Chapter 14: Fraud Against Organizations

Which of the following is an example of a register-disbursement scheme?

A perpetrator who processes transactions as if a customer were returning merchandise, even though there is no actual return.

Which of the following is more likely to help detect occupational frauds?

A tip

According to the ACFE study described in the text, which fraudulent disbursement scheme occurs most frequently?

Billing scheme

The 2006 ACFE Report to the Nation on Occupational Fraud & Abuse covers three types of fraud against organizations: Which of the following is one of them?

Corruption

________ occurs when an employee demands a payment from a vendor in order to make a decision in that vendor's favor.

Economic extortion

Orders placed for buying shares of a mutual fund any time up to 4:00 p.m. are priced at that day's NAV, and orders placed after 4:01 p.m. are priced at the next day's NAV. What is this practice known as?

Forward pricing

What is the point of difference between illegal gratuity and bribery scheme?

Illegal gratuities do not necessarily involve an intent to influence a business decision but rather to reward someone for making a favorable decision.

Which of the following statements with reference to extortion is true?

It is a crime even if the extortion message is only sent but not received.

Identify the two basic bribery schemes.

Kickbacks and bid-rigging

Thefts of inventory are divided into two groups. Identify them.

Larceny and misuse

Larceny is easier to detect than skimming because:

Larceny involves stealing cash after it has already been recorded in the company's accounting system

Which of the following statements regarding larceny is NOT true?

Larceny occurs when employees steal cash before the amounts have been recorded in the accounting system

_____ allowed selected investors to purchase mutual funds after 4:00 p.m., using that day's NAV, rather than the next day's NAV, as required under the law.

Late trading

Which of the following is NOT an example of a commission-based payroll fraud?

Manipulating the number of hours worked and the rate of pay.

Which of the following examples is NOT a billing scheme?

Mark submits a receipt of his cab fare for reimbursement, which includes an extra $10.

Identify the unlawful trading schemes engaged in by mutual funds.

Market timing and late trading

Identify the statement that does NOT represent one of the four types of corruption.

Overbilling the company for travel and other related business expenses, such as business lunches, hotel bills, and air travel

Which of the following is NOT one of the most common types of billing schemes?

Overbilling the company for travel and other related business expenses, such as business lunches, hotel bills, and air travel.

Employees, vendors, and customers of organizations have three opportunities to steal assets. Which of the following is NOT one among them?

Paying off public officials or company insiders for preferential treatment.

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?

Skimming

Which fraud is committed by an employee who doesn't record customer sales and pockets the payment?

Skimming

Which is the least common expense disbursement scheme?

Submitting the same expenses multiple times

What is known as the net asset value (NAV)?

The closing price of the securities that comprise a particular fund's portfolio plus the value of any uninvested cash that the fund manager maintains for the fund.

What is known as dilution?

The harm caused by the transfer of wealth from long-term investors to market timers.

For ghost-employee fraud schemes to work, four things must happen. Which of the following is NOT one among them?

The payment must be made based on an employee's revenue output.

Which of the following is the best example of theft of cash through skimming?

Understating sales by recording larger-than reality sales discounts

Which department or group accounted for the maximum percentage of fraud incidents according to the study conducted by ACFE in 2006?

accounting

The most common occupational frauds in small businesses involve employees doing all of the following EXCEPT:

altering financial statement.

A conflict of interest occurs when:

an employee has an undisclosed economic or personal interest in a transaction that adversely affects the company

Claiming personal travel as a business expense, a personal lunch as a business lunch, altering a receipt to reflect a higher amount than was actually paid, or submitting fictitious receipt is an example of ________.

an expense reimbursement scheme

Asset misappropriation is defined as:

any scheme that involves the theft or misuse of an organization's assets

According to the ACFE study, the most common form of occupational fraud is:

asset misappropriation.

Bid-rigging is a type of

bribery

In asset misappropriation, the fraudsters most often target ______.

cash

Lapping

embezzling one customer's payment and then crediting that customer's account when a subsequent customer pays

Frauds against the organization are most likely to be perpetrated by _____.

employees

Two basic fraudulent register disbursement schemes are:

false refunds and false voids.

According to the ACFE study, ________ comprises by far the highest percentage of asset misappropriation.

fraudulent disbursement

Check tampering is a type of

fraudulent disbursement scheme

Of all payroll fraud schemes, ______ schemes tend to generate the largest losses.

ghost employee

Check tampering is unique among the disbursement frauds because:

it is the one group of schemes in which the perpetrator physically prepares the fraudulent check

The following are different types of corruption EXCEPT

lapping.

All of the following are possible ways to commit fraud by using a payroll scheme EXCEPT

overstating expenses

Identify the most common conflict of interest schemes.

purchase schemes and sales schemes

Kickback schemes almost always attack the _____ function of the victim company

purchasing

The least costly disbursement scheme is:

register disbursement scheme

Commercial bribery is similar to the traditional definition of bribery except that in commercial bribery:

something of value is offered to influence a business decision

The primary victim of a workers' compensation fraud is ______.

the insurance carrier