ACC 608 Exam 1 Study Guide

What types of company assets are typically misused?

-Company vehicles -Supplies -Computers -Other office equipment

What remedies are available through the civil and criminal justice systems?

Civil: Money. Sometimes Cease and Desist Orders and similar penalties may be attached as well. Criminal: Death sentence, incarceration, probation, fines, restitution, and other penalties such as drug treatment, house arrest, electronic monitoring, sanctions, denial of federal benefits, community service and boot camps. Depending on the crime, incarceration may be mandatory.

What is the difference between skimming and cash larceny?

Skimming is off the books and is stolen without it ever being recorded. Cash larceny is the theft of cash after it has been recorded on the accounting records. Skimming involves the act, the concealment, and the conversion, whereas cash larceny involves only the act and conversion.

Describe the fraud examiner/forensic accountants approach to investigations.

The Fraud Theory Approach: 1. Gather relevant data/evidence 2. Analyze available data 3. Create hypotheses 4. Test the hypotheses 5. Refine and amend hypothesis 6. Draw conclusions

Explain the theory of the fraud triangle.

The Fraud triangle helps to explain the conditions necessary for fraud to occur. Includes: Pressures, Rationalization and Opportunity DIFFERENT FROM THE TRIANGLE OF FRAUD ACTION

Which of the following red flags is seldom associated with cash register disbursement frauds? A. Excessive voids B. Uncashed personal checks in the cash drawer received from employees C. Excessive customer refunds D. Higher than expected uncollectible receivables

D

What are the five major categories of fraudulent disbursements?

-Billing schemes -Check tampering schemes -Payroll schemes -Expense reimbursement schemes -Register disbursement schemes

Give examples of non-fraud forensic and ligation advisory services.

-Damage Claims -Workplace issues (lost wages) -Asset and business valuation -Costs and lost profits associated with construction delays -Cost and lost profits resulting from business interruptions -Insurance claims -Antitrust actions -Intellectual property infringement -Environmental issues -Tax disputes -Employment issues related to lost income

What techniques are generally used to conceal a receivables skimming scheme?

-Lapping -Force Balancing -Stolen Statements -Fraudulent Write-offs or Discounts -Debiting the wrong account -Destroying or altering records of the transaction

Give examples of behavioral indications of fraud.

-Living beyond means -Financial difficulties -Unusually close association with vendor/customer -Wheeler-Dealer attitude -Control issues -Divorce/family problems -Irritability, suspiciousness, or defensiveness -Addiction problems -Complained about inadequate pay -Refusal to take vacation -Excessive pressure from employer -Past employment-related problems -Social isolation -Past legal problems -Other -Excessive family pressure -Complained about a lack of authority -Instability in life circumstances

How are non cash assets misappropriated?

-Misuse -Unconcealed larceny -Asset Requisition and transfers -Purchasing and receiving schemes -Fraudulent shipments

Analyze how the fraud triangle would be adjusted for collusive fraud teams.

-Pressure, motive or incentive, generally, is experienced by the leader (instigator) or recruiter who lacks opportunity -Opportunity is enhanced in the collusive group setting, particularly with regard to capability and concealment. -Rationalization is more easily accomplished in a collusive environment where, at least, some of the blame can be emotionally/psychologically shifted to others

What constitutes "good cause" in the discharge of an employee?

-The employee's conduct was against written policy -The employee's conduct made for unsafe or inefficient business operations -The company completed a reasonable investigation to ensure that any such questionable act was committed by the employee and has evidence to support the claim -The investigation was fair, objective, and evidence suggested the elimination of alternative suspects. -The termination was nondiscriminatory, meaning that all persons committing such an act were and would be terminated. -The punishment fits the crime, meaning the punishment is reasonable given the nature of the offense.

In cash larceny schemes, what methods may be used to conceal these schemes at the point of sale?

-Theft from other registers -Death by a thousand cuts -Reversing Transactions -Altering Cash counts or cash register tape. -Destroying register tape

Identify from Cressey's research the six situational categories that cause non-shareable problems.

-Violations of ascribed obligations -Problems resulting from personal failure -Business reversals -Physical isolation -Status gaining -Employer-employee relations

List the legal elements of fraud.

1. A material false statement 2. Knowledge that the statement was false 3. Reliance on the false statement by the victim 4. Damages resulting from victim's reliance on the false statement.

What are the five principle categories of check tampering?

1. Forged maker schemes 2. Forged endorsement schemes 3. Altered Payee schemes 4. Concealed check schemes 5. Authorized maker schemes

Financial statement fraud is often attributed to pressures. These pressures include all of following except: A. Investment losses by managers B. Meeting analysts' expectations C. Deadlines and cutoffs D. Qualifying for bonuses

A

In terms of the definition of occupational fraud and abuse, who is an employee? A. Any person who receives regular and periodic compensation from an organization for his or her labor B. Only rank and file workers C. Any trust violator D. Respectable business and professional individuals

A

Of the following list of evidence, which is considered demonstrative? A. PowerPoints B. Fingerprints C. Official Documents D. Testimony by law enforcement officer with extensive use of hand motions and gestures to emphasize important points.

A

Which of following is NOT a technique to conceal inventory shrinkage? A. Counting and valuing the physical inventory at the end of each year B. Writing off inventory after physical inventory counts C. Understating the value of physical inventory counts D. Altering the yearly physical inventory counts

A

Which of the following best describes the relationship between an employees position and theft (according to Hollinger and Clark's research)? A. The more expensive thefts are observed in jobs with greater access to the assets of value in the organization. B . The higher the level of employee in an organization, the less likely that employee is to steal due to higher levels of compensation and job satisfaction. C. Employees with less tenure with an organization are less knowledgeable about internal controls and are therefore more afraid to steal. D. Hollinger and Clark's research findings suggest that income is a strong predictor of employee theft.

A

Which of the following is NOT a methodology for the skimming of receivables and its related concealment? A. Voiding a sale after the customer leaves the premises B. Accounts receivable write-offs C. Customer accounts receivables discounts D. Destroying or altering accounts receivable transactions back-up

A

Which of the following is NOT typically a methodology to conceal the misuse of non cash assets? A. Voiding sales at the warehouse liquidation location B. Marking receiving documents documents as "short" C. Writing off property plant and equipment as scrap D. Falsifying incoming shipments paperwork

A

Which of the following is a true statement about fraud examination methodology? A. Remediation requires a critical examination of internal controls weaknesses. B. Fraud can always be prevented C. Predication is almost always discovered near the end of the investigation. D. Deterrence is most closely associated with making sure that perpetrators spend time in jail for their crimes.

A

Which of the following is a true statement about the detection of fraud? A. The combined frequency of tips and accidents in discovering fraud exceeds the combined frequency of internal and external audits. B. Law enforcement plays a significant role in the detection of white collar (economic) crimes. C. Internal controls when properly designed are almost bullet proof in terms of preventing fraud. D. For purposes of understanding how fraud is discovered, whistleblower hotlines are the only method proven to detect fraud.

A

Which of the following is the first step to form a shell company? A. Obtain a certificate of incorporation from the state. B. Open a bank account. C. Obtain a tax identification number. D. File the company by-laws at the local court house.

A

Which of the following is usually NOT a factor that affects the decision to prosecute an entity (organization)? A. The number of individuals complicit in the illegal act. B. Remedial actions taken by the entity C. Nature and seriousness of the offense committed by the organization D. Offers restitution by the organization or entity

A

Which of the following red flags is commonly associated with fictitious expense reimbursement schemes? A. Patterns when expense reimbursement are for the same amount B. Ghost employees receiving expense reimbursements C. Cash disbursements where the canceled checks have been altered. D. Billing errors from a problem vendor

A

Which of the following statements is true with regard to accounting? A. Assets are resources under the entity's control that have future value. B. Liabilities are obligations to suppliers, other creditors, and stockholders. C. Assets usually equal liabilities and stockholder's equity but sometimes includes net profits as well. D. Revenues and expenses, which net to profits, are more important pieces of information than assets, liabilities, and stockholder's equity.

A

Which scenario is an example of larceny? A. Brook borrowed a company computer and didnt intend to return it. B. Larry took cash from the register and replaced it with an IOU. C. Mary used a company vehicle without her supervisor's permission. D. Daniel accepted a new car from a vendor to influence his current company to purchase additional merchandise from this vendor.

A

What are the differences between forged maker and forged endorsement schemes?

A forged maker scheme may be defined as a check tampering in which an employee misappropriates a check and fraudulently affixes the signature of an authorized maker (person who signs checks) thereon. Forged endorsement schemes are those check tampering schemes in which an employee intercepts a company check intended for a third party and converts the check by signing the third party's name on the endorsement line of the check. It is true that both kinds of frauds involve the false signing of another person's name on a check. However in a forged maker scheme the perpetrator is normally working with a blank check. The trick of this scheme is to gain access to blank checks and produce a signature that appears authentic. In forged endorsement schemes, the perpetrator is tampering with a check that has already been written, so the issues involved in this fraud are different. The key to a forged endorsement scheme is obtaining checks after they are signed but before they are properly delivered.

Identify common fraud schemes.

Asset Misappropriation - Larceny of cash, Skimming, Fraudulent Disbursements, Larceny of Inventory and inappropriate use of inventory. Corruption - Conflicts of Interest, Bribery, Illegal Gratuities and Economic Extortion. Financial Statement Fraud - Net income over/understatements, Fictitious revenue, understating revenue, improper timing of revenues and expense recognition, concealed liabilities and expenses, overstated liabilities and expenses, improper asset valuation (inappropriate capitalization and asset write-offs) and improper disclosures. Specific Frauds - Bankruptcy Fraud, Contract Fraud, Money Laundering, Tax Fraud, Investment Scams, Terrorist financing and Consumer Fraud (Identity theft, Credit Card Fraud, etc.)

Explain the difference between an audit, fraud examination, and forensic accounting engagement.

Auditing Objective: An audit is generally conducted for the purpose of expressing an opinion on financial statements and related information. Fraud Examination Objective: The fraud examination goal is to determine whether fraud has occurred and who is likely responsible. Forensic Accounting Objective: The forensic accounting professional's goal is to determine whether the allegations are reasonable based on the financial evidence and if so, the financial impact of the allegations.

For a ghost employee, which of the following is NOT one of the four primary steps needed to make this scheme work? A. Delivery of the paycheck to the ghost B. Input a valid home address for the ghost C. Adding the ghost to the payroll records D. Creating timekeeping information for the ghost

B

Given the elements of fraud, which element is most often associated with evidence of intent by the perpetrator? A. The conversion B. The concealment C. The act D. All three elements are indicative of intent

B

One of the most important contributions of criminology to the study of fraud is: A. The M.I.C.E concept B. The fraud triangle C. The relationship of punishment to remediation D. None of the above

B

One way of demonstrating that an act was a fraud and not a mistake is by: A. Demonstrating that the employee concealed the act B. Showing that there were multiple incidents of the same act C. The destruction of evidentiary documents that describe the act D. All of the above

B

Select the statement that best describes organizational versus organized crime: A. Organizational and organized crime are essentially the same - both center on crimes committed by organizations. B. Some of the crimes typically associated with organized crime include money laundering, mail and wire fraud, conspiracy, and racketeering. C. Organized crime occurs when otherwise legitimate and law-abiding organizations are involved in a criminal offense. D. Some of the crimes typically associated with organizational crime include money laundering, mail and wire fraud, conspiracy, and racketeering.

B

The difference between fraud and errors is: A. The materiality of the value involved B. Intent of those involved C. Whether it affects owner's equity or not D. All of the choices are correct

B

Which of the following best describes skimming? A. Skimming involves the theft of cash after the cash is recorded in the company's accounting system. B. Skimming involves the theft of cash prior to the cash entering the company's bank account and accounting system. C. Skimming involves the theft of cash after the cash is entered in the company's bank account. D. A skimming scheme involves both accounts receivable and sales general ledger accounts.

B

Which of the following is a true statement about fraud statistics? A. Positions tend to have only a minor impact on the frequency of fraud but higher level personnel tend to steal lower dollar amounts. B. Men tend to steal more frequently than women. C. Large corporations tend to be the biggest victims of fraudsters in terms of frequency and dollar losses. D. Men and women tend to steal at the same frequency and at approximately the same dollar values.

B

Which of the following is indicative of the actions of the forged maker perpetrator? A. Issue two checks for the same invoice and gets both signed by an authorized signatory. B. Issue two checks for the same invoice and fraudulently signs and cashes the second check. C. Issues two checks of the same invoice and runs both through the automatic check signing machine. D. Issues two payroll checks to himself and gets both signed by an authorized signatory.

B

Which of the following is the least effective methodology to detect cash larceny? A. Correlates cash shortage details to voids and customer discounts by employees to identify unusual activity. B. Visit the store and interview customers concerning their shopping experience. C. Summarize the use of cash registers after business hours. D. Summarize the difference between the cash registers receipts and deposits by employees across times.

B

Which of the following is true with regard to Cressey's theory of crime causation? A. For a fraud to occur, only one of the fraud triangle attributes needs to be present. B. Opportunity includes both the opportunity to complete the fraud and conceal it without getting caught. C. Financial pressures that is shareable will never result in a fraud. D. Rationalization is the least important attribute of the fraud triangle.

B

Which statement regarding surveillance is LEAST accurate? A. Warrants apply to law enforcement only. B. Audio capture is permitted in circumstances where video surveillance is also collected. C. Once the investigator enters the realm of electronic (audio) surveillance, the laws and requirements become more complicated. D. Generally, federal law prevents the interception and/or recording of wire, oral, or electronic communications with certain exceptions, one except is an operator of a switchboard or common carrier.

B

Which two adjustments are made to the fraud triangle to accommodate predators? A. The fraud triangle is not meant to differentiate between accidental and predator fraudsters. B. Criminal mindset and arrogance substitute for pressure and rationalization. C. Predators have less pressure because they are more likely to be involved in international money laundering and setting up shell companies, particularly in foreign countries. D. Criminal mindset and opportunity substitute for pressure and rationalization.

B

Why sales skimming is called an "off-book" fraud.

Because the cash is stolen before it has been recorded in the victim's company's book, skimming schemes are known as "off-book" frauds.

Which of the following would likely be characterized as a forensic accounting investigation rather than a fraud examination? A. An employee submits unsupported damage claims to his employer, provides false documentation and statements, and deposits the insurance proceeds in his bank. B. A husband submits altered bank account statements to his wife's attorney during their divorce case. C. A plaintiff claims a breach of contract by a vendor resulted in a loss of business and ultimate bankruptcy. D. The state taxing agency has accused a state resident of filing a false tax return, claiming that income appears in their bank account but does not appear as income on their tax filings.

C

Identify which of the following is NOT considered a non-shareable problem from Cressey's research. A. Business reversal such as bankruptcy B. Losses due to gambling C. Justification of the fraud act by blaming the employer for poor work conditions D. Personal problems such as an uninsured medical claim

C

Individual rights associated with criminal law are grounded in the following four amendments to the U.S. Constitution: A. First, Fourth, Fifth, and Ninth B. Fourth, Fifth, Sixth , and Ninth C. Fourth, Fifth, Sixth, and Fourteenth D. Fifth, Sixth, Ninth, and Fourteenth

C

Of the following approaches, which is NOT used by investigators to obtain documents? A. Voluntary Consent B. Search Warrant C. Jury Ruling D. Subpoena

C

Select from the following situations the one that should NOT be defined as abuse: A. A human resource employee surfs the internet, including searching college friends on social media during working hours. B. A human resource employee calls in sick and then spends the day getting a car repaired, going to the DMV and shopping at a local retail outlet C. A human resource employee surfs the internet, including social media during working hours for information about prospective employees. D. A human resource employee takes their laptop home for the weekend to search for college friends on social media.

C

Which of the following best describes the difference between skimming and cash larceny? A. Cash larceny is an "off-the-books" scheme, whereas skimming is an "on-the-book" scheme. B. Skimming and cash larceny both involve the act, the concealment, and the conversion. C. Skimming involves the act, the concealment, and the conversion, whereas cash larceny involves only the act and conversion. D. Cash larceny and skimming are both "off-the-book" scheme.

C

Which of the following is NOT a means to a negotiated remedy? A. Arbitration B. Mediation C. Remediation D. Out-of-court settlements

C

Which of the following is NOT a method to deter, prevent, and detect the theft and alteration of outgoing account payable checks? A. Identify vendors with no mailing address or phone number. B. Identify vendors with a mailing address that matches an employee's address. C. Hand each paycheck to the employee while checking appropriate identification. D. Identify, review, and summarize all manual checks not created through the accounts payable system.

C

Which of the following is NOT a methodology for committing and concealing a sales skimming scheme? A. Conducting sales during nonbusiness hours B. Voiding sales transactions C. Lapping D. Cash registration manipulation

C

Which of the following is NOT an essential element of fraud? A. A material false statement B. Knowledge that the statement was false when it was spoken C. Evidence that the statement was false D. Damages resulting from the victims reliance on the false statement

C

Which of the following is NOT one the five major categories of fraudulent disbursements? A. Payroll Schemes B. Expense Reimbursement Schemes C. Shell Company Schemes D. Billing Schemes

C

Which of the following is an integral step in a pay-and-return scheme? A. Establish a shell company. B. Misappropriate the incoming check related to returned goods and deposit the check in a bank account other than the company's. C. Purchase legitimate goods that are paid by the organization and return them. D. Adjust the legitimate good inventory to conceal the shortage related to the returned goods.

C

Which of the following is generally least effective in detecting non cash misappropriations? A. Physical inventory counts and inspections B. Investigation of inventory shortages C. Summarizing inventory items valued at less than the retail price D. Summarizing inventory receiving shortages by employees

C

Which of the following is most accurate with regard to Miranda Warnings? A. A Miranda Warning is only required if the person arrested asks for it. B. A Miranda Warning is considered a privilege in the civil legal system. C. When a suspected perpetrator is taken into custody by law enforcement they must be given a Miranda Warning. D. Miranda Warnings are only required in the civil but not criminal legal system.

C

Which of the following is true with regard to the relative importance of interviewing? A. Auditors never interview clients and interviewing plays little role in auditing. B. In a civil litigation setting, very little interviewing is performed by attorneys through the deposition process. C. Interviewing is an integral part of auditing, fraud examination, and forensic accounting and all such professionals should develop and refine interviewing skills. D. In general, auditors are provided are provided exceptional training in interviewing skills and techniques.

C

Which of the following statements is NOT true concerning the civil and criminal justice systems? A. In the criminal system, a convicted person must be sentenced to jail or probation. B. In both the criminal and civil systems, persons found guilty can be made to pay fines. C. In the civil system, a person found to be liable can be sentenced to jail or required to pay damages. D. The legal action in the criminal case is pursued on behalf of society.

C

In the Albrecht Fraud Scale, which of the following is true? A. The fraud scale adds the characteristic of capability to the fraud triangle. B. The fraud scale adds the characteristic of integrity to the fraud triangle. C. The fraud scale adds the characteristic of rationalization to the fraud triangle. D. The fraud scale substitutes integrity in place of rationalization.

D

Large fraud perpetrators are most likely to use the money for all of the following except: A. To purchase new homes B. To pay for expensive vacations C. To support extramarital affairs D. To pay taxes

D

One major difference between fraud and a mistake is: A. Concealment B. Cover-up C. The act D. Conversion

D

Select the item that most accurately reflects the difference between probation and parole? A. There are no differences; probation and parole are the same thing. B. Parole is a form of limited incarceration. C. The outcome of both probation and parole is never recidivism. D. Probation is a form of punishment while parole only results after a period of incarceration.

D

The following evidence might help antifraud professionals understand and possibly identify which of the following types of fraud perpetrators? A. The perpetrator who has stolen from and been fired by two previous employers in the last 4 years. B. Two perpetrators who collude to steal hundreds of thousands of dollars and split the stolen cash. C. A financially well-off perpetrator who has been stealing from his House of Worship every week for the last 15 years. D. The perpetrator whose spouse is diagnosed with a rare cancer that is not covered by the employee's health insurance but whose treatment will be very expensive and cost more than the employee earns and the employee was the only one with access to bank accounts and accounting records.

D

Which of the following did NOT result from Sarbanes-Oxley Act of 2002? A. Management's assessment of internal controls B. Prohibitions on personal loans to executives C. Certification obligations for Chief Executive and Chief Financial officers D. Statement on Auditing Standards No. 99

D

Which of the following is NOT a behavioral indicator of fraud? A. Buying new luxury cars or wearing expensive jewelry B. Acting irritable, defensive, or in a belligerent manner C. Not taking vacations of more than two or three days D. Failing to retain adequate financial records

D

Which of the following is NOT a typical method that employees use to overstate legitimate expenses on their expense reports? A. Create receipts. B. Purchase an item at an inflated price and request reimbursement at that price while obtaining a vendor refund. C. Purchase more quantity than is necessary and request reimbursement. D. Alter the delivery paperwork for inventory receipts at the warehouse.

D

Which of the following is a non cash assets misappropriation scheme? A. Skimming B. Lapping C. Kiting D. Using a company computer to operate an Internet commerce site after business hours.

D

Which of the following is an example of check tampering? A. Creating a check for a ghost employee. B. Creating a check payable to a shell company. C. Creating a check to an employee for fictions travel expenses. D. Creating a check and altering the payee after the check is signed.

D

Which of the following is generally the least effective methodology to detect sales or accounts receivable skimming? A. Count and summarize accounts receivable write-offs by employee. B. Periodically review the back-up documentation, including approval for accounts receivable write-offs. C. Examine accounts receivable transaction activity after regular business hours and at unusual times of the day and night. D. Review the accounts receivable employee personnel records for prior terminations for fraudulent activity.

D

What is meant by demonstrative evidence? Examples?

Demonstrative evidence is any evidence that purports to educate, summarize, or amplify real evidence. Demonstrative evidence tends to tell a story and complements other forms of evidence such as real and testimonial evidence. Because demonstrative evidence is not real, it must not create prejudice and it must not materially alter significant aspects of the facts at issue. Examples: PowerPoints, Maps, Charts, Diagrams, Drawings, Scale Models, Computer reconstructions, Animations, and Scientific tests

What are the factors that affect the decision to prosecute an entity?

Factors that affect the decision to prosecute an entity are similar to those for individual prosecution and include the sufficiency of evidence, likelihood of success at trial, probability of deterrence and rehabilitation, and the adequacy of non prosecutorial remediation options. Other Factors: -Nature an seriousness of offense -Corporation's history -Timely and voluntary disclosure -Willingness to cooperate -Corporate compliance program -Replacement of management -Discipline/termination of wrongdoers -Payment of restitution -Disproportionate harm to employees, shareholders, and pensioners -Adequacy of prosecution for individuals -Adequacy of other remedies: civil, regulatory -Consistent with the remainder of the criminal justice system, prosecutors have wide discretion in these type of situations.

How can theft and alteration of outgoing checks be prevented or detected?

Forge maker schemes: Strict set of procedures for handling outgoing checks (safeguarding blank check stock), establishing rules of custody of checks that have been prepared but not signed, and separating duties of check preparation and check signing. Rotate authorized check signers, authorized check signers should verify their signatures on returned checks or another employee should be required to spot-check signatures, restriction of signature stamp and a log of who uses it. too much to write/know...

Explain fraud examination methodology.

Fraud examination is a methodology developed by the ACFE for resolving fraud allegations from inception to disposition, including obtaining evidence, interviewing, writing reports, and testifying. Fraud examination methodology requires that all fraud allegations be handled in a uniform, legal fashion and that they be resolved in a timely manner. (pg. 30) Gathering the required financial and non-financial evidence to affix culpability. (Fraud examination objective from Table 1-2 pg. 12) In a fraud examination, evidence is usually gathered in a manner that moves from general to specific. (pg. 27) Includes: Predication, Fraud Prevention and Deterrence, Detection and Investigation, and Remediation. (pg. 30)

Define fraud

Fraud, sometimes referred to as the fraudulent act, is an intentional deception, whether by omission or co-mission, that causes its victim to suffer an economic loss and/or the perpetrator to realize a gain. A simple working definition of fraud is "theft by deception."

How do fraudulent disbursements at the cash register differ from other register frauds?

Fraudulent disbursement scheme differ from other register frauds (skimming/cash larceny at point of sale) in that when money is taken from the cash register, the removal of money is recorded on the register tape. A false transaction is recorded as though it were a legitimate disbursement to justify the removal of money.

Explain the relationship between an employee's position and the level of theft.

From chapter 1: Fraud losses tended to rise based on the perpetrator's level of authority within an organization. From chapter 2: Owners and executives are involved in only about one quarter of all occupational frauds but, when involved, steal significantly larger amounts than lower level employees. Managers are the second most frequent fraud perpetrators. Finally, line employees are the principal perpetrators in the majority of occupational fraud schemes, yielding average losses to the company less than $100,000. Summary: The lower the position an employee holds the higher the percentages of cases related to occupational fraud, but has the lowest median losses. The highest positions employees hold have a lower percentage of cases related to occupational fraud, but the highest median losses.

What approaches are used by investigators to obtain documents?

Generally, investigators can obtain documents and data files using three approaches: 1. Voluntary consent 2. Subpoena 3. Search Warrant

Under what circumstances would a Miranda Warning be required?

In custodial settings by law enforcements, and in those settings where the suspected has been taken into custody and denied freedom presumably against their will, federal law may require that a Miranda warning be read to the suspect.

What is meant by inventory shrinkage?

Inventory shrinkage is the unaccounted for reduction in the company's inventory that results from theft.

How may the larceny of non cash assets be prevented?

Most important: Segregation of duties helps to ensure that no individual has access to every aspect of a transaction and separates the custody, recording, and approval functions. To prevent larceny of non cash assets, the duties of requisitioning, purchasing, and receiving of these assets should be segregated. Other prevention methods: -Physical Controls -Security Camera (Deterrence) -Periodic physical inventory counts -Mechanism for receiving customer complaints regarding "short" shipments.

Describe occupational fraud and abuse:

Occupational fraud and abuse is defined as "the use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employing organizations resources or assets."

What is the discovery process and how does it work?

Once the complaint and answer have been filed (and assuming that the case continues in civil courts) discovery begins. Discovery is the process by which each side may explore the merits of the other side's arguments by obtaining documentary and testimonial evidence. Any matter or material relevant to the civil action that is not privileged is subject to discovery. Stage 1: Interrogatories Stage 2: Opposing parties submit "requests to produce documents" to one another. Stage 3: Depositions Stage 4: "Requests of admissions"

What red flags are are commonly associated with fictitious expense schemes?

One of the most common red flags of fictitious expense scheme is when an employee claims items, particularly high dollar items, were paid for in cash. Organizations should be alert for patterns in which an employee uses credit cards for low-dollar expenses but pays cash for high dollar expenses. Other red flags: -expenses are consistently rounded off -patterns in which expenses are consistently for the same amount -reimbursement requests from an employee that consistently falls at or just below the organization's reimbursement limit -receipts from a restaurant that are submitted over an extended period of time, yet are consecutively numbered. -receipts or other support that does not look professional or lacks information

Discuss the essence of organizational crime.

Organizational crime occurs when entities, companies, corporations, not-for-profits, nonprofits, and governmental bodies, otherwise legitimate and law abiding organizations, are involved in a criminal offense. Corporate violations may include administrative breaches, such as noncompliance with agency, regulatory, and court requirements; environmental infringements; fraud and financial crimes, such as financial reporting fraud, bribery, and illegal kickbacks; labor abuses; manufacturing infractions related to public safety and health; and unfair trade practices. Organizational crime is more of a problem internationally and often consists of unfair pricing, unfair business practices, violation of FCPA, and tax evasion.

How do employees overstate legitimate expenses on their expense reports?

Overstating legitimate expenses is 1 of 4 subcategories of expense reimbursement schemes: Includes mischaracterized expense reimbursements, overstated expense reimbursements, fictitious expense reimbursements, and multiple reimbursements. -Altered receipts -Over purchasing -Overstating another employee's expenses -Orders to overstate expenses.

In the criminal justice system, how is probation different from parole?

Probation is a penalty and is used as an alternative to prison, whereas parole is used to describe the corrections process subsequent to having served time in prison. Parole is often used as a reward for good behavior during time served.

How did the Sarbanes-Oxley Act address corporate governance and public accounting responsibilities?

Public Accounting Responsibilities: New Standards for Auditor Independence, Audit Partner Rotation, Conflict of Interest Provisions, Auditor Reports to Audit Committee, Auditors Attestation of Internal Controls, Standards set by the PCAOB Corporate Governance: Certification Obligations for CEO/CFO, Management Assessment of Internal Controls, Audit Committee Independence, Composition of Audit Committee, Financial Expert, Code of Ethics for Senior Financial Officers, Enhanced Review of Periodic Filings, and Improved Disclosures.

What is the most effective control to prevent receivables skimming?

Segregation of Duties: If the accounting duties associated with accounts receivable are properly separated, so that there independent checks of all transactions, skimming of these payments is very difficult to commit and very easy to detect.

What is a shell company and how is it formed?

Shell companies are fictitious entities created for the sole purpose of committing fraud. They may be nothing more than a fabricated name and a post office box that an employee uses to collect disbursements from false billing. To open a bank account for a shell company, a fraudster will probably have to present the bank with a certificate of incorporation, a tax identification number or an assumed name, also known as a DBA certificate. For fraudulent checks to be collected, an employee often rents a post office box and lists it as the mailing address of his shell company. Some may list their home addresses instead.

Describe the services that a forensic accountant might provide related to a martial dispute:

The forensic accountant can be expected to participate in any legal action that involves money, following the money, performance measurements, valuation of assets, cost measurements and any other aspect related to a litigant's finances, financial performance and/or financial condition.

Differentiate between fraud and abuse.

The term abuse has taken on a largely amorphous meaning over the years, frequently used to describe any misconduct that does not fall into a clearly defined category of wrongdoing. Typically handled differently internally. Fraudsters are typically terminated, while employees who commit abuse are likely to be reprimanded.

What is a ghost employee and what are the four steps needed to make this scheme work?

The term ghost employee refers to someone on the payroll who does not actually work for the victim company. The ghost employee may be a fictitious person, or a real individual who simply does not work for the victim employer. For a ghost employee scheme to work, four things must happen: 1. the ghost must be added to the payroll 2. timekeeping and wage rates information must be collected and submitted for processing 3. a paycheck must be issued to the ghost 4. the check must be delivered to the perpetrator or an accomplice.

What are the three major types of negotiated remedies and how do they differ?

There are three major forms of negotiated remedies: Out-of-court settlements, arbitration, and mediation. Out-of-court settlements occur when both sides come to a settlement position after examination of their own clients, the evidence, the qualities of their fact witnesses, the strength of their expert opinions, and other important aspects of the case. Assuming that the two sides are reasonably close, the attorneys will confer with their clients and negotiate with the opposing attorney. If a negotiated settlement (out-of-court settlements) between opposing attorneys in concert with their client does not work, a second approach is mediation. In this environment, an independent, objective mediator will work with both sets of opposing counsels to help reach a settlement between the two. The mediator does not decide who wins, but is his or her responsibility is to assist both sides to more objectively assess the merits of their case and work towards a mutual agreeable resolution. Since the mediator has no authority on which to decide cases, any settlement is voluntary on the part of the opposing sides. A third possibility is arbitration. Like a mediator, an arbitrator is an independent third party who has the authority to determine the outcome of the case. Thus, the arbitrator acts like the judge or jury. Arbitration may be binding, meaning that 'verdict' of the arbitrator is final, or it can be non-binding.

How do pay and return schemes work?

There are various ways of making a pay and return scheme work. All the methods involve an employee intentionally mishandling payments that are owed to legitimate vendors. One way of doing this include double paying invoices and the requesting recipients return one of the checks, which is then intercepted by the employee and deposited in their own bank account. A second way is to intentionally pay the wrong vendor. The employee then calls the vendor and explains the "mistake" and requests that they return the checks to them . The employee then deposits that check in their own bank and runs the vouchers through the AP system a second time to pay the appropriate vendors. Finally, an employee may pay the proper vendor but intentionally overpay the organization. They then request that the vendor return the excess amount and deposit it into their personal bank account. An employee might also intentionally purchase excess merchandise, return the excess, and pocket the refund.

What steps should an organization take to prevent fraudulent shipments of merchandise?

To prevent fraudulent shipments of merchandise, organizations should make sure every packing slip is matched to an approved purchase order and that every outgoing shipment is matched to the sales order before the merchandise goes out. Shipments of inventory should be periodically matched to sales records to detect signs of fraud.

Explain the benefits of the triangle of fraud in comparison to the fraud triangle in a courtroom testimonial situation.

While the fraud triangle identifies the conditions under which fraud may occur, the triangle of fraud action described the actions an individual must perform to perpetrate the fraud. The triangle of fraud action is valuable to the investigator where proof of intent is required. While the fraud triangle points investigators to why people might commit fraud, the evidentiary trail might be weak or nonexistent, and most forensic accountants and examiners do not have the expertise to be able to comment on one's inner state of mind associated with pressure and rationalization. Since financial pressures and rationalizations are not directly observable, the antifraud professional needs an evidence-based approach to conduct examinations. The triangle of fraud action is helpful because each element can be directly observed and documented. Evidence of the act, conversion, and concealment can be collected and presented during adjudication. When considered in concert, the elements of fraud make it difficult for the perpetrator to argue the act was accidental or to deny their role in the act. The triangle of fraud represents specific actions that can be document in the form of evidence. (Act, Concealment, and Conversion)

Analyze how the fraud triangle would be adjusted for predator fraudsters.

With regard to the fraud triangle and predators, pressure and rationalization play little or no role because the predator needs only opportunity. Instead arrogance and a criminal mindset replace the original fraud triangles antecedents of pressure and rationalization and we are left with elements as they pertain to the predator.