CFE Accounting

Quick ratio

(Cash + marketable securities + receivables) / current liabilities

Ways to prevent skimming scheme

Performing a physical inventory

Most shell company schemes involve the purchas of ficitious...

Services

Income statement

details how much profit or loss a company earned over a period of time

Statement of owners equity acts as the link between

income statement and balance sheet

Corruption

the wrongful use of influence to procure a benefit for the actor or another person, contrary to the duty or the rights of others.

Asset Turnover Ratio

(net sales divided/ by average total assets) is used to determine the efficiency with which asset resources are used by the entity. The asset turnover ratio is one of the more reliable indicators of financial statement fraud. A sudden or continuing decrease in this ratio is often associated with improper capitalization of expenses, which increases the denominator without a corresponding increase in the numerator.

is a program or command procedure that gives the appearance that it is useful but in fact contains hidden code that causes malicious damage. When the hidden code in a Trojan horse is activated, it performs some unwanted or harmful function. Often, viruses and worms attach themselves to other legitimate programs, becoming Trojan horses and spreading to other systems.

A Trojan horse

Skimming

A credit card skimming scheme requires a device, often referred to as a skimmer or a wedge, that scans and stores a large amount of credit card numbers. Credit card skimming is more frequent in businesses where an employee is able to remove the card from the customer's view in order to run the transaction. This scam might occur in a retail situation in which a credit card is processed behind a tall counter, or in a restaurant scenario wherein a waiter walks away with a customer's card to run the transaction.

is the practice of recording the deposit of an interbank transfer before recording the disbursement, thus briefly double-counting the amount of cash. In a kiting scheme, multiple bank accounts are opened and money is "deposited" from account to account, although the money never exists.

Check kiting

is a type of fraudulent disbursement scheme in which an employee either (1) prepares a fraudulent check for his own benefit or (2) intercepts a check intended for a third party and converts the check for his own benefit.

Check tampering

Appears on the balance sheet

Current assets

Current ratio

Current assets/ current liabilities

viruses load themselves onto the target system's memory, infect other files, and then unload themselves.

Direct-action

Accounts

Entries to the left side of an account are referred to as debits, and entries to the right side of an account are referred to as credits. Debits increase asset and expense accounts, whereas credits decrease these accounts. On the other side of the equation, credits increase liability, revenue, and owners' equity accounts. Conversely, debits decrease liabilities, revenues, and owners' equity.

Forged maker

Forges the signature

Comparing personnel records maintained by the human resources department to payroll data can be useful in detecting ghost employee schemes. An analysis of payroll withholdings might also reveal either ghost employees or trust account abuses. Ghost employees often will have no withholding taxes, insurance, or other normal deductions. Therefore, a listing of any employee without these items might reveal a ghost employee. Another way to detect a ghost employee scheme is to examine paychecks for dual endorsements. This might indicate that the fraudster has forged an endorsement in order to deposit the ghost's paycheck into his own account.

Ghost employees

In general, payroll schemes fall into one of the following categories:

Ghost employees Falsified hours and salary Commission schemes

Income statement

How much profit or loss the company earned over a particular time.

a bank buys, sells, and swaps its bad loans for the bad loans of another bank, creating new documentation in the process. Its purpose is to mask or hide bad loans by making them look like they are recent and good.

In a daisy chain,

refers to the process by which users are allowed to use computer systems and networks, and logical access control refers to a process by which users are identified and granted certain privileges to information, systems, or resources. These controls are designed to protect the confidentiality, integrity, and availability of informational resources. Logical access controls can be used to verify a person's identity and privileges before granting the person logical access to information or other online resources.

Logical access

GAAP principle corresponding expenses and revenue

Matching

Skimming Scheme

More difficult than cash larcency,

is an information security goal that an e-commerce system should strive to provide its users and asset holders. It refers to a method used to guarantee that the parties involved in an e-commerce transaction cannot repudiate (deny) participation in that transaction. Non-repudiation is obtained through the use of digital signatures, confirmation services, and timestamps. Additional information security goals that should be provided to users and account holders of information systems include: Confidentiality of data Integrity of data Availability of data Authentication

Non-repudiation

Pass through Scheme

Pass-through schemes are usually undertaken by employees in charge of purchasing on the victim company's behalf. Instead of buying merchandise directly from a vendor, the employee sets up a shell company and purchases the merchandise through that fictitious entity. He then resells the merchandise to his employer from the shell company at an inflated price, thereby making an unauthorized profit on the transaction.

Overstated refund

Rather than create an entirely fictitious refund, some employees merely overstate the amount of a legitimate refund and steal the excess money. For example, if a customer returns $100 worth of merchandise, the employee might ring up a $200 return. The employee gives the customer $100 in return for the merchandise and then pockets the remaining $100. The customer might or might not be aware of the scheme taking place. This will result in shrinkage of $100 worth of inventory. In other words, the inventory balance on the books will be overstated by the amount of the excess refund.

means of measuring the relationship between two different financial statement amounts

Ratio analysis

is the amount withheld from each draw request until such time as the construction is complete and the lien period has expired.

Retainage

is a method for gaining unauthorized access to a computer system in which the attacker deceives victims into disclosing personal information or convinces them to commit acts that facilitate the attacker's intended scheme.

Social engineering

Going Concern

The assumption that a business will continue indefinitely is reflected in the accounting concept of:

Matching principle

The matching principle requires that expenses be recorded in the same accounting period as the revenues they help generate. Estimates, accruals, and allocations are often required to meet this requirement. As a sale is made, the appropriate charges for cost of goods sold, or other expenses directly corresponding to the sale, should be recorded in the same accounting period.

is built to overcome people's most common misgivings about investment. Promoters are very specific in their prospectus. The offer sounds good and (within its own logic) makes sense. The "opportunity" is usually pitched by someone familiar to the victim, or at least by someone with an affinity the victim trusts. Most important, the pyramid does return people's money, with the incredible profits attached as promised. Pyramid schemes are designed to initially pay off to the earliest investors.

The pyramid investment structure

involves the company that initially conned the consumer. Using a different company's name, the outfit contacts the consumer again and asks if he would like to help put the unethical company out of business and get his money back. Naturally, an upfront fee is required to finance the investigation.

The scavenger or revenge scheme

Cash Flow statement includes

The statement of cash flows reports a company's sources and uses of cash during the accounting period. This statement is often used by potential investors and other interested parties in tandem with the income statement to determine the true financial performance of a company during the period being reported. The statement of cash flows is broken down into three sections: Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities

What financial statement fraud scheme involves recording revenues and expenses in improper periods

Timing differences

Assets, liabilities, and owners' equity are all items that appear on a company's balance sheet.

True

Credits decrease asset and expense accounts

True

Sales that are contingent on additional terms should not be recorded as revenue on the selling company's books.

True

a large amount of overdue accounts receivable on the books is a red flag of a fictitious revenue scheme

True

comprise an industry of their own by providing the collateral a telemarketing scam needs—turnkeys launder credit card receipts and checks, sell autodialers and phone lists, and provide the merchandise portrayed as valuable prizes.

Turnkeys

scam users (both consumers and businesses) into disclosing personal information. Government and financial institutions, as well as online auctions and their payment services, can be targets of voice phishing. A vishing scheme is generally transmitted as an incoming recorded telephone message that uses a spoofed (fraudulent) caller ID matching the identity of a misrepresented organization. The message uses an urgent pretext to direct unsuspecting users to another telephone number. The victim is invited to punch his personal information on his telephone keypad. The criminals capture the key tones and convert them back to numerical format.

Vishing

Contingent liabilities

are potential obligations that will materialize only if certain events occur in the future. A corporate guarantee of personal loans taken out by an officer or a private company controlled by an officer is an example of a contingent liability. Such a liability must be disclosed if it is material.

asset & liability accounts

are flipped in thinking for debits and credits in regards to increasing and decreasing

Accounting model

assests= liabilities + owners equity

balance sheet

assets are generally presented on the balance sheet in order of liquidity

Vertical analysis

is the expression of the relationship or percentage of component items to a specific base item on the income statement or balance sheet.

Historical cost

is the proper basis for recording a piece of equipment on a company's books.

debt to equity ratio

dividing total liabilities/ by total equity

three common methods for concealing liabilities and expenses on financial statements

failure to disclose warranty cost and liabilities, capitalized expenses, liability/expense omissions

Ditching

falsely reports a vehicle as stolen to cash in on an insurance policy

permit onto an organization's internal network based on factors such as origination or destination address, content of the message, protocol being used to transmit the message, and other filtering methods.

firewall

Crimeware

is the term used to describe malicious software used to simplify or automate online criminal activities.

statement of cash flows

is used in tandem with the income statemnt to determine a company's true financial performance

Forged endorsement

forges the endorsement on back to a 3rd party

Ratio analysis

is a means of measuring the relationship between any two different financial statement amounts. The relationship and comparison are the keys to any of these types of financial analyses.

Horizontal analysis

is a technique for analyzing the percentage change in individual financial statement items from one accounting period to the next.

Password cracking

is an automated process by which an attacker attempts to guess a system user's most likely passwords.

Financial statement fraud

is the deliberate misrepresentation of the financial condition of an enterprise accomplished through the intentional misstatement or omission of amounts or disclosures in the financial statements to deceive financial statement users.

Not ture about the statement of cash flows

shows the companies financial position at a specific point in time

The quick ratio

is used to assess a company's ability to meet sudden cash requirements. This ratio compares the most liquid assets to current liabilities by dividing the total of cash, securities, and receivables by current liabilities. The quick ratio is a conservative measurement of liquidity that is often used in turbulent economic times to provide an analyst with a worst-case scenario of a company's working capital situation.

Pay and return scheme

issues two payments asks one to be returned then cashes it for them selves

Electronic payment tampering is generally ............ difficult to detect than traditional check tampering schemes.

more

vertical analysis on an income statment what coponent is assigned 100%

net sales

A method for gaining unauthorized access to a computer system in which an attacker dupes a target into providing sensitive data by falsely claiming to be from an actual business, bank, ISP, or other entity with which the target does business

phishing?

Workers comp schemes

premium, agent, claimant,....

Timing difference financial statement fraud scheme

recording revenue in year 1 when payment is received, but serviced wont be performed until year 2

There are three principal types of billing schemes:

shell companies, nonaccomplice vendors, Personal purchases with company funds

The most common giveaway scam is known as............ A postcard arrives in the mail telling the receiver he has already won a prize. A new luxury vehicle tops the list, along with cash, jewelry, a living room set, and gift certificates. The odds of winning any of the prizes are astronomical. Victims are given trinkets or coupons redeemable only for the company's own shoddy merchandise.

the "1-in-5."

Asset turnover ratio

to determine the efficiency with which assets are used during the period. The asset turnover ratio is typically calculated by dividing net sales by average total assets (net sales / average total assets). However, average operating assets can also be used as the denominator (net sales / average operating assets).

off book sales always cause shrinkage

true

The caller is passed to a ............. who reads some vague words about the deal and records the person's agreement. These recordings are intentionally vague, leaving out the pitch and key details, essentially recording only the customer's consent. Verifiers also stall customers who call back to complain (heat calls), finding reasons why a little more patience will solve the problem, and in some cases, convincing the person to send a little more money to help the process along.

verifier,