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Fraud > Final Exam > Flashcards

Final Exam Flashcards

1
Q

Occupational Fraud

A

The use of ones occupation for personal enrichment through deliberate misuse or misappropriation of the employing organization’s resources or assets.

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2
Q

4 Types of Corruption

A

Conflicts of Interest
Bribery
Illegal Gratuities
Economic Extortion

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3
Q

2 Types of Asset Misappropriation

A

Cash

Inventory & Non Cash

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4
Q

2 Types of Fraudulent Statement

A

Financial

Non financial

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5
Q

What is a conflict of interest?

A

situation where an employee, manager, or executive has an undisclosed economic or personal interest in a transaction that adversely affects the company as a result

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6
Q 
In differentiating between auditing and fraud examination, auditing has the following characteristics except:
Recurring
Professional Skepticism
Adversarial
All of the Above
A

Adversarial

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7
Q

What is a bid-rigging scheme?

A

Process where an employee assists a vendor to fraudulently win a contract through the competitive bidding process

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8
Q

How are bid-rigging schemes categorized?

A

Categorized based on the stage of bidding at which the fraudster exerts his influence. Typically occurring in the presolicitation phase, solicitation phase, or the submission phase

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9
Q 
The fraud triangle consists of the following except:
Perceived non-sharable need
Perceived opportunity
Situational environment
All of the Above
A

All of the above

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10
Q

In order to start up a shell company, the fraudster will most likely need all of the following except:
Bank account
Mailing address
Company logo
Certificate of incorporation or assumed name certificate

A

Company Logo

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11
Q 
Able Stone, a customer of ABC Electronics, stole a box of computer games while sales assoc. waited on another customer. Which of the following can Able be charged with:
Larceny
Embezzlement
Fraud
All of the Above
A

Larceny

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12
Q

3 primary reasons people commit financial statement fraud?

A
  1. Pressure to show earnings
  2. Meet performance goals
  3. Look prosperous to investors
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13
Q 
During an interview, when the respondent uses certain phrases such as, "honestly", "frankly", or "to tell the truth", this is known as:
Character testimony
Oaths
Illustrators
Manipulators
A

Oaths

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14
Q 
Cash larceny differs from skimming in which one of the following ways:
Cash larceny is an on-book scheme
Cash larceny is an off-book scheme
Cash larceny is a disbursement scheme
Cash larceny only involves cash
A

Cash larceny is an on book scheme

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15
Q

3 methods of engaging in timing differences

A
  1. Matching Revenue with expenses
  2. Premature revenue recognition
  3. Record expenses in the wrong period
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16
Q

3 common methods for concealing liabilities and expenses

A
  1. omit liab/exp
  2. capitalize exp
  3. failing to disclose warranty costs and liab.
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17
Q

3 primary reasons people commit financial statement fraud?

A
  1. Pressure to show earnings
  2. Meet performance goals
  3. Look prosperous to investors
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18
Q

What is fraud triangle

A

pressure
perceived opportunity
rationalization

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19
Q

What is the fraud diamond

A

pressure
perceived opportunity
rationalization
capability

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20
Q 
During an interview, when the respondent uses certain phrases such as, "honestly", "frankly", or "to tell the truth", this is known as:
Character testimony
Oaths
Illustrators
Manipulators
A

Oaths

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21
Q

Nine motivators of fraud

A 
Living beyond means
Overwhelming desire for personal gain
High personal debt
Close association with customers
Pay not commensurate with job
Wheeler-dealer
Strong challenge to beat system
Excessive gambling
Family or peer pressure
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22
Q

4 types of evidence

A
  1. Testimony of witnesses
  2. Records and documents
  3. Facts and data
  4. Tangible objects
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23
Q

How do books stay in balance in a sales skimming scheme

A

The is no recorded transaction

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24
Q

Format of an investigation report

A 
author/date
summary
introduction/purpose
body
results
followup/recommendations
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25
Q 
Cash larceny differs from skimming in which one of the following ways:
Cash larceny is an on-book scheme
Cash larceny is an off-book scheme
Cash larceny is a disbursement scheme
Cash larceny only involves cash
A

Cash larceny is an on book scheme

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26
Q

forged maker scheme

A

perp forges name of authorized signer

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27
Q

Perception of detection

A

Employees who perceive they will be caught engaging in occupational fraud and abuse are less likely to commit fraud

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28
Q

What are 4 factors that influence the level of fraud risk faced by an organization

A
  1. nature of business
  2. operating environment
  3. effectiveness of internal controls
  4. ethics & values of the company and the people within it
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29
Q

concealed check schemes

A

employee prepares a fraudulent check and submits it along with legitimate checks. Check is payable to the employee accomplice a fictitious person or fictitious business

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30
Q

authorized maker schemes

A

employee with signature authority writes a fraudulent check

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31
Q

What are two main categories of register disbursement schemes

A

false refunds

false voids

32
Q

What are the three categories of payroll schemes?

A
  1. Ghost employee scheme
  2. Falsified hours and salary scheme
  3. Commission scheme
33
Q

What are some nonverbal cues to deception?

A
  • Change in speech pattern
  • oaths
  • answering with a question
  • selective memory
34
Q

Who is most likely to add a ghost employee

A

individuals that have authority to add new employees to the system. Such as someone in HR or has managerial responsibilities.

35
Q

4 types of evidence

A
  1. Testimony of witnesses
  2. Records and documents
  3. Facts and data
  4. Tangible objects
36
Q

3 characteristics/objectives of a good investigation report

A
  1. conveys evidence
  2. adds credibility
  3. accomplishes objectives of the case
37
Q

5 categories of misappropriation of tangible non-cash assets

A
  1. Unconcealed Larceny
  2. Requisitions and Transfers
  3. False shipments
  4. Purchase and Receiving
  5. Misuse
38
Q

What is the fraud scale

A

situational pressures
perceived opportunities
personal integrity

39
Q

Nine motivators of fraud

A 
Living beyond means
Overwhelming desire for personal gain
High personal debt
Close association with customers
Pay not commensurate with job
Wheeler-dealer
Strong challenge to beat system
Excessive gambling
Family or peer pressure
40
Q

Inductive Method of Fraud

A

broad in scope and often relies on general observations or relationships

41
Q

Deductive Method of Fraud

A

helps determine what kinds of frauds can occur in a particular situation and then uses technology or other methods to determine if fraud exists

42
Q

Benford’s Law

A

Noted the frequency of the first digits in any table of unmanipulated data followed a predictable pattern

43
Q

Perception of detection

A

Employees who perceive they will be caught engaging in occupational fraud and abuse are less likely to commit fraud

44
Q

What are 4 factors that influence the level of fraud risk faced by an organization

A
  1. nature of business
  2. operating environment
  3. effectiveness of internal controls
  4. ethics & values of the company and the people within it
45
Q

define skimming

Is it on or off book

A

Theft of cash from a victim entity prior to its entry in an accounting system

off book

46
Q

How do books stay in balance in a sales skimming scheme

A

The is no recorded transaction

47
Q

Lapping

A

method of concealing the theft of cash designated for A/R by crediting one account while abstracting money from a different account. Continuously repeated to avoid detection.

48
Q

Cash Larceny

A

Theft of an organization’s cash after it has been recorded in the accounting system.

49
Q

Deposit Lapping

A

Method of concealing deposit theft that occurs when an employee steals part or all of the deposit from one day and then replaces it with receipts from subsequent days .

50
Q

What are six methods used to conceal receivables skimming

A 
lapping
force balancing
stolen statements
fraudulent write-offs or discounts
debiting the wrong account
destroying or altering records of the transaction
51
Q

Force Balancing and how does it conceal cash larceny

A

making unsupported entries in the books to produce a fictitious balance between receipts and ledgers

52
Q

What are the 5 check tampering schemes

A 
forged maker schemes
forged endorsement schemes
altered payee schemes
concealed check schemes
authorized maker schemes
53
Q

forged maker scheme

A

perp forges name of authorized signer

54
Q

forged endorsement scheme

A

employee intercepts a company check intended for a third party. Perp signs the third party’s name on the endorsement line of the check

55
Q

altered payee schemes

A

employee intercepts a company check intended for a third party. Payee designation is altered so the check can be converted

56
Q

concealed check schemes

A

employee prepares a fraudulent check and submits it along with legitimate checks. Check is payable to the employee accomplice a fictitious person or fictitious business

57
Q

authorized maker schemes

A

employee with signature authority writes a fraudulent check

58
Q

What are the three categories of payroll schemes?

A
  1. Ghost employee scheme
  2. Falsified hours and salary scheme
  3. Commission scheme
59
Q

Ghost Employee

A

someone on the payroll who does not actually work for the victim company

60
Q

Who is most likely to add a ghost employee

A

individuals that have authority to add new employees to the system. Such as someone in HR or has managerial responsibilities.

61
Q

What constitutes expense reimbursement fraud?

A
  • Mischaracterized Expenses
  • Overstated Expenses
  • Fictitious Expenses
  • Multiple Reimbursements
62
Q

Multiple Reimbursement Schemes

A

A single expense item is submitted several times to receive multiple reimbursements

63
Q

5 categories of misappropriation of tangible non-cash assets

A
  1. Larceny
  2. Requisitions and Transfers
  3. False shipments
  4. Purchase and Receiving
  5. Misuse
64
Q

Billing Schemes

A

the perpetrator uses false documentation to cause a payment to be issued for a fraudulent purpose

65
Q

3 types of billing schemes

A

Shell company schemes
Non accomplice vendor schemes
Personal purchases schemes

66
Q

Shrinkage

A

unaccounted for reduction in a company’s inventory that results from theft.

67
Q

4 methods to conceal inventory shrinkage

A
  1. Altered inventory records
  2. Fictitious Sales and A/R
  3. Write-off Inventory and other Assets
  4. Physical Padding
68
Q

Fictitious expense reimbursement schemes

A

Scheme in which an employee seeks reimbursement for wholly nonexistent items or expenses

69
Q

False Refund Scheme

A

fraudulent refund is processed at the cash register to account for stolen cash

70
Q

Fictitious Refund Scheme

A

employee processes a fake refund transaction as if a customer were actually returning merchandise and pockets the cash instead

71
Q

Overstated Refund Scheme

A

employee overstates the amount of a legitimate customer refund then gives the customer the actual amount of the refund and steals the excess

72
Q

False Void Scheme

A

scheme in which employee accounts for stolen cash by voiding a previously recorded sale

73
Q

Perpetual Inventory

A

method of accounting for inventory in the records by continually updating the amount of inventory on hand as purchases and sales occur

74
Q

Forced reconciliation

A

concealing by altering journal entries/ intentionally miscomputing totals

75
Q

Horizontal Analysis

A

technique for analyzing the percentage change in individual financial statement items from one year to the next

76
Q

Vertical Analysis

A

expression of the relationship or percentage of component part items to a specific base item

77
Q

Duty of Reasonable Care

A

Expectation that a corporate officer, director, or high-level employee as well as other people in a fiduciary relationship, will conduct business affairs prudently with the skill and attention normally exercised by people in similar positions

Fraud (1 decks)

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