Chapter 14

Asset misappropriations are divided into two categories: theft of cash and theft of inventory. a. True b. False

A

Orders placed for buying shares of a mutual fund any time up to 4:00 p.m. are priced at that day's net asset value (NAV), and orders placed after 4:01 p.m. are priced at the next day's NAV. What is this practice known as? a. Forward pricing b. Late trading c. Price arbitrage d. Price dealing

A

The 2010 ACFE Report to the Nation on Occupational Fraud & Abuse covers three types of fraud against organizations. Which of the following is one of them? a. Corruption b. Bid-rigging c. Check tampering d. Lapping

A

Bid-rigging is a type of which of the following? a. Skimming b. Bribery c. Extortion d. Illegal gratuity

B

Identify the action that does NOT represent one of the four types of corruption. a. Offering, giving, receiving, or soliciting anything of value in order to influence an official act b. Overbilling the company for travel and other related business expenses, such as business lunches, hotel bills, and air travel c. An employee's demands for payment from a vendor in order to make a decision in that vendor's favor d. The exertion of an employee's influence to the detriment of his or her company

B

Identify the two basic bribery schemes. a. Larceny and skimming b. Kickbacks and bid-rigging c. Economic extortion and illegal gratuity d. Lapping and extortion

B

Kickback schemes always involve the purchasing function of the victim company. a. True b. False

B

Larceny, skimming, and misuse are all subdivisions of theft of cash. a. True b. False

B

Skimming schemes are far less common than larceny schemes. a. True b. False

B

Which is the least common expense disbursement scheme? a. Mischaracterizing expenses b. Submitting the same expenses multiple times c. Submitting fictitious expenses d. Overstating expenses

B

Which of the following is the best example of theft of cash through skimming? a. Preparing fraudulent checks b. Understating sales by recording larger-than-reality sales discounts c. Setting up dummy companies d. Stealing cash after it has already been recorded

B

Which of the following is the most common target regarding asset misappropriation? a. Inventory b. Cash c. Equipment d. Valuable information

B

Which of the following statements regarding larceny is NOT true? a. Larceny is easier to detect than skimming and is less common. b. Larceny occurs when employees steal cash before the amounts have been recorded in the accounting system. c. Smaller occurrences of larceny are often written off as "shorts" or "miscounts." d. Perpetrators of larcenies must have direct access to inventory or other assets.

B

An ice cream store cashier sells two-scoop ice cream cones to customers and enters the sales as single-scoop sales, while keeping the difference for himself. Which fraud is being committed here? a. Larceny b. Disbursement c. Skimming d. Illegal gratuities

C

Check tampering is a type of: a. larceny. b. skimming. c. fraudulent disbursement scheme. d. fraudulent statement scheme.

C

Identify the unlawful trading schemes engaged in through mutual funds. a. Leveraging and layering b. Commission fraud and speculative trading c. Market timing and late trading d. Circular trading and NAV manipulation

C

What are the three major classes of asset misappropriation? a. Stealing receipts, stealing money as it comes into a company, and purchasing fraud. b. Stealing receipts, stealing inventory, and stealing information. c. Stealing receipts, disbursement fraud, and stealing assets on hand. d. Stealing receipts, purchasing fraud, and disbursement fraud.

C

Which fraud is committed by an employee who doesn't record customer sales and pockets the payment? a. Larceny b. Disbursement c. Skimming d. Illegal gratuities

C

Which of the following is NOT a form of corruption? a. Extortion b. Conflict of interest c. Lapping d. Bribery

C

Which of the following is NOT one of the most common types of billing schemes? a. Setting up dummy companies (shell companies) to submit invoices to the victim organization b. Altering or double-paying a non-accomplice vendor's statements c. Overbilling the company for travel and other related business expenses, such as business lunches, hotel bills, and air travel d. Making personal purchases with company funds

C

Which of the following is more likely to help detect occupational frauds? a. An internal audit b. An external audit c. A tip d. Internal controls

C

Which of the following occurs when an employee demands a payment from a vendor in order to make a decision in that vendor's favor? a. Bribery b. Larceny c. Economic extortion d. Illegal gratuity

C

Which of the payroll fraud schemes listed below tends to generate the largest losses? a. Commission b. Falsified hours and salary c. Ghost employee d. False worker compensation

C

"Putting someone on the payroll who does not actually work for the victim company" is an example of a(n): a. Commission scheme. b. Expense scheme. c. Register disbursement scheme. d. Payroll scheme.

D

According to the ACFE study, which of the following comprises the highest percentage of asset misappropriation? a. Larceny b. Skimming c. Delayed payment recognition d. Fraudulent disbursement

D

What is known as dilution? a. The artificial difference between the net asset value (NAV) and the fair value of the securities b. An investment technique that involves short-term "in-and-out" trading of mutual fund shares c. The loss resulting from "forward pricing" requirements d. The harm caused by the transfer of wealth from long-term investors to market timers

D

Which function of the victim company is usually involved in kickback schemes? a. Sales b. Accounting c. Human resources d. Purchasing

D

According to the ACFE study, which of the following is the most common form of occupational fraud? a. Bid-rigging b. Fraudulent statements c. Corruption d. Asset misappropriation

D

Asset misappropriation is defined as: a. a scheme that involves offering, giving, receiving, or soliciting anything of value to influence an official act. b. demanding payment from a vendor in order to make or influence a decision in a vendor's favor. c. deceiving individuals in putting their money into a fake investment. d. a scheme that involves an employee prepares a fraudulent check for his or her own benefit.

D

Claiming personal travel as a business expense, claiming a personal lunch as a business lunch, altering a receipt to reflect a higher amount than was actually paid, or submitting fictitious receipts is an example of which of the following? a. A billing scheme b. A payroll disbursement scheme c. A register disbursement scheme d. An expense reimbursement scheme

D

Employees, vendors, and customers of organizations have three opportunities to steal assets. Which of the following is NOT one among them? a. Steal receipts of cash and other assets as they are coming into an organization b. Steal cash, inventory, and other assets that are on hand c. Commit disbursement fraud by having the organization pay for something it shouldn't pay for or pay too much for something it purchases d. Paying off public officials or company insiders for preferential treatment

D

For ghost-employee fraud schemes to work, four things must happen. Which of the following is NOT one among them? a. The ghost must be added to the payroll. b. Timekeeping and wage rate information must be collected. c. A paycheck must be issued to the ghost. d. A member of human resources must be involved in the fraud.

D

The most common occupational frauds in small businesses involve employees doing all of the following EXCEPT: a. skimming revenues. b. fraudulently writing company checks. c. processing fraudulent invoices. d. altering financial statements.

D

The primary victim of a workers' compensation fraud is the ______. a. government b. employer c. vendor d. insurance carrier

D

Thefts of inventory are divided into two groups. Identify them. a. Corruption and bribery b. Expense scheme and skimming c. Economic extortion and illegal gratuities d. Larceny and misuse

D

Two basic fraudulent register disbursement schemes are: a. purchase schemes and sales schemes. b. bid-rigging schemes and kickbacks. c. ghost employees and commission schemes. d. false refunds and false voids.

D

The two basic fraudulent register disbursement schemes are false refunds and false voids. a. True b. False

A

The two main categories of conflict of interest schemes are: a. purchase schemes and sales schemes. b. bid-rigging schemes and kickbacks. c. ghost employees and commission schemes. d. false refunds and false voids.

A

Which of the following defines lapping? a. Embezzling one customer's payment and then crediting that customer's account when a subsequent customer pays b. Stealing cash from an organization before it is recorded on the organization's books and records c. Helping a vendor illegally obtain a contract that should have involved competitive bidding d. Demanding a payment from a vendor in order to make a decision in that vendor's favor

A

Which of the following is NOT a possible way to commit fraud by using a payroll scheme? a. Overstating expenses b. Falsifying hours worked c. Creating ghost employees d. Producing false workers' compensation claims

A

Which of the following is an example of a register-disbursement scheme? a. A perpetrator processes transactions as if a customer were returning merchandise, even though there is no actual return b. A perpetrator uses the expense register to falsely record expenses that are then paid out by the A/P department c. A perpetrator physically prepares a check from the check register, claiming it is a legitimate expense when it is not d. A perpetrator slowly takes money from the register drawer after making regular sales, showing that a discount was given to a customer on the receipt

A

Which of the following statements with reference to extortion is true? a. It is a crime even if the extortion message is only sent but not received. b. The words "pay up or else" are insufficient to constitute extortion. c. It is a crime even if the extortion message is sent either unwillingly or without the knowledge of the sender. d. An extortionate threat made to another in jest is not extortion.

A

Why is larceny is easier to detect than skimming? a. Larceny involves stealing cash after it has already been recorded in the company's accounting system. b. Larceny involves fraudulent disbursements of cash, while skimming involves fraudulent receipts of cash. c. Larceny involves stealing cash as it is paid by a customer. d. Larcenies can take place in any circumstance in which an employee has access to cash.

A

Check tampering is unique among the disbursement frauds because: a. the fraud perpetrator processes the transaction as if a customer were returning merchandise, even though there is no actual return. b. it is the one group of schemes in which the perpetrator physically prepares the fraudulent check. c. it is the one group of schemes in which the culprit generates a payment to himself or herself by submitting some false document to the victim company, such as an invoice or a timecard. d. the perpetrator does not have to undergo the risk of taking company cash or merchandise

B

Commercial bribery is different from traditional bribery in that the offer made in commercial bribery is to influence an official act of government and traditional briberies never involve government officials. a. True b. False

B

Employee frauds constitute a greater percentage of all frauds and have greater median losses than do management and owner frauds combined. a. True b. False

B

The most affected party in a workers' compensation fraud case is which of the following? a. Employer. b. Employer's insurance carrier. c. Other employees. d. Government.

B

What has been verified as the most significant impact for companies who have antifraud controls in place? a. More employee fraud is prevented. b. Victim organizations have lower losses. c. More management fraud is prevented. d. Consumer loyalty is increased

B

What is the term that describes allowing selected investors to purchase mutual funds after 4:00 p.m., using that day's net asset value (NAV), rather than the next day's NAV, as required under the law? a. Forward pricing b. Late trading c. Backdating d. Circular trading

B

Which of the following is NOT an example of a commission-based payroll fraud? a. Creating fictitious sales b. Manipulating the number of hours worked and the rate of pay c. Falsifying the value of sales made by altering prices listed on sales documents d. Overstating sales by claiming sales made by another employee or in another period

B