Fraud Test #1

Front 1

Discipline of Fraud Examination

Back 1

resolving allegation of fraud from tips, complaints, or accounting clues

Front 2

Methods to resolve allegations

Back 2

documents, interviews, investigative reports, testifying, assisting in the detection of fraud

Front 3

Predication

Back 3

circumstances that would lead a reasonable person to believe fraud has occurred, is occurring or will occur

Front 4

Fraud Theory Approach

Back 4

analyze data
create hypothesis
test hypothesis
amend hypothesis

Front 5

Tools Used in Fraud Examination

Back 5

document analysis
neutral third-party witness
corroborative witnesses
co-conspirators
target

Front 6

Elements of Fraud

Back 6

material misstatement
knowledge of the material misstatement
reliance on the information
damages resulting from the reliance

Front 7

Fraud Traingle

Back 7

pressure
rationalization (controllable)
opportunity

Front 8

Fraud Triangle creator

Back 8

donald cressey

Front 9

White-collar crime creator

Back 9

edward sutherland

Front 10

most often position of fraudster

Back 10

employee

Front 11

most losses of fraudster

Back 11

executive

Front 12

most likely department

Back 12

accounting

Front 13

most loss by department

Back 13

executive

Front 14

most often initial detection

Back 14

tip

Front 15

types of occupational frauds

Back 15

corruption
asset misappropriation
fraudulent statements

Front 16

most frequent type of fraud

Back 16

asset misappropriation

Front 17

most losses come from

Back 17

fraudulent statements

Front 18

important of skepticism

Back 18

increases the perception of detection

Front 19

professional skepticism traits (7)

Back 19

informed
independent in mind
persistant
ethical
perceptive
effective communications
question without adversary

Front 20

skepticism during observation (2)

Back 20

walk throughs:
1. perpetrate
2. conceal
3. conspire
4. override
lifestyle changes

Front 21

skepticism during document reviews (3)

Back 21

concealment techniques
1. modification
2. duplication
3. withholding
third party confirmations
use of experts

Front 22

skepticism during interviews

Back 22

investigate inconsistencies
signs of deception:
1. vocal clues
2. nonvocal clues
3. verbal clues

Front 23

types of skimming

Back 23

sales
receivables
refunds

Front 24

skimming

Back 24

theft of cash prior to its entry in the accounting system

Front 25

most often asset misappropriations

Back 25

cash (most often and most loss)

Front 26

most frequent & biggest losses cash misappropriations

Back 26

fraudulent disbursements

Front 27

sales skimming

Back 27

employee makes a sale, collects the payments and makes no record of the transaction

Front 28

sales skimming prevention & detection (5)

Back 28

perception of detection
oversight presence
video cameras
maintain activity logs
incoming mail opened in supervised area

Front 29

receivables skimming

Back 29

employee records sale, collection is expected, customer is notified when sale isn't received

Front 30

types of receivable skimming

Back 30

write-off
lapping
unconcealed

Front 31

lapping

Back 31

using one customers payments for another

Front 32

hiding receivable skimming (5)

Back 32

force balancing
stolen statements
fraudulent write-offs
debiting wrong account
destroying records

Front 33

receivables skimming prevention & detection (3)

Back 33

improve controls (vacations, auditing)
search for accounting clues
trend analysis

Front 34

types of cash larceny (3)

Back 34

cash on hand
incoming receivables
from the deposit

Front 35

cash larceny stats

Back 35

least common and least amount of losses

Front 36

cash larceny

Back 36

theft of incoming payments that have already been recorded on the books

Front 37

larceny at point of sale

Back 37

most common point of access to ready cash--imbalance between register amount and cash drawer

Front 38

ways to conceal (5)

Back 38

theft from other register
many small thefts
reversing transaction
altering cash counts
destroying register tapes

Front 39

point of sale prevention & detection (4)

Back 39

separation of duties
independent checks
cash to cashier's office
run reports

Front 40

larceny of receivables

Back 40

theft occurs after payment has been made resulting in an imbalance of cash

Front 41

larceny from the deposit

Back 41

individual who brings the money to the bank has an opportunity to take the deposit

Front 42

deposit lapping

Back 42

day 1 deposit is stolen and replaced by day 2 deposit

Front 43

deposit in transit

Back 43

missing money is carried as a deposit in transit but never hits the bank statement

Front 44

deposit larceny prevention & detection (4)

Back 44

separation of duties
incoming revenue to a centralized area
authenticated deposit slips
deposits at night drop box

Front 45

types of billing schemes (3)

Back 45

shell company
non-accomplice vendor
personal purchases

Front 46

most frequent fraudulent disbursement

Back 46

billing

Front 47

most losses for fraudulent disbursement

Back 47

check tampering

Front 48

billing schemes

Back 48

uses false documentation to cause a payment to be issued for a fraudulent purpose

Front 49

shell schemes

Back 49

fake entity created to commit fraud

(bank account, address, number, names, etc)

Front 50

methods for shell schemes (5)

Back 50

create false invoices
approve false invoice
collusion
purchase services
pass-through schemes

Front 51

shell schemes prevention & detection (4)

Back 51

regular updated approved vendor list
verify all vendors
identify shell invoices
test for shell schemes
1. pricing trends
2. budget overruns
3. compare vendor addresses

Front 52

non-accomplice vendor schemes

Back 52

payments owed to a legitimate vendor are intercepted and stolen or fake invoice is created to real company

Front 53

non-accomplice prevention & detection (3)

Back 53

incoming check should be attached to remittance
banks shouldn't cash checks payable to organization
spot check AP files

Front 54

personal purchases with company funds

Back 54

personal purchases unneeded assets

Front 55

methods for personal purchases through false invoices (4)

Back 55

authorizer for invoices
falsified documents
altering purchase orders
created false purchase requisition

Front 56

personal purchase prevention & detection (4)

Back 56

review of credit card statements
original support
two copies of credit card statements
monitor unexplained increases in purchases

Front 57

types of check tampering (4)

Back 57

forged maker
forged endorsement
altered payee
concealed checks
authorized maker

Front 58

check tampering schemes

Back 58

perpetrator physically prepares check depending on access to checks, bank statements, cash disbursement journal or ability to forge

Front 59

forge maker scheme (def & 3 requirements)

Back 59

employee misappropriates check and affixes the signature of an authorized maker

(access to blank check, good forging, ability to conceal)

Front 60

forge maker prevention & detection (5)

Back 60

safeguard checks
rules for custody
segregation of duties
rotate authorized signatures
limit access to signature stamps

Front 61

forged endorsement schemes

Back 61

employee intercepts a check intended for someone else and forges the endorsement

Front 62

forged endorsement prevention & detection (7)

Back 62

segregation of duties
training employees
investigate complaints
flag duplicate payments
restrict ability to make vendor checks
chart mailing
investigate cancelled checks

Front 63

altered payee schemes

Back 63

employee intercepts checks intended for third party and payee designation is altered

Front 64

ability to alter

Back 64

tack on letters
erasable ink
blank checks

Front 65

altered payee prevention & detection (3)

Back 65

separation of duties in check writing & reconciliation
compare canceled checks against entries
use carbon copies of checks

Front 66

conceal check schemes

Back 66

employee prepared fraudulent check and submits it with legitimate checks

Front 67

conceal check prevention & detection (3)

Back 67

(check signer generally is relied upon as control)

separation of duties
dual signatures for disbursement
up-to-date vendor list

Front 68

concealing check tampering (5)

Back 68

reconcile bank statement
re-alteration of check when return from bank
falsifying disbursement journal
reissuing intercepted checks
bogus supporting documents

Front 69

electric payment tampering

Back 69

gain access to employer payment system and tamper with information

Front 70

electric payment tampering prevention & detection (5)

Back 70

separation of duties
separate bank accounts for paper and electronic transactions
account monitoring
bank security services

Front 71

bank security services (3)

Back 71

ach blocks
positive pay
restive access to software

Front 72

types of payroll schemes (4)

Back 72

ghost employee
commission schemes
workers compensation
falsified wages

Front 73

payroll schemes

Back 73

person causes organization to issue a payment by making a false claim for compensation

Front 74

ghost employee

Back 74

someone on the payroll who does not actually exist

Front 75

ghost employee prevention & detection (6)

Back 75

separate hiring and payroll
maintain personnel records
verify changes to payroll
check payroll against terminated employees
run reports for SSN, no taxes, etc
proper distribution

Front 76

falsified hours & salary

Back 76

overpayment of wages by increasing hours worked or rate of pay

Front 77

falsified hours & salary prevention & detection (6)

Back 77

separation of duties
transfer of funds should be independent
sick/vacation should be monitored
authorize overtime
verify wages
no access to time cards after approval

Front 78

tests for detecting payroll schemes (4)

Back 78

review people with lots of overtime
trend analysis
large increase in wages should be checked
compare net payroll to checks issues

Front 79

commission schemes

Back 79

falsify the amount of sales make by creating false sales or overstating legitimate sales or increase rate of commission

Front 80

commission schemes prevention & detection (4)

Back 80

run reports
compare commission earned
track uncollected sales
random samples

Front 81

expense reimbursement schemes (4)

Back 81

mischaracterized expenses
overstated expenses
fictitious expenses
multiple reimbursement

Front 82

mischaracterized expense reimbursement

Back 82

fraudster seeks reimbursement for personal expenses

Front 83

most often perpetrator?

Back 83

high-level employees

Front 84

mischaracterized expense reimbursement prevention & detection (6)

Back 84

establish system of controls
original support documents
direct review of travel expenses
strict policies
scrutinize expenses paid by other dept
compare dates & prior years

Front 85

overstated expense reimbursement (3)

Back 85

altered receipts
overpurchasing
overstating another persons expenses

Front 86

overstated expense reimbursement prevention & detection (5)

Back 86

original receipts
verify photocopied receipts
book travel through company
compare employees expenses for inconsistencies
spot checks

Front 87

fictitious expenses (3)

Back 87

fake receipts
black receipts from vendors
claiming expenses paid by others

Front 88

fictitious expense prevention & detection

Back 88

look for high dollar items
rounded of expenses
same amount expenses
reimbursements just below the limit
over time expenses
not professional looking

Front 89

multiple reimbursement schemes (3)

Back 89

single expense several times
credit card receipts from corporate card
same expense to different departments

Front 90

multiple reimbursement schemes prevention & detection

Back 90

enforce policies
support documents
look at reports approved outside the dept
**reimbursement approved by direct supervisor
**policy that expenses have time limit