Fraudulent Disbursements

Question 1

Which of the following is an example of a fictitious expense reimbursement scheme?

A. An employee generates a fake receipt using basic computer software and includes it with an expense report.
B. An employee submits a receipt for a hotel reservation in one expense report and a copy of the credit card statement showing the same reservation in the next period’s expense report.
C. An employee alters an electronic receipt using photo-editing software to show a higher cost than what the employee paid.
D. An employee who travels frequently for business submits receipts from a hotel stay during a family vacation as a business expense.

Answer 1

A. An employee generates a fake receipt using basic computer software and includes it with an expense report.

Question 2

For employee expense reimbursement requests, electronic receipts are preferred to paper receipts because they are more difficult to alter or forge.

A. True
B. False

Answer 2

False

Question 3

All the following are types of expense reimbursement schemes EXCEPT:

A. Fictitious expenses
B. Ghost expense reports
C. Multiple reimbursements
D. Mischaracterized expenses

Answer 3

B. Ghost expense reports

Question 4

Which of the following control procedures will NOT help prevent payroll fraud?

A. Maintaining personnel records separately from payroll and timekeeping functions
B. Having the employee who prepares the payroll also review and sign all payroll checks
C. Keeping the payroll accounting function independent of the general ledger function
D. Prenumbering payroll checks and issuing them in numerical sequence

Answer 4

B. Having the employee who prepares the payroll also review and sign all payroll checks

Question 5

Jacob was on a business trip in another city. One night, he met some friends (unrelated to his work) at an expensive restaurant, paid for the group’s meal using his credit card, and said that “the company would pay for it.” He submitted the receipt for the dinner with the legitimate business receipts from the trip and described the dinner as “client entertainment.” What type of scheme did Jacob commit?

A. A multiple reimbursement scheme
B. A mischaracterized expense scheme
C. An overstated expense scheme
D. A fictitious expense scheme

Answer 5

B. A mischaracterized expense scheme

Question 6

What happens when an employee records a fictitious refund of goods at the employee’s cash register?

A. The register total is out of balance with the register log
B. Inventory is returned to the store
C. The victim company’s inventory is overstated
D. None of the above

Answer 6

C. The victim company’s inventory is overstated

Question 7

Jill is an accountant who needs to satisfy continuing professional education (CPE) requirements to maintain her professional license. Her supervisor usually signs these requests without paying them much attention, which Jill decides to use to her advantage. Jill realizes that it would be easy to copy the image of the logo from a popular CPE provider and generate a receipt using basic computer software. She creates a fraudulent receipt and submits it to her supervisor for reimbursement. What type of scheme is Jill committing?

A. A mischaracterized expense scheme
B. Collusion with a supervisor
C. A multiple reimbursement scheme
D. A fictitious expense scheme

Answer 7

D. A fictitious expense scheme

Question 8

Julia, a fraud examiner, is performing tests to look for potential asset misappropriation schemes at her company. One of her routine tests is to compare the payroll records to the human resources (HR) files. What type of fraud scheme is she MOST LIKELY looking for when performing this test?

A. A check tampering scheme
B. A falsified hours and wages scheme
C. A ghost employee scheme
D. A fraudulent commissions scheme

Answer 8

C. A ghost employee scheme

Question 9

Which of the following schemes refers to the falsification of personnel or payroll records, causing paychecks to be generated to someone who does not work for the victim company?

A. Inflated commission scheme
B. Record alteration scheme
C. Falsified salary scheme
D. Ghost employee scheme

Answer 9

D. Ghost employee scheme

Question 10

Which of the following is recommended to prevent fraud in electronic payments?

A. Having separate bank accounts for paper checks and electronic payments
B. Positive pay for ACH transactions
C. Applying ACH blocks and filters
D. All of the above

Answer 10

D. All of the above

Question 11

Which of the following is a method of committing a falsified hours and salary scheme?

A. Forging a supervisor’s signature
B. Altering a time sheet after it has been approved
C. Colluding with a supervisor
D. All of the above

Answer 11

D. All of the above

Question 12

Pass-through schemes are usually undertaken by employees who receive inventory on behalf of the victim company.

A. True
B. False

Answer 12

False

Question 13

Belinda used her company credit card to pay for a business dinner at which she was entertaining a client, knowing Belinda’s employer would pay the credit card bill. Belinda saved the receipt and later filed an expense report seeking reimbursement for the cost of the meal, attaching the receipt as support. This is an example of what kind of fraud?

A. False billing scheme
B. Personal purchases with company funds
C. Mischaracterized expense scheme
D. Multiple reimbursement scheme

Answer 13

D. Multiple reimbursement scheme

Question 14

Sheila, an accounts payable supervisor for ABC Company, bought supplies for a company she owns on the side. Sheila entered vouchers in ABC’s accounts payable system for the cost of the supplies so that ABC would pay for the supplies. The supplies were then drop-shipped to a location where Sheila could collect them. What type of occupational fraud is this?

A. An invoice kickback scheme
B. A pay and return scheme
C. A personal purchases with company funds scheme
D. An expense reimbursement scheme

Answer 14

C. A personal purchases with company funds scheme

Question 15

Zach was booking travel arrangements for a business trip. He purchased an airline ticket online using his own funds and obtained a receipt for the ticket via email. Using photo-editing software, Zach increased the ticket price on the electronic receipt and submitted the altered receipt to his employer for reimbursement. This is an example of what type of fraud scheme?

A. Multiple reimbursement scheme
B. Personal purchases with company funds
C. Overstated expense scheme
D. Mischaracterized expense scheme

Answer 15

C. Overstated expense scheme

Question 16

Which of the following is a red flag of register disbursement schemes?

A. Personal checks from cashiers are found in the cash register
B. Voided transactions are not properly documented or approved by a supervisor
C. There are multiple refunds or voids just under the review limit
D. All of the above

Answer 16

D. All of the above

Question 17

A detailed expense report should require which of the following components?

A. Original receipts (when possible)
B. Explanation of the business purpose of each expense
C. Time period when the expense occurred
D. All of the above

Answer 17

D. All of the above

Question 18

Joe formed a company called Glenn Corp. He opened a bank account in Glenn Corp.’s name and used his home computer to create fraudulent invoices from Glenn Corp. for “consulting services.” However, Glenn Corp. is a fictitious entity that was created solely to commit fraud, and no services were rendered. Joe mailed these invoices to his employer, Paisley Company. Paisley Company promptly submitted payment to Glenn Corp., not realizing that the company was fake, and Joe deposited the money. What type of billing scheme did Joe commit?

A. A cash larceny scheme
B. A pass-through scheme
C. A pay and return scheme
D. A shell company scheme

Answer 18

D. A shell company scheme

Question 19

Which of the following does NOT happen in a fictitious refund scheme?

A. The company’s inventory is overstated.
B. Merchandise is returned to the stock room.
C. A fraudster processes a transaction as if a customer were returning merchandise.
D. The register log balances with the amount of money in the register.

Answer 19

B. Merchandise is returned to the stock room.

Question 20

Which of the following scenarios BEST describes a mischaracterized reimbursement expense scheme?

A. An employee produces a fictitious receipt and includes it with an expense report.
B. An employee submits a receipt for an item in one expense report and an email confirmation for the same item in the next period’s expense report.
C. An employee who travels frequently for business submits receipts from a hotel stay during a family vacation as a business expense.
D. An employee alters a receipt to show a higher cost than what the employee paid and submits it for reimbursement.

Answer 20

C. An employee who travels frequently for business submits receipts from a hotel stay during a family vacation as a business expense.

Question 21

A register disbursement scheme is easier to conceal when cashiers are authorized to void their own transactions.

A. True
B. False

Answer 21

True

Question 22

For a ghost employee scheme involving an hourly employee to be successful, all the following must happen EXCEPT:

A. A paycheck must be issued to the ghost employee.
B. The ghost employee must be added to the payroll.
C. Timekeeping information must be collected for the ghost employee.
D. The ghost employee must be a fictitious person.

Answer 22

D. The ghost employee must be a fictitious person.

Question 23

Pam is the purchasing manager at a retail store. She decides to form a shell company and purchase merchandise through this entity. She then sells the merchandise to her employer at an increased price as if she were a legitimate vendor. What type of scheme is Pam committing?

A. A pay and return scheme
B. A cash larceny scheme
C. A need recognition scheme
D. A pass-through scheme

Answer 23

D. A pass-through scheme

Question 24

Gaps in the transaction numbers on the register log might indicate that a register disbursement scheme is taking place.

A. True
B. False

Answer 24

True

Question 25

Electronic payment tampering is generally easier to detect than traditional check tampering because it leaves a clear audit trail.

A. True
B. False

Answer 25

False

Question 26

Tanya, a cash register attendant at a department store, regularly inflates the amount of customer refunds. For instance, if a customer returns an item for $100, Tanya records a $150 refund. Then Tanya gives the customer $100 and keeps $50 for herself. This scheme is known as:

A. An overstated refund scheme
B. Skimming
C. A false void scheme
D. A fictitious refund scheme

Answer 26

A. An overstated refund scheme

Question 27

White, an employee of ABC Corporation, intentionally issued two payments for the same invoice. After the checks had been mailed, White called the vendor and explained that a double payment had been made by mistake. White asked the vendor to return one of the checks to her attention. When the vendor returned the check, White took it and cashed it. This is an example of a:

A. Pay and return scheme
B. Shell company scheme
C. Receivables skimming scheme
D. Pass-through scheme

Answer 27

A. Pay and return scheme

Question 28

Which of the following describes the primary purpose of an automated clearing house (ACH) filter?

A. It matches the details of incoming payments with those on a list of expected payments provided by the account holder.
B. It is a tool used by auditors to examine electronic payment activity on the bank records.
C. It enables account holders to provide their banks with a list of criteria to ensure that only designated individuals are paid.
D. It requires the bank to contact the account holder before any payments are made.

Answer 28

C. It enables account holders to provide their banks with a list of criteria to ensure that only designated individuals are paid. CORRECT

Question 29

Which of the following methods would be useful in detecting a ghost employee scheme?

A. Analyzing payroll withholdings
B. Comparing personnel records to payroll data
C. Examining payroll checks for dual endorsements
D. All of the above

Answer 29

D. All of the above

Question 30

_______________ is a system by which the bank verifies checks presented for payment against the list provided by the company of approved checks written on the account.

A. Verification control
B. Positive pay
C. Payment patrol
D. Check matching

Answer 30

B. Positive pay

Question 31

Which of the following is TRUE regarding an overstated refund scheme?

A. An employee overstates the amount of a legitimate refund and keeps the excess cash.
B. It is based on an entirely fictitious refund transaction.
C. It requires collusion between the customer and the employee.
D. The company’s inventory balance on the books will be understated

Answer 31

A. An employee overstates the amount of a legitimate refund and keeps the excess cash.

Question 32

All the following are types of payroll schemes EXCEPT:

A. Falsified hours and salary
B. Commission schemes
C. Ghost employees
D. Stolen paychecks

Answer 32

D. Stolen paychecks

Question 33

All the following measures are recommended to help mitigate the risk of billing schemes EXCEPT:

A. Prohibiting competitive bidding
B. Separating the purchasing function from the payment function
C. Providing objective compensation for purchasing staff
D. Implementing a hotline function

Answer 33

A. Prohibiting competitive bidding