Fraud Examination Exam 1
____________________ is the theft of cash from a victim entity prior to its entry in an accounting system. A. fictitious disbursement B. Skimming C. Larceny D. Conversion
B
According to Cressey, the perceived opportunity to commit fraud consists of two elements: general information and technical skill. True False
a
According to the 2012 Report to the Nations on Occupational Fraud and Abuse, billing schemes were the second most costly type of fraudulent disbursements schemes. a. True b. False
a
According to the 2012 Report to the Nations on Occupational Fraud and Abuse, cash larceny schemes were the least common form of cash misappropriations. True False
a
According to the 2012 Report to the Nations on Occupational Fraud and Abuse, the most common fraudulent disbursement schemes were: a. Billing schemes b. Check tampering schemes c. Payroll schemes d. Register disbursement schemes
a
According to the results of the Hollinger-Clark study, employees steal primarily because of: a. Job dissatisfaction b. Greed c. Informal organizational structures d. Economic pressures
a
Asset misappropriations are broken down into two categories: cash schemes and non-cash schemes. According to the 2012 Report to the Nations on Occupational Fraud and Abuse, cash schemes are much more common than non-cash schemes. True False
a
Cash misappropriations are divided into two broad groups: fraudulent disbursements schemes and cash receipts schemes. a. True b. False
a
Categories of billing schemes include which of the following? a. Shell company schemes b. Larceny billing schemes c. Fictitious disbursements schemes d. All of the above
a
Computing the percentage of assigned time to unassigned time for employees is one method to detect an employee skimming scheme. True False
a
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): a. Deposit in transit b. Outstanding check c. Credit memo d. None of the above
a
If discrepancies are found between the sales records and the cash on hand, which of the following schemes might be occurring? a. Cash larceny at the point of sale b. Cash larceny from the deposit c. Fraudulent disbursements d. Sales skimming
a
In a fraud examination, evidence is usually gathered in a manner that moves from general to specific. True False
a
In one of the case studies in the textbook, Bill Gurado was a branch manager for a consumer-loan finance company in New Orleans who decided to help himself to the daily deposits. Instead of depositing the money into the company's bank account, he deposited the money into his own personal account. How was Gurado's fraud discovered? a. He suspected he was on the verge of being caught, called the company's president, and confessed that he had taken the money. b. The auditors found it during a surprise audit of the branch Gurado managed. c. His assistant suspected him and reported him to the company's audit committee. A customer called to complain about receiving d. an overdue notice.
a
In one of the case studies in the textbook, Stefan Winkler was the controller for a beverage company in south Florida. Money was collected by either the delivery drivers who brought in the cash and checks from their route customers (route deposits), or by credit customers who mailed in their payments (office deposits). Winkler stole cash from the route deposits and made up for it by using checks from the office deposits. Which of the following red flags were present that could have alerted the company to the fraud? a. Missing deposit slips b. Customer complaints c. Winkler never took vacations d. All of the above
a
In the 2012 Report to the Nations on Occupational Fraud and Abuse, financial statement fraud had a higher median loss than asset misappropriation and corruption schemes. True False
a
In the 2012 Report to the Nations on Occupational Fraud and Abuse, the median loss in schemes committed by males was higher than the median loss in schemes committed by females. True False
a
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. a. True b. False
a
Joel Baker, a customer of ABC Electronics, stole a box containing computer games while the sales associate waited on another customer. Which of the following could Joel be charged with? a. Larceny b. Embezzlement c. Fraud d. All of the above
a
Mandating supervisory approval for write-offs or discounts can help prevent receivables skimming schemes. a. True b. False
a
Running a report that summarizes user access for the sales, accounts receivable, cash receipt, and general ledger systems during non-business hours might identify a cash larceny scheme. a. True b. False
a
Skimming receivables is generally more difficult to conceal than skimming sales. True False
a
The central weakness of a cash larceny scheme is the resulting imbalance in the organization's accounting records. a. True b. False
a
The most important factor in preventing cash larceny from the deposit is: a. Separating the duties of the deposit function b. Having two employees deliver the deposit to the bank c. Having a visible management presence in the mailroom d. None of the above
a
To a fraudster, the principle advantage of skimming is the difficulty with which the scheme is detected. True False
a
To prevent cash larceny through falsification of cash counts, an independent employee should verify the cash count in each register or cash box at the end of each shift. a. True b. False
a
What is the primary difference between cash larceny and skimming? a. Cash larceny is an on-book scheme; skimming is an off-book scheme. b. Cash larceny is an off-book scheme; skimming is an on-book scheme. c. Cash larceny is a disbursement scheme; skimming is a cash receipts scheme. d. Cash larceny involves cash only; skimming can involve either cash or checks.
a
Which of the following is not one of the legs of the Fraud Triangle? a. Situational environment b. Perceived non-sharable financial need c. Perceived opportunity d. Rationalization
a
Which of the following procedures would not be useful in preventing and detecting sales skimming schemes? a. Comparing register tapes to the cash drawer and investigating discrepancies b. Summarizing the net sales by employee and c. extracting the top employees with low sales
a
While conducting a routine internal audit, Sally Franks overheard one of the company's purchasing agents bragging about receiving a substantial discount on a new SUV from the company's supplier of fleet cars. Is there sufficient predication to initiate a fraud examination? Yes No
a
According to the 2012 Report to the Nations on Occupational Fraud and Abuse, cash larceny schemes had the largest median loss of all cash misappropriations. True False
b
According to the 2012 Report to the Nations on Occupational Fraud and Abuse, skimming schemes are both the most common and the most costly type of cash misappropriation scheme. True False
b
Deposit lapping is considered an off-book scheme. a. True b. False
b
Fraud examination differs from auditing in that fraud examination is: a. Recurring b. Adversarial c. General in scope d. All of the above
b
George Albert was a property manager for a large apartment complex while he was going to college. One of his duties was to collect rent from the tenants. If rent was paid after the third of the month, a late fee was tacked on to the amount due. When a tenant paid his rent late, George would backdate the payment, record and remit only the rent portion to his employers, and pocket the late fee. This is an example of what type of fraud? a. Larceny b. Sales skimming c. Fraudulent write-offs d. Plugging
b
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. How was the fraud caught? a. The auditors found a discrepancy in the invoices that were submitted. b. The new chief of internal audit found it by accident. c. A vendor received a check by mistake and called the accounts payable department. d. The external audit found it in an audit sample of canceled checks.
b
In one of the case studies in the textbook, Bill Gurado was a branch manager for a consumer-loan finance company in New Orleans who decided to help himself to the daily deposits. Instead of depositing the money into the company's bank account, he deposited the money to his own personal account. How was the case settled? a. The company pursued civil action for the repayment of the stolen funds. b. Gurado was terminated and he immediately paid back the money. c. Gurado was convicted of grand theft and scheming to defraud, and he was placed on probation. d. Gurado was placed on deferred adjudication and required to make restitution.
b
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. What was his motivation for committing the fraud? a. He needed to repay his student loan. b. He was greedy. c. He felt that the clinic was taking too much of a cut from his income. d. He wanted to use the proceeds to fund his "doctors without borders" practice.
b
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 vault and stole two deposit bags worth approximately $16,000. How was she ultimately caught? a. She broke down and confessed to the investigators during a routine interview of all tellers. b. Her husband found the bank's money and turned her in. c. The bank found some of the checks in the dumpster near her house with her fingerprints on them. d. None of the above
b
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 vault and stole two deposit bags worth approximately $16,000. Which of the following red flags made the investigators suspect Laura? a. The security system showed that she was the last one to leave the bank on the day before the bags were stolen. b. She broke out in a rash when she was interviewed. c. During the interview she made a point of mentioning that the other teller had been having financial problems. d. All of the above
b
In one of the case studies in the textbook, a Southeastern medical college was plagued with fraudulent activity. What started as an investigation into some suspicious expense reimbursement activity eventually led to the discovery of a fictitious company that was set up to fraudulently bill the college for supplies that never existed. How was the case resolved? a. The perpetrator was terminated, and the funds were recovered. b. The perpetrator was convicted and placed on probation, and partial restitution was ordered. c. The perpetrator left the state and was caught pulling the same scam at another company. d. A civil suit was filed and restitution was ordered.
b
In one of the case studies in the textbook, a Southeastern medical college was plagued with fraudulent activity. What started as an investigation into some suspicious expense reimbursement activity eventually led to the discovery of a fictitious company that was set up to fraudulently bill the college for supplies that never existed. What was the first sign that there were more problems than the initial expense reimbursement fraud? a. The auditors found an usually high number of new unapproved vendors. b. The administrative assistant suddenly left town when requested to be interviewed. c. The supervisor resigned his position immediately. d. A tip was received by internal auditors.
b
In the 2012 Report to the Nations on Occupational Fraud and Abuse, most frauds were initially detected during an external audit. True False
b
In the 2012 Report to the Nations on Occupational Fraud and Abuse, most perpetrators of fraud had been previously charged with or convicted of a fraud-related offense. a. True b. False
b
In the Fraud Tree, all of the following are categories of fraudulent disbursements except: a. Payroll schemes b. Cash larceny c. Check tampering d. Billing schemes
b
Jan Ashley worked for the R&S Department Store as a sales associate in the fine linens department. As she would give change back to a customer for cash sales, she would also pull out a $10 bill and slip it in her pocket. She concealed her scheme by issuing one false refund at the end of her shift for the total amount she stole that day. This is an example of what type of scheme? a. Sales skimming b. Larceny at the point of sale c. Lapping d. Larceny at the deposit
b
Larceny schemes are generally more difficult to detect than skimming schemes. a. True b. False
b
Mel Turner, the runner for a small bookstore, had a bad habit of helping himself to cash from the deposit on the way to the bank. He covered his tracks by substituting a check from the next day's deposit for the amount he stole from the previous day's deposit. This is an example of what type of concealment? a. Deposits in transit b. Deposit lapping c. Force balancing d. None of the above
b
Most shell company schemes involve the purchase of goods rather than services. a. True b. False
b
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? a. Match the vendor master file to the accounts receivable file b. Review payments with little or no sequence between invoice numbers c. Extract all employees without a social security number d. All of the above
b
Once sufficient predication has been established, what is the first step a fraud examiner following the fraud theory approach should take? a. Create a hypothesis. b. Analyze data. c. Interview witnesses. d. Interview the suspect.
b
Peggy Booth is the bookkeeper for an equipment rental company. After recording the cash sales and preparing the bank deposit, she takes $200 dollars from the total. This is an example of a skimming scheme. a. True b. False
b
Predication, although important, is not required in a fraud examination. True False
b
Producing an invoice that looks professional is the most difficult part of a shell company scheme. a. True b. False
b
Purchasing personal items using an organization's money is what type of scheme? a. Larceny scheme b. Billing scheme c. Pay-and-return scheme d. Skimming scheme
b
Research in the Hollinger-Clark study suggests that the best way to deter employee theft is by: a. Increasing sanctions imposed on occupational fraudsters b. Increasing the perception of detection c. Strengthening internal controls d. Communicating the organization's fraud policies to employees
b
Sally Fuller is a buyer for GWA publishing company. Her job is to purchase supplies and services for the printing of technical manuals. Her brother sets up a printing company, and Sally hires him to print most of these manuals for GWA. However, rather than actually printing the manuals, her brother hires another printer to do the work, then sells the printed manuals to GWA at a 50 percent markup. As a result, his prices are much higher than the other printers who serve GWA. This type of scheme is most likely a: a. Pay-and-return scheme b. Pass-through scheme c. Inventory-markup scheme d. Non-accomplice vendor scheme
b
Skimming can be either an on-book scheme or an off-book scheme, depending on whether cash or a check is stolen. True False
b
Skimming involves the theft of money that has already appeared on a victim's books, while cash larceny involves stealing money before it has been recorded. True False
b
Sue Meyers was an accounts receivable clerk for an insurance broker. When premium payments were received, she would steal the check of every tenth customer and cash it at a liquor store. To conceal her scheme, she would credit the account of the customer that she stole from with a payment that was received from another customer's account. This is an example of: a. Force balancing b. Lapping c. Understating sales d. A forged endorsement scheme
b
The basic tenet of Edwin Sutherland's theory of differential association is that crime is passed on genetically; that is, the offspring of criminals commit crimes because their parents did. True False
b
The concealment of receivables skimming can be difficult because: a. The audit trail must be destroyed. b. The incoming payments are expected. c. Inventory must be padded to conceal shrinkage. d. All of the above
b
The discipline of fraud examination includes all of the following except: a. Writing investigative reports b. Determining the guilt of the suspect c. Testifying to findings d. Interviewing witnesses
b
The internal auditor for the Bremer Group recently ran a computer audit test that showed that Ouetzen Company, one of the company's listed vendors, doesn't have a telephone number or a tax ID number. Of the choices given, what type of fraud does this situation most likely indicate? a. Larceny scheme b. Shell company scheme c. Non-accomplice vendor scheme d. Personal purchases scheme
b
To cover up a skimming scheme in which the employee takes cash from the register, the employee must make a voided sale in order for the register to balance. True False
b
When Jill Michaels, an assistant to the director of procurement, moved into her new home, she used the company's flat bed truck to move her furnishings on an afternoon when her boss was out of town. Which of the following best describes Michael's act? a. Fraud b. Abuse c. Embezzlement d. Larceny
b
When a billing scheme is occurring, the company's expenses appear lower than they should, causing the financial statements to show falsely inflated profits. a. True b. False
b
Which of the following computer audit tests would be the least useful in detecting a cash larceny scheme? a. Summarizing the difference between the cash receipt report and the sales register system by employee b. Summarizing the top sales producers by employee c. Summarizing discounts, returns, and cash receipt adjustments by employee d. Reviewing all unique journal entries in the cash accounts
b
Who developed the Fraud Scale? a. Joseph T. Wells b. W. Steve Albrecht c. Richard C. Hollinger d. Donald R. Cressey
b
____________________ are schemes in which the employee intentionally mishandles payments that are owed to legitimate vendors. a. Pass-through schemes b. Pay-and-return schemes c. Shell company schemes d. Switch-and-swap schemes
b
A method of concealing receivables skimming by crediting one account while abstracting money from a different account is known as: a. Account substitution b. Kiting c. Lapping d. Plugging
c
A pass-through scheme is usually undertaken by someone who works in which department? a. Accounts payable b. Receiving c. Purchasing d. Accounts receivable
c
Abby Watkins works in the accounts payable department for SVX Company. Recently, she set up a payment to Pacific Industries for invoice number 7001a, which is unlike any invoice number she has seen from Pacific in the past. The voucher contains a purchase order that backs up the invoice, but it looks like a photocopy. Additionally, the accounting system shows that invoice number 7001 from Pacific was for a slightly different amount and has already been paid. Pacific Industries is an established vendor with SVX, but the payment address has recently been changed to a P.O. Box in the vendor file. What type of fraud does this situation most likely indicate? a. Personal purchases scheme b. Shell company scheme c. Non-accomplice vendor scheme d. False purchase requisition scheme
c
Alice Durant works in the accounts payable department for the BC Group. She recently found out that Della Granger, another A/P clerk, received a bigger raise than she did, even though Durant has been with the company longer and frequently has to correct Granger's errors. Which leg of the Fraud Triangle best applies to Durant's situation? a. Motive b. Perceived opportunity c. Rationalization d. Non-sharable financial need
c
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? a. Larceny b. Kiting c. Skimming d. Currency balancing
c
Danielle Boyle, CFE, was hired to investigate some suspicious activity in the accounts receivable department at Red Technologies. While examining the company's accounting records, she noticed several payments posted to customers' accounts that were later reversed with journal entries to "courtesy discounts." What type of scheme might this situation indicate? a. Receivables skimming b. Deposit lapping c. Cash larceny of receivables d. Shell company
c
Eli Adams is an accounts payable clerk for MJF Productions. By forging signatures, he was able to procure a company credit card. He recently bought home stereo equipment and put it on his company credit card. When the credit card statement arrived at MJF, Eli prepared a check to the credit card company and buried the purchase in the monthly expenses of the company's largest cost center, knowing that his manager is generally inattentive when approving payments. What type of fraud is this? a. Larceny b. Pass-through scheme c. Personal purchases scheme d. Forged maker scheme
c
Fictitious entities created for the sole purpose of committing fraud are called: a. Ghost companies b. Non-accomplice vendors c. Shell companies d. "Rubber stamp" companies
c
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: a. Undue family or peer pressure b. Lack of recognition of job performance c. Living beyond one's means d. Lack of appreciation by management
c
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? a. Through a routine audit of the clinic's records b. Through an anonymous tip to the clinic c. By accident d. None of the above
c
In the Fraud Tree, asset misappropriations are broken down into cash and non-cash schemes. Which of the following is not considered a misappropriation of cash? a. Larceny b. Skimming c. Concealed expenses d. Fraudulent disbursements
c
Methods for concealing larceny of receivables include which of the following? a. Lapping b. Stolen statements c. Reversing entries d. All of the above
c
Myra Manning, CFE, was hired to investigate some suspicious activity at Arizona Medical Supply after one of the company's largest customers complained several times that its account statements do not reflect all the payments it has made. While examining the accounts receivable activity, Myra noticed a significant rise in the volume of overdue accounts during the last 6 months. What type of scheme might this situation indicate? a. Cash larceny b. Shell company c. Receivables skimming d. False refunds
c
Richard Moore is the controller for Ajax Company. Recently, he suffered several large losses at the race track, causing him to incur enormous personal debts. Which type of non-sharable financial problem best describes Richard's situation? a. Business reversal b. Physical isolation c. Violation of ascribed obligations d. Status gaining
c
Samantha Lewis, CFE, is conducting an investigation into possible skimming of the accounts receivable at Southwest Paint and Supply Co. If Lewis plans to interview all of the following parties, whom should she interview first? a. Marie Riley, the primary suspect b. Jose Rodriguez, an accounts receivable clerk who filled in for Riley while she was on vacation c. Sean Miles, a regular customer of the company, whose complaint about his account balance prompted the investigation d. Thomas Banks, Riley's supervisor, who is suspected of helping Riley cover up the fraud in exchange for a portion of the proceeds
c
The customer service department at JNC, Inc. has been receiving phone calls from customers for whom there is no record. This is a red flag of what type of scheme? a. Receivables skimming b. Shell company c. Unrecorded sales d. None of the above
c
The two categories of cash receipts schemes are: a. Lapping and skimming b. Lapping and cash larceny c. Cash larceny and skimming d. Skimming and billing schemes
c
Where do most larceny schemes involving cash occur? a. In the accounting department b. In the mailroom c. At the point of sale d. At off-site locations
c
Which of the following actions is least likely to help prevent and detect schemes involving fraudulent invoices from non-accomplice vendors? a. Marking "paid" on every voucher that has been paid b. Verifying vendor address changes before disbursements are issued c. Matching all bank statement items to canceled checks d. Separating the duties of purchasing, authorizing, and distributing payments
c
Which of the following computer audit tests can be used to detect skimming schemes? a. Summarizing by employee the difference between the cash receipt report and the sales register system b. Identifying unique journal entries to the cash account c. Joining the customer statement report file to the accounts receivable and reviewing for balance differences d. Extracting invoices paid by cash
c
Which of the following controls can be used to prevent or detect personal purchases on company credit cards? a. Having credit card statements sent directly to someone with signature authority on the account for review and payment b. Requiring employees to receive store credits rather than cash when returning items they purchased with the company's credit card c. Monitoring credit card expenses for unexplained increases in purchasing levels d. All of the above
c
Which of the following is not a part of the fraud theory approach? a. Analyze available data. b. Develop "what-if" scenarios. c. Identify who committed the fraud. d. Refine the hypothesis.
c
Which of the following is the correct order for a fraud examiner to interview witnesses? a. Corroborative witnesses, neutral third-parties, co-conspirators, suspect b. Suspect, co-conspirators, corroborative witnesses, neutral third-parties c. Neutral third-parties, corroborative witnesses, co-conspirators, suspect d. Suspect, corroborative witnesses, co-conspirators, neutral third-parties
c
All of the following are ways a fraudster might conceal cash larceny from the deposit except: a. Posting missing money as "deposits in transit" b. Deposit lapping c. Falsifying the bank copy of the deposit slip d. Destroying customer statements
d
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? a. Larceny b. Embezzlement c. Conversion d. All of the above
d
Charles Dieter and Joey Davis worked together to steal nearly $50,000 from Valdosta Medical Supply. Charles, an accounts payable clerk, deliberately overpaid a few of the company's vendors. He then called the vendors, explained the "mistake," and asked for the excess to be refunded. Joey, a mailroom employee, intercepted the incoming refund checks and cashed them. The two men split the proceeds. What type of scheme did Charles and Joey commit? a. Shell company b. Larceny c. Pass-through d. Pay-and-return
d
Eddie Dolan is the manager of shipping and receiving and has been working at the UFA Company for twenty years. He rarely calls in sick and gets good performance reviews every year. For the past year, his wife's company, ABC Co., has been in serious financial trouble. ABC Co. likely will not be able to make the payroll for next month and may have to close down. Which leg of the Fraud Triangle best applies to Dolan's situation? a. Motive b. Perceived opportunity c. Rationalization d. Non-sharable financial need
d
In a ______________ scheme, the perpetrator uses false documentation to cause a payment to be issued for a fraudulent purpose. a. Purchasing b. Skimming c. Larceny d. Billing
d
In a shell company scheme, which of the following methods might a fraudster use to get a phony invoice approved for payment? a. Collusion b. A "rubber stamp" supervisor c. Falsification of purchase orders and receiving reports d. Any of the above
d
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: a. Lack of clear lines of authority b. Inadequate attention to detail c. Lack of an internal audit function d. Placing too much trust in key employees
d
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? a. Employees in the accounts payable department did not follow departmental procedures. b. Accounts payable never checked signatures on the invoices against the authorized signatures on file. c. Miano was allowed to pick up the approved invoices from the administrative vice-president's office and deliver them to the accounts payable department. d. All of the above
d
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 he punished? a. He was convicted of grand larceny and sentenced to probation. b. He was sued in civil court for the amount of the loss. c. He was terminated from the practice and was required to make full restitution in lieu of prosecution. d. He was allowed to continue to practice at the clinic but was required to make full restitution.
d
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 vault and stole two deposit bags worth approximately $16,000. How was the case settled? a. She paid the bank back in lieu of prosecution. b. She was prosecuted and sentenced to eighteen months in jail. c. She was dismissed and signed a promissory note to repay the money. d. She was prosecuted but received probation in lieu of prison time.
d
In one of the case studies in the textbook, Stefan Winkler was the controller for a beverage company in south Florida. Money was collected by either the delivery drivers who brought in the cash and checks from their route customers (route deposits), or by credit customers who mailed in their payments (office deposits). Winkler stole cash from the route deposits and made up for it by using checks from the office deposits. How did Winkler conceal his crime? a. He altered electronic files b. He stole cash receipt journals, copies of customer checks, and deposit slips c. He removed his personnel file d. All of the above
d
In one of the case studies in the textbook, a Southeastern medical college was plagued with fraudulent activity. What started as an investigation into some suspicious expense reimbursement activity eventually led to the discovery of a fictitious company that was set up to fraudulently bill the college for supplies that never existed. Which of the following red flags were found during the investigation? a. Some vendors didn't have street addresses or telephone numbers. b. Invoices were received for just under the amount that required two authorized signatures. c. Some of the checks were cashed at check cashing companies. d. All of the above
d
In order to prove that fraud occurred, four elements must be present. Which of the following is not one of those elements? a. A material false statement b. Knowledge that the statement was false c. Reliance on the false statement by the victim d. Intent to cause the victim damages
d
In order to start up a shell company, the fraudster will most likely need which of the following? a. Certificate of incorporation b. Mailing address c. Bank account d. All of the above
d
Jason Herman works part-time as a retail clerk at a local bookstore. One night while his manager was out of town, Jason decided to keep the store open for a few extra hours. He reset the cash registers at the normal closing time, but continued making sales. Two hours later, when he closed for the night, he reset the registers again, removing all evidence that any extra transactions had been made, and pocketed the money from the after-hours sales. What kind of scheme did Jason commit? a. Register disbursement b. Force balancing c. Receivables skimming d. Unrecorded sales
d
Jeff Lewis is an accounts receivable clerk for FTB Industries. As customers pay off their balances, Lewis posts the payments but pockets the money. He can conceal his theft by: a. Making unsupported entries for the amount stolen b. Adjusting the account with a discount c. Destroying the records d. All of the above
d
Methods of skimming sales include which of the following? a. Conducting unauthorized sales after hours b. Rigging the cash register so that the sale is not recorded c. Posting a sale for less than the amount collected d. All of the above
d
Procedures that can be used to prevent and/or detect receivables skimming include which of the following? a. Reconciling the bank statement regularly b. Mandating that employees take annual vacations c. Performing a trend analysis on the aging of customer accounts d. All of the above
d
Receivables skimming can be concealed through: a. Lapping b. Force balancing c. Document destruction d. All of the above
d
Victor Jackson, CFE, was hired by BRS Carpet and Tile to investigate possible cash larceny at the point of sale. Which of the following red flags should he look for? a. Large differences between sales records and cash on hand b. Unusual journal entries to the cash accounts c. A large number of small differences between sales records and cash on hand d. All of the above
d
Warning signs of a shell company scheme include which of the following? a. Invoices lacking details of the items purchased b. A vendor that is not listed in the phone book c. An unexpected and significant increase in "consulting expenses" d. All of the above
d
Which of the following antifraud controls can help prevent and detect cash larceny from the deposit? a. Having two copies of the bank statement delivered to different persons in an organization b. Comparing the bank authenticated deposit slip with the general ledger posting of the day's receipts c. Preparing the deposit slip to show each individual check and money order along with currency receipts d. All of the above
d
Which of the following best describes the objective of a fraud examination? a. To make recommendations to management about how to prevent fraud b. To determine whether financial statements are free of misstatements due to fraud c. To express an opinion on the guilt or innocence of a suspect d. To determine whether a crime has been committed, and if so, who is responsible
d
Which of the following computer audit tests can be used to detect billing schemes? a. Extracting manual checks and summarizing by vendor and issuer b. Extracting a sample of vendor open invoices for confirmation with the vendor c. Extracting delivery addresses that do not correspond to company locations d. All of the above
d
Which of the following methods can be used to conceal a larceny scheme that occurred at the point of sale? a. Falsifying the cash count b. Destroying the register tape c. Stealing from another employee's register d. All of the above
d
Which of the following techniques is not used to conceal sales skimming schemes? a. Lapping b. Inventory padding c. Destroying records of transaction d. Recording false voids
d