Assignment
Question 1
Running a computer program that compares adjustments to inventory to the void/refund transactions summarized by employee can detect which of the following schemes?
Skimming schemes
Cash larceny schemes
Register disbursement schemes
All of the above
Question 2
In order to prove that fraud occurred, four elements must be present. Which of the following is not one of those elements?
Reliance on the false statement by the victim
A material false statement
Intent to cause the victim damages
Knowledge that the statement was false
Question 3
For the perpetrator, the most dangerous part of a typical register disbursement scheme is often:
replacing the returned merchandise in the physical inventory.
adjusting the cash register tape to match the cash count.
physically removing the cash from the register and carrying it out of the store.
forging the customer receipt as documentation for the reversing transaction.
Question 4
An altered or forged receipt can indicate what type of expense reimbursement scheme?
Mischaracterized expense reimbursements
Fictitious expense reimbursements
Overstated expense reimbursements
All of the above
Question 5
Daisy McMillan works as the office manager for Timball and Lewis, a medium-sized law firm. One afternoon, she went to the hardware store to purchase a few maintenance items for the office. While there, she also bought her husband a hammer as a birthday present. At the register, the items, including the hammer, totaled $63. She paid for all the items together and received both a carbon copy receipt and a separate credit card receipt. Back at the office, she carefully scratched additional numbers on to the carbon copy receipt to increase the total price to $168 and turned in the altered receipt for reimbursement. Several weeks later, she turned in the credit card receipt along with another reimbursement request for the $63. What type of expense reimbursement fraud did she commit?
Overstated expense reimbursement
Multiple reimbursements
Mischaracterized expense reimbursement
All of the above
Question 6
When an employee perpetrates a credit card refund scheme, the perpetual inventory will show a greater amount than the physical inventory.
True
False
Question 7
Which of the following methods can be used to perpetrate a fictitious expense reimbursement scheme?
Submitting expenses that were paid by a third party
Stealing blank receipts
Creating counterfeit receipts
All of the above
Question 8
According to the 2012 Report to the Nations on Occupational Fraud and Abuse, register disbursement schemes were the most frequently reported type of fraudulent disbursement scheme.
True
False
Question 9
In one of the case studies in the textbook, Marcus Lane, a geologist for an environmental management and engineering services firm, traveled all over North and South America as part of his job, resulting in numerous expense reimbursements. Unfortunately, Lane went too far and began to double book his air travel using his personal credit card. He booked two separate flights to the same location, but with a huge cost difference. He used the cheaper ticket for the actual flight and returned the more expensive ticket for credit. And, of course, he submitted the more expensive ticket for reimbursement. How was he punished?
He was terminated and agreed to pay the money back.
He was convicted of grand theft and received probation.
He was allowed to resign and the company agreed not to seek a refund if it was kept quiet.
He resigned from the company and a civil suit was filed against him.
Question 10
In a study by Steve Albrecht, Marshall Romney, and Keith Howe, participants were asked to rank personal characteristics as motivating factors that contributed to fraud. The highest ranked factor was:
living beyond one's means.
lack of recognition of job performance.
lack of appreciation by management.
undue family or peer pressure.
Question 11
In a study by Steve Albrecht, Marshall Romney, and Keith Howe, participants were asked to rank characteristics of the organizational environment that contributed to fraud. The highest ranked factor was:
inadequate attention to detail.
lack of clear lines of authority.
placing too much trust in key employees.
lack of an internal audit function.
Question 12
Register disbursement schemes are different from skimming and larceny at the register in that they:
are on-book schemes, whereas skimming and larceny are off-book schemes.
leave a record of the removal of money on the register tape.
require the use of an accomplice.
all of the above.
Question 13
Remy Lewis has just started working as a marketing research analyst for Commercial Casting Company in New York City. He is relocating his family to New York from North Carolina, but they haven't moved yet. Twice a month, the company pays for Lewis to travel to North Carolina to visit his family and help with the move. During the month of September, Lewis only visited his family once; however, he submitted expense reports for mileage for two separate trips to North Carolina and back. What type of scheme is this?
Fictitious expense reimbursement
None of the above
Mischaracterized expense reimbursement
Billing
Question 14
Nicolas Barrens conspired with his manager to steal nearly $6,000 over 2 months from the grocery store where they worked. Each time Nicolas rang up a customer at the register, he asked the customer if he'd like a receipt. When a customer said no, Nicolas pretended to discard the receipt in the trash, but actually slipped the receipt into his pocket. At the end of his shift, he filled out a void slip for each of these sales and submitted them to his supervisor for approval. With the original receipt and the approved void slip, Nicolas removed cash from the register in the amount of the voided sales and split the proceeds with his supervisor. Nicolas committed what type of fraud scheme?
Skimming
Fictitious expenses
False voids
None of the above
Question 15
Which of the following is not considered a red flag of a fictitious expense reimbursement scheme?
An employee repeatedly uses the company credit card for business travel expenses.
An employee's reimbursement requests are always for round-dollar amounts.
An employee frequently requests reimbursement for high-dollar items that he claims were paid for in cash.
An employee submits reimbursement requests that consistently fall just below the reimbursement limit.
Question 16
Which of the following is not a part of the fraud theory approach?
Develop "what-if" scenarios
Refine the hypothesis
Identify who committed the fraud
Analyze available data
Question 17
Skimming receivables is generally more difficult to conceal than skimming sales.
True
False
Question 18
Dorothy McNally stole $232 from the company deposit while on the way to the bank. She can conceal the theft by recording the missing amount on the bank reconciliation as a(n):
outstanding check.
deposit in transit.
none of the above.
credit memo.
Question 19
In one of the case studies in the textbook, Laura Grove was the head teller at a bank in Tennessee. As the head teller, she had the authority to open the night depository along with another teller. For security reasons, each teller only had half of the combination to the vault. In the end, Grove opened the approximately $16,000. How was the case settled?
She was prosecuted but received probation in lieu of prison time.
She paid the bank back in lieu of prosecution.
She was dismissed and signed a promissory note to repay the money.
She was prosecuted and sentenced to eighteen months in jail.
Question 20
In one of the case studies in the textbook, Brian Lee, a top-notch plastic surgeon, collected payments from his patients without giving a cut to the clinic where he practiced. How was his fraud discovered?
Through an anonymous tip to the clinic
Through a routine audit of the clinic's records
None of the above
By accident
Question 21
The two categories of cash receipts schemes are:
Question 21 options:
lapping and skimming.
lapping and cash larceny.
cash larceny and skimming.
skimming and billing schemes.
Question 22
Arthur Baxter, a manager in records retention for SWC Company, has ordered seven laptop computers for his department, even though he only has five employees. In addition to each laptop, he ordered extra copies of several software programs. When the equipment arrives, Baxter sends one of the extra laptops to his son who is a freshman at Eastern University and sells three of the original software packages to friends. Which of the following offenses could Baxter be charged with?
Embezzlement
Conversion
All of the above
Larceny
Question 23
Mandating supervisory approval for write-offs or discounts can help prevent receivables skimming schemes.
True
False
Question 24
Invoices that are submitted by shell companies can be for fictitious goods or services or for items that were actually sold to the victim company.
True
False
Question 25
Anne Mullens is the bookkeeper for DWG Refrigeration Repair. One afternoon while she was preparing the bank deposit, a customer came in to the office and paid his account in full with a $57 check. Rather than adding the check to the deposit, Anne pocketed $57 cash from the previously recorded amount and included the customer's check in the money to be taken to the bank. What type of scheme did Anne commit?
Skimming
Larceny
Currency balancing
Kiting
Question 26
Cash misappropriations are divided into two broad groups: fraudulent disbursements schemes and cash receipts schemes.
True
False
Question 27
Which of the following methods can be used to conceal a larceny scheme that occurred at the point of sale?
Stealing from another employee's register
Destroying the register tape
Falsifying the cash count
All of the above
Question 28
Procedures that can be used to prevent and/or detect receivables skimming include which of the following?
Reconciling the bank statement regularly
Performing a trend analysis on the aging of customer accounts
Mandating that employees take annual vacations
All of the above
Question 29
The central weakness of a cash larceny scheme is the resulting imbalance in the organization's accounting records.
True
False
Question 30
____________________ are schemes in which the employee intentionally mishandles payments that are owed to legitimate vendors.
Pay-and-return schemes
Shell company schemes
Pass-through schemes
Switch-and-swap schemes
Question 31
When a billing scheme is occurring, the company's expenses appear lower than they should, causing the financial statements to show falsely inflated profits.
True
False
Question 32
Warning signs of a shell company scheme include which of the following?
A vendor that is not listed in the phone book
An unexpected and significant increase in "consulting expenses"
Invoices lacking details of the items purchased
All of the above
Question 33
A method of concealing receivables skimming by crediting one account while abstracting money from a different account is known as:
lapping.
account substitution.
plugging.
kiting.
Question 34
Nicolas Hill, CFE, has been hired to look into suspicious activity at Mason & Jefferson, LLC. The company's controller has reason to believe that the company has fallen victim to a shell company scheme. As part of his investigation, Nicolas should do which of the following?
Match the vendor master file to the accounts receivable file
All of the above
Extract all employees without a social security number
Review payments with little or no sequence between invoice numbers
Question 35
Which of the following controls will help prevent and detect falsified hours and salary schemes?
The duties of payroll preparation, authorization, and distribution are segregated.
Sick leave and vacation time are monitored for excesses by the payroll department.
All of the above.
Supervisors return authorized timecards to the employees for review before they are sent to the payroll department.
Question 36
The most common method of misappropriating funds from the payroll is:
theft of payroll deductions.
overstating commissions.
overpayment of wages.
using a ghost employee.
Question 37
Which type of check tampering scheme is usually the most difficult to defend against?
Authorized maker
Forged endorsement
Altered payee
Concealed check
Question 38
In one of the case studies in the textbook, Albert Miano, the facilities supervisor for a popular magazine, submitted phony invoices. When Miano received the checks for the phony invoices, he forged the contractor's signature. He then endorsed the check in his own name. What controls weaknesses did the company have that facilitated Miano's scheme?
Employees in the accounts payable department did not follow departmental procedures.
Accounts payable never checked signatures on the invoices against the authorized signatures on file.
Miano was allowed to pick up the approved invoices from the administrative vice-president's office and deliver them to the accounts payable department.
All of the above.
Question 39
In one of the case studies in the textbook, Melissa Robinson, who worked as an executive secretary for a worldwide charitable organization and was active in her children's school, was also a thief. As one of two people allowed to sign checks on the organization's bank accounts, she learned early on that she could forge the second person's signature without anyone becoming suspicious. What red flags were present that indicated that something wasn't appropriate?
Robinson would not release any financial information when requested and gave excuses for why it wasn't available.
There were a lot of missing files that the auditors couldn't locate during their annual audit.
Robinson would not take vacation leave.
All of the above.
Question 40
Which of the following procedures will not help prevent ghost employee schemes?
The personnel records are maintained separately from the payroll and timekeeping functions.
The personnel department verifies all changes to the payroll.
The personnel department conducts background and reference checks on all prospective employees before hiring them.
The person responsible for hiring new employees also supervises the payroll function.
Question 41
In one of the case studies in the textbook, Melissa Robinson, who worked as an executive secretary for a worldwide charitable organization and was active in her children's school, was also a thief. As one of two people allowed to sign checks on the organization's bank accounts, she learned early on that she could forge the second person's signature without anyone becoming suspicious. How was she finally caught?
Robinson's husband tipped off the audit committee after he became suspicious of some of Robinson's purchases.
A co-worker contacted the organization's executive director when she found that a company check had been written to the children's school for Robinson's personal items.
New officers were elected, and they took the accounting books from her.
The auditors discovered her fraud during an annual audit of the books.
Question 42
Which of the following procedures can help prevent and detect the theft and conversion of outgoing company checks?
Train employees to look for dual endorsements on canceled checks.
Track changes made to vendor records.
Chart the date of mailing for every outgoing check.
All of the above.
Question 43
Concealing a check tampering scheme generally means hiding both the identity of the perpetrator and the fact that the fraud ever occurred.
True
False
Question 44
In one of the case studies in the textbook, Ernie Phillips was a CPA who had fallen on hard times both financially and personally. He eventually got a job as a controller for a friend who had just been named as the receiver for a financial services company. Within a short period of time Phillips began writing checks to himself that had nothing to do with payroll. What happened to Phillips?
He was charged criminally, and while out on bail, he fled with his family.
He quit his job and moved to another state.
He paid the money back by mortgaging his home.
He pleaded guilty to fraud and grand theft and spent 24 months in prison.
Question 45
Which of the following computer audit tests can be used to detect billing schemes?
Extracting delivery addresses that do not correspond to company locations
Extracting manual checks and summarizing by vendor and issuer
Extracting a sample of vendor open invoices for confirmation with the vendor
All of the above
Question 46
Jed Butler is an internal auditor for Billings Industries. Recently he ran a program that identified customer accounts which had previously been dormant for six months or more but had sales in the last two months of the year. What type of fraud would this test most likely reveal?
Pay-and-return scheme
Shell company scheme
Personal purchases scheme
Commission scheme
Question 47
According to the 2012 Report to the Nations on Occupational Fraud and Abuse, check tampering is the most common fraudulent disbursement fraud.
True
False
Question 48
Marsha Wood added her one-year-old niece, Jackie, to the payroll at JNC Company and began issuing paychecks in Jackie's name, even though Jackie did not work for the organization. Marsha's niece is not considered a ghost employee because she is a real individual rather than a fictitious person.
True
False
Question 49
In one of the case studies in the textbook, Katie Jordon was the "All-American Girl Next Door" working her first job out of college. As an on-site manager for an apartment complex in Dallas, she did such a good job that when her employer purchased a huge apartment complex in Houston, she was asked to run it. All was well until a member of the maintenance crew resigned. She continued to keep him on the payroll and pocketed his wages. She later added a non-existent assistant once she saw how easy it was to add an employee without being questioned. However, her scheme eventually came to light, and her days of bonus pay were over. What was her motivation for stealing?
Her boyfriend, a professional motocross racer, was injured in a race.
She wanted to pay off her college loan early so she could save for a house.
She blew the engine in her car and didn't have the money to replace it.
She was getting married and needed money for the wedding.