CFE- Financial Transactions (Missed)

Julia runs a printing company and has an antique printing press that she uses in her business. She purchased the press ten years ago for $5,000. Similar presses are selling on the market today for about $8,000. Julia mentioned that she's thinking about retiring, so her friend offered to give Julia $9,000 for the press. According to U.S. generally accepted accounting principles (GAAP), how much should the printing press be listed for on Julia's books? A. $5,000 B. $9,000 C. $8,000 D. $3,000

$5,000 In this example, Julia should list the printing press on her balance sheet for the amount she originally purchased it for $5,000.

Which of the following health care frauds would be best described as a fictitious services scheme? A. A patient fraudulently reports symptoms they do not actually have to receive a prescription. B. A doctor uses the identifying information of patients the doctor has never serviced to bill an insurer. C. A doctor intentionally submits a bill to an insurer using improper codes for the services provided. D. A patient who is not insured pretends to be an insured party to receive medical services.

A doctor uses the identifying information of patients the doctor has never serviced to bill an insurer.

Which of the following situations is often present in real estate fraud schemes? A. No expert assistance at closing B. The services of an arms-length legal representative C. A false appraisal report D. All of the above

A false appraisal report

Which of the following scenarios illustrates a fraudster's use of social engineering? A. A fraudster calls a company employee and requests sensitive information while claiming to be a coworker whose systems are down B. A fraudster has lunch at a restaurant where a target company's employees are known to eat with the intention of overhearing sensitive conversations C. A fraudster without an employee badge gains access to a secure facility by following legitimate employees who are oblivious to the fraudster's presence D. None of the above

A fraudster calls a company employee and requests sensitive information while claiming to be a coworker whose systems are down Social engineering is the act of using deceptive techniques to manipulate people into taking certain actions or disclosing information. (USING DECEPTIVE TECHNIQUES / MANIPULATE PEOPLE)

Joe formed a company called Glenn Corp. He opened a bank account in Glenn Corp.'s name and used his home computer to create fraudulent invoices from Glenn Corp. for "consulting services." However, Glenn Corp. is a fictitious entity that was created solely to commit fraud, and no services have been rendered. Joe mailed these invoices to his employer, Paisley Company. Paisley Company promptly submitted payment to Glenn Corp., not realizing that the company was fake, and Joe deposited the money. What type of billing scheme did Joe commit? A. A cash larceny scheme B. A pass-through scheme C. A pay and return scheme D. A shell company scheme

A shell company scheme "consulting services"

Which of the following best illustrates the use of technical surveillance for purposes of corporate espionage? A. A spy creates a deceptive website to trick employees into entering confidential information. B. A spy hacks into a target computer and monitors an employee's communications. C. A spy impersonates a help desk representative to obtain an employee's network password. D. A spy uses a phony employee badge to enter an office and take a sensitive document.

A spy hacks into a target computer and monitors an employee's communications.

Which of the following health care frauds would be best described as a fictitious provider scheme? A. A thief steals a health care provider's identification information and bills a government health care program under the name of a fake clinic. B. A doctor at a hospital inflates the cost of services by coding them as being more complex than they should be. C. A group of people posing as medical professionals provide services without proper licenses. D. A provider operates a mobile lab that bills a health care program for unnecessary tests and then relocates.

A thief steals a health care provider's identification information and bills a government health care program under the name of a fake clinic. In a fictitious provider scheme, corrupt providers or other criminals fraudulently obtain and use another provider's identification information and steal or purchase lists of patients' identifying information.

Bruce is a purchaser for Acme Widgets. Bruce's brother-in-law is a salesperson for Olson Electronics, one of Acme's largest suppliers. Bruce told his supervisor about the relationship, and she approved his ordering of supplies from his brother-in-law as long as the purchases were reviewed by a senior manager. Bruce did not receive any favors or money from his brother-in-law in return for the sales. A year after Bruce discussed the situation with his supervisor, Acme's management discovers that another supplier offers the same parts as Olson Electronics but at a cheaper price. Acme Widgets is considering suing Bruce for conflict of interest. Which of the following is the MOST ACCURATE statement about Acme's chances of success? A. Acme's chances are poor because the company was aware of the situation and allowed Bruce to do business with his brother-in-law's company despite the relationship. B. Acme's chances are good because it is clear that Bruce had a conflict of interest in dealing with his brother-in-law. C. Acme's chances are good because it could have gotten the supplies at a lower price. D. Acme's chances are poor because Bruce did not actually receive any money from his brother-in-law for sending him business.

A. Acme's chances are poor because the company was aware of the situation and allowed Bruce to do business with his brother-in-law's company despite the relationship.

Why is the health care industry concerned about the potential effect of the electronic data interchange (EDI) on fraudulent activity? A. The tools required to detect EDI fraud are difficult to use B. Only a few types of health care transactions can be processed by EDI C. The efficiency of EDI allows for more vendors and thus more claims to process D. All of the above

The efficiency of EDI allows for more vendors and thus more claims to process

The type of fraud that targets groups of people who have some social connection, such as neighborhoods of racial minorities or immigrant groups, is known as: A. Reloading B. Consolation C. Affinity fraud D. None of the above

Affinity fraud Affinity fraud targets groups of individuals who have some social connection. Religious and professional ties are often exploited.

Which of the following steps are often taken during an account takeover scheme? A. Change customer contact information on the overtaken account B. Steal account login information using phishing emails C. Place orders using funds from the overtaken account D. All of the above

All of the above

Which of the following is a typical method used to make corrupt payments in bribery and corruption schemes? A. Gifts, travel, and entertainment B. Checks and other financial instruments C. Payment of credit card bills D. All of the above

All of the above Often, corruption schemes involve corrupt payments—items of value paid to procure a benefit contrary to the rights of others. There are various ways to make corrupt payments, and many do not involve money. Any tangible benefit given or received with the intent to corruptly influence the recipient can be an illegal payment, and traditional methods of making corrupt payments include: Gifts, travel, and entertainment Cash payments Checks and other financial instruments Hidden interests Loans Credit cards Transfers not at fair market value Promises of favorable treatment

Which of the following does NOT constitute an electronic funds transfer (EFT)? A. A customer's use of a debit card to purchase dinner at a restaurant B. An airline ticket purchased through the Internet with the use of a credit card C. The computer-initiated deposit of an employee's paycheck directly into the employee's bank account D. A transfer of funds from a checking account to a savings account performed on a personal computer

An airline ticket purchased through the Internet with the use of a credit card debit card to purchase dinner at restaurant (goes through a point of sale POS)

Annika, a bookkeeper for a small company, created checks to a local vendor and had her boss sign them. She then used correctional fluid to cover up the vendor's name and insert her own. She also changed the amounts of the checks in the same manner. Then she cashed the checks. What kind of scheme did Annika commit? A. A forged maker scheme B. A cash larceny scheme C. A forged endorsement scheme D. An altered payee scheme

An altered payee scheme an employee intercepts a company check intended for a third party and alters the payee designation so that the check can be converted by the employee or an accomplice

Baker, the managing partner in a small law firm, is the authorized signer on all company checks. When his personal phone bill arrived last month, Baker prepared and signed a company check to pay the bill. He did not disclose this payment to his partners. Baker committed: A. A mischaracterized expense scheme B. An authorized maker scheme C. A false billing scheme D. A forged maker scheme

An authorized maker scheme An authorized maker scheme is a type of check tampering fraud in which an employee with signature authority on a company account writes fraudulent checks for their own benefit and signs their own name as the maker.

Which of the following scenarios is an example of a kickback scheme? A. A vendor inflates the amount of an invoice submitted to the company for payment B. A politician threatens to shut down a business if it does not pay a bribe C. An employee receives a payment for directing excess business to a vendor D. A government official demands money in exchange for making a business decision

An employee receives a payment for directing excess business to a vendor Kickbacks are improper, undisclosed payments made to obtain favorable treatment. Thus, an employee who receives a payment for directing excess business to a vendor is an example of a kickback scheme. In such cases, there might not be any overbilling involved; the vendor simply pays the kickbacks to ensure a steady stream of business from the purchasing company.

Which of the following is the best definition of the automobile insurance scheme known as ditching? A. An agent collects a customer's premium but does not remit the payment to the insurance company. B. An agent inflates their commissions by pressuring customers to unnecessarily replace existing policies for new ones. C. An insured falsely reports a vehicle as stolen to collect on an insurance policy. D. An insured has two insurance policies in place and files claims with both.

An insured falsely reports a vehicle as stolen to collect on an insurance policy. Ditching, also known as owner give-ups, involves getting rid of a vehicle to collect on an insurance policy or to settle an outstanding loan.

Which of the following is NOT considered to be a red flag of a Ponzi scheme? A. A financial manager who manages, administers, and retains custody of the investment funds B. An investment that promises extremely high or short-term returns with little risk involved C. A financial manager who puts an unusual amount of pressure on investors to act immediately D. An investment that has a history of inconsistent returns coinciding with fluctuations in financial markets

An investment that has a history of inconsistent returns coinciding with fluctuations in financial markets

All of the following are classifications of billing schemes EXCEPT: A. Shell company schemes B. Personal purchases with company funds C. Bid rigging D. Invoicing via nonaccomplice vendors

Bid rigging

ABC Bank recently acquired a new portfolio of consumer loans. Because this particular loan portfolio is experiencing a higher than normal default rate, management has asked Bradley, a Certified Fraud Examiner (CFE), to evaluate the portfolio. Bradley notices that the loan package was sold without recourse to the broker, the brokerage fee was high relative to other purchases, and the broker is no longer in business. Which of the following types of schemes has Bradley most likely uncovered? A. Letter of credit fraud B. Money transfer fraud C. Daisy chain fraud D. Brokered loan fraud

Brokered loan fraud brokerage fee was high.

Which of the following is NOT a common red flag of a bid tailoring scheme? A. Competitive awards vary among several suppliers. B. Only a few bidders respond to bid requests. C. There are unusually broad specifications for the type of goods or services being procured. D. A contract is not rebid even though fewer than the minimum number of bids are received.

Competitive awards vary among several suppliers.

Generally, if the dollar amount of an embezzlement scheme at a financial institution is small enough such that the targeted entity's financial statements will not be materially affected, the scheme can be most effectively detected through which of the following methods? A. Conducting a financial statement analysis B. Conducting a review of source documents C. Reviewing all disbursements below the approval limit D. Educating employees who are responsible for handling currency

Conducting a review of source documents

Common fraud schemes involving automated teller machines (ATMs) include all of the following EXCEPT: A. Credit data blocking B. Unauthorized access to PINs and account codes C. Employee manipulation D. Counterfeit ATM cards

Credit data blocking EXCEPT

Both falsely increasing the perpetual inventory balance and failing to reconcile inventory records are ways a fraudster might conceal inventory shrinkage. True or False.

False. Falsely increasing the perpetual inventory record would only worsen the shrinkage problem. In addition, failing to reconcile inventory records would likely cause more suspicion to arise.

A forged maker scheme is a check tampering scheme 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 check's endorsement line. True or False.

False. Forged Endorsement Frauds

When an employee or official uses force or fear to demand money in exchange for making a particular business decision, that individual is engaging in: A. An illegal gratuity scheme B. A kickback scheme C. Bribery D. Economic extortion

D. Economic extortion Extortion is defined as the obtaining of property from another, with the other party's consent induced by wrongful use of actual or threatened force or fear. Economic extortion is present when an employee or official, through the wrongful use of actual or threatened force or fear, demands money or some other consideration to make a particular business decision. Thus, an example of an economic extortion scheme is if an employee or government official demands money in exchange for making a business decision. Similarly, another example of an economic extortion scheme would be if a politician threatens to shut down a business if it does not pay a bribe.

If a fraudster wants to conceal the misappropriation of cash, which of the following actions will NOT result in a balanced accounting equation? A. Decreasing a liability B. Reducing owners' equity C. Creating an expense D. Decreasing another asset

Decreasing another asset

Which of the following is NOT an appropriate technique for detecting a nonconforming goods or services scheme? A. Conduct unannounced inspections of questioned goods or materials. B. Determine if contract costs have exceeded or are expected to exceed the contract value. C. Interview procurement personnel about the presence of any red flags. D. Review the inspection and testing reports of questioned goods or materials.

Determine if contract costs have exceeded or are expected to exceed the contract value.

A virus that loads itself onto the target system's memory, infects other files, and then unloads itself is called a: A. Boot sector virus B. Direct-action virus C. Network virus D. None of the above

Direct-action virus

Workers' compensation schemes are generally broken into four categories. Which of the following is NOT one of these categories? A. Agent fraud B. Double duty fraud C. Claimant fraud D. Premium fraud

Double duty fraud

Special care facilities generally have the capability to meet all of their patients' needs without the services of outside providers, leading to a lower likelihood of fraud involving such institutions. True or False.

False. Many special care facilities do not have the in-house capability to provide all the services and supplies their patients need.

Which of the following statements is TRUE with regard to factoring companies? A. Factoring groups buy credit card receipts from telemarketing operations at a discount. B. Factoring companies approach banks on a telemarketer's behalf in order to secure credit card processing services. C. Factoring companies in Asian and European countries tend to charge more for their services than factoring companies in other countries. D. Factoring is illegal in all jurisdictions.

Factoring groups buy credit card receipts from telemarketing operations at a discount.

Which of the following is a method by which contractors can inflate material costs in negotiated contracts? A. Estimating costs based on valid cost allocation methods B. Disclosing residual inventory C. Obtaining materials at stated prices from third parties D. Failing to disclose discounts and credits

Failing to disclose discounts and credits

Which of the following situations can constitute health care fraud committed by an insurance company? A. Failing to pay a claim because the claim is missing required information B. Failing to follow procedures to detect fraudulent claims when acting as an intermediary for another insurance program C. Submitting cost data to health care regulators to justify rate increases D. All of the above

Failing to follow procedures to detect fraudulent claims when acting as an intermediary for another insurance program

The accounting concept of consistency prohibits any change in an accounting principle previously employed. True or False

False Entities should employ consistent accounting procedures from period to period. However, the concept of consistency does not completely prohibit changes in the accounting principles used. Changes are permissible when it is believed that the use of a different principle will result in a more fair financial presentation of the entity. The change in accounting principle must be justifiable, however; the desire to project an artificially strong performance, for example, is not a justifiable reason for a change in accounting principle.

Traditional identity theft involves the use of entirely fabricated personal information or a combination of real and fabricated information to create a new identity. True or False

False Synthetic- entirely fabricated OR combo of real and fabricated Traditional- pretends to be individual

Pass-through schemes are usually undertaken by employees who receive inventory on the victim company's behalf. True or False.

False. 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. They then resell the merchandise to their employer from the shell company at an inflated price, thereby making an unauthorized profit on the transaction.

The quick ratio is used to determine the efficiency with which a company uses its assets. True or false.

False. quick ratio = current assets / current liabilities to yield a measure of a company's ability to meet sudden cash requirements

Because it is a common occurrence, the fact that documents are missing from a loan file is generally not a red flag for loan fraud. True or False.

False. Missing or altered documentation is a red flag for any type of fraud scheme, and it is a particular concern for loan fraud.

_________________ is the most common type of identity theft. A. Financial identity theft B. Business identity theft C. Medical identity theft D. Criminal identity theft

Financial identity theft

Which of the following best describes how a baiting scheme works in the context of identity theft? A. Fraudsters trick victims into inserting malware-infected data storage devices into their computers. B. Fraudsters impersonate the victim's bank to persuade the victim into releasing information. C. Fraudsters use telephone calls or voice messages to manipulate targets into revealing personal or business information. D. Fraudsters use imitation websites to trick computer users into entering sensitive data.

Fraudsters trick victims into inserting malware-infected data storage devices into their computers.

Karl finds a residential property with a non-resident owner. He then forges contractual property documents showing that the owner is transferring ownership of the property completely to Karl, such as would normally happen during a property sale. The property owner is unaware that Karl has created and filed the documents. Later, Karl takes the falsified documents to a lender and borrows money against the property. Which of the following best describes Karl's scheme? A. Property flipping B. Air loan C. Unauthorized draw on home equity line of credit D. Fraudulent sale

Fraudulent sale

The assumption that a business will continue indefinitely is reflected in the accounting concept of: A. Objective evidence B. Cost C. Materiality D. Going concern

Going concern A company's management is required to provide disclosures when existing events or conditions indicate that it is more likely than not that the entity might be unable to meet its obligations within a reasonable period of time after the financial statements are issued. There is an underlying assumption that an entity will continue as a going concern; that is, the life of the entity will be long enough to fulfill its financial and legal obligations. Any evidence to the contrary must be reported in the entity's financial statements.

Generally speaking, under U.S. generally accepted accounting principles (GAAP), _________________ is the proper basis for recording a piece of equipment on a company's books. A. Current market value B. Estimated replacement value C. Appraised value D. Historical cost

Historical cost Although some exceptions exist, under U.S. generally accepted accounting principles (GAAP), historical cost is generally the proper basis for the recording of assets, expenses, equities, etc. For example, a piece of operational machinery should be shown on the balance sheet at initial acquisition cost (historical cost) and not at current market value, appraised value, or an estimated replacement value.

Which of the following is most indicative that the winning bid on an original construction project was not feasible? A. High turnover in developer's personnel B. Draw requests C. Missing documentation D. Increasing trend in the number of change orders

Increasing trend in the number of change orders

Which of the following refers to the type of network security systems that are designed to supplement firewalls and other forms of network security by detecting malicious activity coming across the network or on a host? A. Intrusion admission systems B. Intrusion detection systems C. Network access controls D. Network address prevention systems

Intrusion detection systems

Which of the following describes the primary purpose of an automated clearing house (ACH) filter? A. It requires the bank to contact the account holder before any payments are made. B. It enables account holders to provide their banks with a list of criteria to ensure only designated individuals get paid. C. It matches the details of incoming payments with those on a list of expected payments provided by the account holder. D. It is a tool used by auditors to examine electronic payment activity on the bank records.

It enables account holders to provide their banks with a list of criteria to ensure only designated individuals get paid. With positive pay, banks match the details of ACH payments with those on a list of legitimate and expected payments provided by the account holder. Only authorized electronic transactions are allowed to be withdrawn from the account; exceptions are reported to the customer for review. House. Holders.

Lindsey, a medical provider, provides monetary payments to existing patients and other providers for referring new patients to her practice. Which of the following best describes Lindsey's scheme? A. Kickback B. Beneficiary fraud C. Deductible forfeiture D. Fictitious services

Kickback

Loyalty programs are susceptible to fraud for all of the following reasons EXCEPT: A. Loyalty points can often be used to purchase sellable items such as gift cards. B. Loyalty points can only be used for products or services offered by the original company. C. Some airlines allow the conversion of travel points for tickets in another person's name. D. Many loyalty programs allow the transfer of points from one account to another.

Loyalty points can only be used for products or services offered by the original company.

Which of the following does NOT happen in a fictitious refund scheme? A. A fraudster processes a transaction as if a customer were returning merchandise. B. The company's inventory is overstated. C. The register log balances with the amount of money in the register. D. Merchandise is returned to the stock room.

Merchandise is returned to the stock room. In a fictitious refund scheme, an employee processes a transaction as if a customer were returning merchandise, even though no actual return takes place. First, the employee takes cash from the register in the amount of the false return. Since the register log shows that a merchandise return has been made, the disbursement appears legitimate. The register log balances with the amount of money in the register because the money that was taken by the employee is supposed to have been removed and given to a customer as a refund. The second thing that happens in a fictitious refund scheme is that a debit is made to the inventory system showing that the merchandise has been returned to the inventory. Because the transaction is fictitious, no merchandise is actually returned. As a result, the company's inventory is overstated.

Which of the following is NOT a common red flag of procurement fraud schemes involving collusion among contractors? A. The same contractors bid on each project or product. B. There is limited competition within the industry. C. More competitors than usual submit bids on a project or product. D. Bid prices begin to fall when a new competitor enters the competition.

More competitors than usual submit bids on a project or product.

Belinda used her company credit card to pay for a business dinner at which she was entertaining a client, knowing the credit card bill would be paid by Belinda's employer. Belinda saved the receipt and later filed an expense report seeking reimbursement for the cost of the meal, attaching the receipt as support. This is an example of what kind of fraud? A. Mischaracterized expense scheme B. Personal purchases with company funds C. False billing scheme D. Multiple reimbursement scheme

Multiple reimbursement scheme payed with company card and asked for an additional reimbursement later

A contractor who delivers materials of lesser quality than specified in the contract or uses a lower quality staff than specified in the contract might be involved in which of the following types of procurement fraud schemes? A. Nonconforming goods or services fraud B. Material mischarging fraud C. Product division fraud D. Labor mischarging fraud

Nonconforming goods or services fraud

When a construction developer submits a draw request to a lender, all of the following would be red flags for loan fraud EXCEPT: A. Missing inspection reports B. Invoice documentation that appears altered C. Failure to include lien releases from each subcontractor D. Omission of developer's personal account statements

Omission of developer's personal account statements The developer's personal account statements would never be included with a draw request.

Which of the following statements about the methods used to make corrupt payments in bribery and corruption schemes is INCORRECT? A. Payers often make corrupt payments by using their credit cards to pay recipients' transportation, vacation, and entertainment expenses. B. Payers often make corrupt payments by making outright payments falsely described as innocent loans. C. Payers often make corrupt payments by buying assets from recipients and allowing the recipients to retain title or use of the items. D. Payers often make corrupt payments by selling property to recipients at prices higher than the property's market value.

Payers often make corrupt payments by selling property to recipients at prices higher than the property's market value. Corrupt payments often take the form of loans. Three types of loans often turn up in fraud cases: An outright payment that is falsely described as an innocent loan A legitimate loan in which a third party—the corrupt payer—makes or guarantees payments to satisfy the loan A legitimate loan made on favorable terms (e.g., an interest-free loan) A corrupt payment can be in the form of credit card use or payments toward a party's credit card debt. The payer might use a credit card to pay a recipient's transportation, vacation, or entertainment expenses, or the payer might pay off a recipient's credit card debt. In some instances, the recipient might carry and use the corrupt payer's credit card. Corrupt payments also might come in the form of promises of favorable treatment. In addition, corrupt payments might occur in the form of transfers for a value other than fair market. In such transfers, the corrupt payer might sell or lease property to the recipient at a price that is less than its market value, or the payer might agree to buy or rent property from the recipient at an inflated price. The recipient might also "sell" an asset to the payer but retain the title or use of the property.

_________ is an attack in which users are fooled into entering sensitive data into a malicious website that imitates a legitimate website. A. Pharming B. Phishing C. Spear phishing D. SMiShing

Pharming

_______________ is a system by which the bank verifies checks presented for payment against the list provided by the company of approved checks written on the account. A. Verification control B. Payment patrol C. Positive pay D. Check matching

Positive pay Positive pay allows a company and its bank to work together to detect fraudulent items presented for payment. The company provides the bank with a list of checks and amounts that are written each day. The bank verifies items presented for payment against the company's list and rejects items that are not on the list. Investigations are conducted as to the origin of the unlisted items. Positive Pay. Presented. Payment. Approved.

Which of the following statements about ransomware is TRUE? A. Ransomware is a form of malware that locks a user's operating system and restricts access to data files until a payment is made. B. Ransomware is a type of software that collects and reports information about a computer user without the user's knowledge or consent. C. Ransomware is a program or command procedure that gives the appearance of being useful but in fact contains hidden malicious code that causes damage. D. Ransomware is a classification of malware designed to simplify or automate online criminal activities.

Ransomware is a form of malware that locks a user's operating system and restricts access to data files until a payment is made.

Which of the following would be considered a timing difference financial statement fraud scheme? A. Recognizing a percentage of revenue on a construction project corresponding to the percentage of the project that is complete B. Recognizing revenue in Year 1 when the service is performed, even though the customer doesn't have to pay until Year 2 C. Waiting to record revenue on a contract until a construction job is complete D. Recording revenue in Year 1 when the payment is received, even though the service won't be performed until Year 2

Recording revenue in Year 1 when the payment is received, even though the service won't be performed until Year 2.

In most construction contracts, a certain amount will be withheld from each draw request by the contractor. This amount is not paid until the contract has been finished and approved by the owner. The withheld amount is referred to as which of the following? A. Retainage B. Good faith deposit C. Withholding D. None of the above

Retainage

Falsified prescriptions for equipment, excessive supplies, noncovered supplies, and scooter scams are forms of fraud commonly involving what type of health care entity? A. Hospitals B. Out-patient services groups C. Special care facilities D. Reusable medical equipment suppliers

Reusable medical equipment suppliers

Of the following, who should conduct physical observations of a company's inventory in order to most effectively prevent inventory theft? A. Purchasing agents B. Sales representative C. Purchasing supervisor D. Warehouse personnel

Sales representative Someone independent of the purchasing or warehousing functions should conduct physical observation of inventory. Sales representatives usually communicate with customers and encourage them to buy the company's products, but they typically have no access to the physical inventory.

Which of the following is NOT a method that is used to conceal inventory shrinkage? A. Selling merchandise without recording the sale B. Performing a forced reconciliation of the inventory records C. Writing off stolen inventory as scrap D. Placing empty boxes on warehouse shelves

Selling merchandise without recording the sale Selling merchandise without recording the sale would actually increase the amount of shrinkage on a company's books because the physical inventory would be depleted without a corresponding adjustment to the perpetual inventory.

Which of the following practices is a potential indicator of a bid splitting scheme? A. Low employee turnover in an organization's procurement department B. Two or more purchases from the same supplier in amounts just above competitive bidding limits C. Sequential purchases under the competitive bidding limits that are followed by change orders D. Frequent use of sole-source procurement contracts

Sequential purchases under the competitive bidding limits that are followed by change orders A dishonest employee might break up a large project into several small projects that fall below the mandatory bidding level and award some or all of the component jobs to a contractor with whom the employee is conspiring.

__________ is the term used for including additional coverages in an insurance policy without the insured's knowledge. A. Sliding B. Churning C. Twisting D. None of the above

Sliding Sliding into fees without known (like sliding into DM)

All of the following are types of medical provider fraud EXCEPT: A. Smurfing B. Fictitious providers C. Rolling labs D. Fictitious services

Smurfing

Which of the following statements is TRUE regarding a fictitious refund scheme? A. The victim company's inventory is understated B. The amount of cash in the register balances with the register log C. Inventory is returned to the store D. All of the above

The amount of cash in the register balances with the register log In a fictitious refund scheme, an employee processes a transaction as if a customer were returning merchandise, even though no actual return takes place. The register log balances with the amount of cash in the register because the money that was taken by the fraudster is supposed to have been removed and given to the customer as a refund. Instead, however, the employee keeps this cash. The second thing that happens in a fictitious refund scheme is that a debit is made to the inventory system showing that the merchandise has been returned. Since the transaction is fictitious, no merchandise is actually returned. The result is that the company's inventory is overstated.

Pharming differs from phishing in that in a pharming scheme: A. The attacker delivers the solicitation message via short message service (also known as SMS or text messaging) instead of email. B. The attacker does not have to rely on having users click on a link in an email or other message to direct them to the malicious website that is imitating a legitimate website. C. The attacker has to rely on having users click on a link in an email or other message to direct them to the malicious website that is imitating a legitimate website. D. The attacker delivers the solicitation message via telephones using Voice over Internet Protocol (VoIP) instead of email.

The attacker does not have to rely on having users click on a link in an email or other message to direct them to the malicious website that is imitating a legitimate website.

For a ghost employee scheme involving an hourly employee to be successful, all of the following must happen EXCEPT: A. Timekeeping information must be collected for the ghost employee. B. The ghost employee must be added to the payroll. C. A paycheck must be issued to the ghost employee. D. The ghost employee must be a fictitious person.

The ghost employee must be a fictitious person. The ghost employee may be a fictitious person or a real individual who simply does not work for the victim employer.

Which of the following activities is included in the post-award and administration phase of procurements involving open and free competition? A. The procuring entity develops the bid specifications. B. The procuring entity issues the solicitation document. C. The procuring entity evaluates the bids or proposals. D. The procuring entity performs its contractual obligations.

The procuring entity performs its contractual obligations.

The solicitation phase of procurements involving open and free competition includes which of the following activities? A. The procuring entity identifies its needs and develops the criteria used to award the contract. B. The prospective contractors prepare and submit their bids. C. The procuring entity performs its contractual obligations. D. The procuring entity determines the method for acquiring the goods or services.

The prospective contractors prepare and submit their bids.

Which of the following is NOT one of the key phases of procurement processes that employ competitive bidding mechanisms? A. The post-award and administration phase B. The solicitation phase C. The purchase and procurement phase D. The presolicitation phase

The purchase and procurement phase

Which of the following statements is TRUE with regard to the statement of cash flows? A. The statement of cash flows shows a company's financial position at a specific point in time. B. The statement of cash flows is often used in tandem with the income statement to determine a company's true financial performance. C. The statement of cash flows is not always necessary because most companies operate under cash-basis accounting rather than accrual accounting. D. There are four types of cash flows: cash flows from operating activities, from investing activities, from financing activities, and from revenue activities.

The statement of cash flows is often used in tandem with the income statement to determine a company's true financial performance. 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 a company's true financial performance during the period being reported. The nature of accrual accounting allows (and often requires) the income statement to contain many noncash items and subjective estimates that make it difficult to fully and clearly interpret a company's operating results. However, it is much harder to falsify the amount of cash that was received and paid during the year, so the statement of cash flows enhances the financial statements' transparency.

All of the following are correct statements about identity theft EXCEPT: A. Identity thieves often engage in pretexting by impersonating the victim's bank. B. One way to conceal identity theft is to change the victim's mailing address. C. The type of malware most commonly associated with identity theft is ransomware. D. Solicitations for pre-approved credit cards are especially valuable to identity thieves.

The type of malware most commonly associated with identity theft is ransomware.

What happens when an employee records a fictitious refund of goods at the employee's cash register? A. Inventory is returned to the store B. The register total is out of balance with the register log C. The victim company's inventory is overstated D. None of the above

The victim company's inventory is overstated First, the employee takes cash from the register in the amount of the false return. Since the register log shows that a merchandise return has been made, it appears that the disbursement is legitimate. The second thing that happens in a fictitious refund scheme is that a debit is made to the inventory system showing that the merchandise has been returned. Since the transaction is fictitious, no merchandise is actually returned. The result is that the company's inventory is overstated.

In a financial statement fraud scheme in which capital expenditures are recorded as expenses rather than assets, the transactions will have the following effect on the organization's financial statements: A. Total assets will be understated B. Net income will be overstated C. Sales revenue will be overstated D. All of the above

Total assets will be understated.

A company must disclose potential losses from ongoing litigation only if the related liability is likely to result in a future obligation. True or False

True Contingent liabilities are potential obligations that will materialize only if certain events occur in the future. Current accounting standards require entities to disclose contingent liabilities in the notes to the financial statements if it is possible that an outflow of cash will be required to settle a present obligation in the future.

Revenue should not be recognized for work that is to be performed in subsequent accounting periods, even though the work might currently be under contract. True or False

True In general, revenue is recognized to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. According to the revenue recognition principle, revenue should not be recognized for work that is to be performed in subsequent accounting periods, even though the work might currently be under contract. For a performance obligation satisfied over time, an entity should select an appropriate measure of progress to determine how much revenue should be recognized as the performance obligation is satisfied.

Kickbacks are improper, undisclosed payments made to obtain favorable treatment. True or False

True Kickbacks are improper, undisclosed payments made to obtain favorable treatment. For example, in a kickback scheme, an employee might receive compensation in exchange for directing excess business to a vendor. Such compensation could involve monetary payments, entertainment, travel, or other favorable perks.

The asset turnover ratio is calculated by dividing net sales by average total assets. True or False

True Sales / Avg Total Assets

A fraudster can understate expenses and their related liabilities to make a company appear more profitable than it actually is. True or False.

True.

A pyramid scheme is designed to pay off its earliest investors. True or False.

True.

An insurance company might be guilty of fraud if it fails to pass on the fee breaks it negotiates with its providers to its consumers. True or False

True.

Off-book sales of goods always cause shrinkage. True or False.

True. Off-book sales of goods, otherwise known as skimming, will always leave an inventory shortage and a corresponding rise in the cost of goods sold.

Automatic debit program schemes occur when fraudsters obtain a consumer's bank account information and then use this information to draft money from the consumer's bank account without that person's consent. True or False.

True. Automatic debit programs are a convenient way to pay bills, such as recurring charges for mortgages and car loans. Fraudsters exploit these programs by obtaining consumers' bank account information through telemarketing schemes. Fraudsters then use this information to draft money from consumers' bank accounts without their consent.