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ACCT - Fraud Examination > Exam 2 > Flashcards

Exam 2 Flashcards

1
Q

Perpetrator physically prepares the fraudulent check.

A

Check tampering schemes

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2
Q

What are the 5 options of committing check tampering?

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

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

A

Check tampering

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4
Q

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

A

Forged maker schemes

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5
Q

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

A
  1. Perpetrator
  2. Accomplice
  3. “Cash”
  4. Vendors
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6
Q

What are 4 ways to safeguarding check stock?

A
  1. Lock and key
  2. Sealed tape
  3. Watermarked
  4. Destroy voided checks
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7
Q

What are 3 ways to forging a signature?

A
  1. Free-handing
  2. Photocopy
  3. Automatic check-signing mechs.
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8
Q

What are 2 options for forged makers schemes?

A
  1. Conceal fraud
  2. Convert check
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9
Q

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

A
  1. Safeguard checks
  2. Separation of duties
  3. Rotate and limit signatures and stamps
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10
Q

Employee intercepts a company check intended for a third party.

A

Forged endorsement schemes

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11
Q

What are 3 reasons checks are intercepted before delivery?

A
  1. Poor controls
  2. Theft of returned checks
  3. Rerouting delivery
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12
Q

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

A
  1. Employees trained to look
  2. Investigate concealed checks
  3. Date all outgoing checks
  4. Accounting system identify duplicate payments
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13
Q

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

A

Altered payee schemes

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14
Q

What are 2 ways a fraudster can prepare altered checks?

A
  1. Erasable ink
  2. Blank checks
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15
Q

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

A
  1. Separation of duties
  2. Check canceled checksagainst entries
  3. Carbon copy checks
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16
Q

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

A

Concealed check schemes

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17
Q

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

A

Authorized maker schemes

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18
Q

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

A
  1. Separation of duties
  2. Require dual signatures
  3. Maintain vendor lists
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19
Q

What are 3 problems with concealing check tampering?

A
  1. Bogus support docs
  2. Reissued checks
  3. Checks never sent to real payee
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20
Q

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

A

Electronic payment tampering

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21
Q

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

A
  1. Segregate bank accounts
  2. Daily monitoring
  3. Positive pay for ACH
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22
Q

What are 4 payroll schemes?

A
  1. Ghost employees
  2. Commission schemes
  3. Workers compensation
  4. Falsified wages
23
Q

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.

A

Payroll schemes

24
Q

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

A

Ghost employees

25
Q

What are 4 steps to commit a ghost employee scheme?

A
  1. Add fake employee
  2. Collecting timekeeping info
  3. Issue ghost’s paycheck
  4. Deliver check
26
Q

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

A
  1. Personnel records independently maintained
  2. Background/reference checks (hiring)
  3. Keep signed checks secure
  4. Compare payroll with schedules
27
Q

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

A

Falsified hours and salary

28
Q

What are 4 situations that lead to manually prepared timecards?

A
  1. Forging supervisors signatures
  2. Collusion with supervisor
  3. Rubber stamp supervisor
  4. Poor custody procedures
29
Q

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

A
  1. Only authorized over-time
  2. Sick/vacation not granted without approval
  3. Fund transfers handled independently
30
Q

What are 4 ways to test for fraudulent payroll activity?

A
  1. Review employees for overtime
  2. Actual vs. Budget
  3. Report on large wage employees
  4. Payroll matches return
31
Q

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

A

Commission schemes

32
Q

What are 3 ways to detect commission schemes?

A
  1. Test customers
  2. Test commissions
  3. Track uncollected sales
33
Q

What are 4 ways to commit expense reimbursement schemes?

A
  1. Mischaracterized expenses
  2. Overstated expenses
  3. Fictitious expenses
  4. Multiple reimbursements
34
Q

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

A

Expense reimbursement schemes

35
Q

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

A

Mischaracterized expense reimbursements

36
Q

What are 3 ways to prevent and detect mischaracterized expenses?

A
  1. Descriptive & public policies
  2. Establish controls
  3. Compare dates on receipts
37
Q

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

A

Altered receipts

38
Q

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

A

Overpurchasing

39
Q

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

A

Overstated another employee’s expenses

40
Q

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

A

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

41
Q

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

A
  1. Original receipts
  2. Use company credit card
  3. Expense reports
42
Q

What are 3 things used to create fictitious expenses?

A
  1. Computers
  2. Calculators
  3. Cut and paste
43
Q

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

A

Multiple reimbursement schemes

44
Q

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

A
  1. No photocopies
  2. Establish accepted documentation
  3. Expenses timely submitted
45
Q

What are 2 ways to commit register disbursements?

A
  1. False voids
  2. False refunds
46
Q

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

A

Refunds

47
Q

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

A

Fictitious refunds

48
Q

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

A

Overstated refunds

49
Q

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

A

Credit card refund schemes

50
Q

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

A

False voids

51
Q

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

A
  1. two
  2. inventory
  3. shrinkage
52
Q

Below the manager’s limit required for reviewing disbursements.

A

Small disbursements

53
Q

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

A

Destroy records

54
Q

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

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

ACCT - Fraud Examination (4 decks)

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