To whom is the fraudulent check made payable? (4 things)
- Perpetrator
- Accomplice
- “Cash”
- Vendors
What are 4 ways to safeguarding check stock?
- Lock and key
- Sealed tape
- Watermarked
- Destroy voided checks
What are 3 ways to forging a signature?
- Free-handing
- Photocopy
- Automatic check-signing mechs.
What are 2 options for forged makers schemes?
- Conceal fraud
- Convert check
What are 3 ways to prevent and detect FORGED MAKER schemes?
- Safeguard checks
- Separation of duties
- Rotate and limit signatures and stamps
Employee intercepts a company check intended for a third party.
Forged endorsement schemes
What are 3 reasons checks are intercepted before delivery?
- Poor controls
- Theft of returned checks
- Rerouting delivery
What are 4 ways to prevent and detect the theft of outgoing company checks?
- Employees trained to look
- Investigate concealed checks
- Date all outgoing checks
- Accounting system identify duplicate payments
Employee intercepts and alters a company check intended for third party.
Altered payee schemes
What are 2 ways a fraudster can prepare altered checks?
- Erasable ink
- Blank checks
What are 3 ways to prevent and detect altered company checks?
- Separation of duties
- Check canceled checksagainst entries
- Carbon copy checks
An employee prepares a fraudulent check and submits it along with legitimate checks.
Concealed check schemes
Employee with signatory authority writes a fraud check. (difficult to detect due to being seen as a control)
Authorized maker schemes
What are 3 ways to prevent and detect check tampering by authorized makers?
- Separation of duties
- Require dual signatures
- Maintain vendor lists
What are 3 problems with concealing check tampering?
- Bogus support docs
- Reissued checks
- Checks never sent to real payee
An alternative to paper checks which enables a perpetrator to transmit funds electronically.
Electronic payment tampering
What are 3 ways to prevent and detect electronic payment tampering?
- Segregate bank accounts
- Daily monitoring
- Positive pay for ACH
What are 4 payroll schemes?
- Ghost employees
- Commission schemes
- Workers compensation
- Falsified wages
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.
Payroll schemes
Someone on the payroll who does not actually work for the victim company.
Ghost employees
What are 4 steps to commit a ghost employee scheme?
- Add fake employee
- Collecting timekeeping info
- Issue ghost’s paycheck
- Deliver check
What are 4 ways to detect and prevent ghost employee schemes?
- Personnel records independently maintained
- Background/reference checks (hiring)
- Keep signed checks secure
- Compare payroll with schedules
When there is an overpayment of wages, increased number of hours, manually prepared time cards, etc.
Falsified hours and salary
What are 4 situations that lead to manually prepared timecards?
- Forging supervisors signatures
- Collusion with supervisor
- Rubber stamp supervisor
- Poor custody procedures
What are 3 ways to prevent and detect falsified hours and salary schemes?
- Only authorized over-time
- Sick/vacation not granted without approval
- Fund transfers handled independently
What are 4 ways to test for fraudulent payroll activity?
- Review employees for overtime
- Actual vs. Budget
- Report on large wage employees
- Payroll matches return
Pay based on an employee’s output rather than hours worked or set a salary. (falsify sales)
Commission schemes
What are 3 ways to detect commission schemes?
- Test customers
- Test commissions
- Track uncollected sales
What are 4 ways to commit expense reimbursement schemes?
- Mischaracterized expenses
- Overstated expenses
- Fictitious expenses
- Multiple reimbursements
Employees are reimbursed for expenses paid on behalf of their employer. Fraudulently lie about expenses.
Expense reimbursement schemes
Purpose of reimbursement request is misstated. Usually high-level employees.
Mischaracterized expense reimbursements
What are 3 ways to prevent and detect mischaracterized expenses?
- Descriptive & public policies
- Establish controls
- Compare dates on receipts
Employee doctors a receipt or other supporting documentation to reflect higher cost.
Altered receipts
Purchased 2 tickets for his business travel. Return expensive one but use receipt to get more reimbursement.
Overpurchasing
Overstated expense schemes committed by someone else who handles/process expenses reports.
Overstated another employee’s expenses
True or false.
Overstated expense reimbursements are rare and easy to detect.
False.
Overstated expense reimbursements are very common, and very difficult to detect.
What are 3 ways to prevent and detect overstated expense reimbursements?
- Original receipts
- Use company credit card
- Expense reports
What are 3 things used to create fictitious expenses?
- Computers
- Calculators
- Cut and paste
Least common reimbursement scheme according to ACFE research. Single expense submitted several times.
Multiple reimbursement schemes
What are 3 ways to prevent and detect multiple reimbursement schemes?
- No photocopies
- Establish accepted documentation
- Expenses timely submitted
What are 2 ways to commit register disbursements?
- False voids
- False refunds
Processed at the register when a customer returns an item of merchandise purchased from that store.
Refunds
The process of a transaction as if customer returned merchandise, even though no return happened.
Fictitious refunds
Fraudster overstates the amount of a legitimate refund and skims the excess money.
Overstated refunds
Refunds appear as credits to the customer’s credit card rather than as cash disbursements. Refunded to perpetrator’s card.
Credit card refund schemes
Copy of a customer’s receipt is attached to slip and voided. Generates disbursement from register for perpetrator.
False voids
When concealing register disbursements, there is a ___ step process. Includes crediting _______. Fraudster usually makes no effort to conceal ________.
- two
- inventory
- shrinkage
Below the manager’s limit required for reviewing disbursements.
Small disbursements
Employee has conceded that management will discover the theft. Last ditch effort when concealing fraud.
Destroy records
What are 3 ways to prevent and detect register disbursement schemes?
- Management approval
- Guarded key/code
- Original receipt stapled to void slip
