Deck 13: Employee, Vendor, and Other Frauds Against the Organization

Question 1

An employee is authorizing refund checks without any supporting documentation. This is an example of:

A) Accounts receivable fraud.
B) Expenditure cycle fraud.
C) Custodial theft of money.
D) Lapping of accounts receivables.

Answer 1

A

Question 2

When an accounts receivable clerk is allowed to steal one customers payment and apply the next one toward that payment and so on, this is a violation of:

A) segregation of duties.
B) management oversight.
C) checks and balances.
D) all of the above.

Answer 2

A

Question 3

Hiring a relative that is untrained and paying them at a higher rate is an example of:

A) Accounts receivable fraud.
B) Expenditure cycle fraud.
C) Payroll fraud.
D) Lapping of accounts receivables.

Answer 3

C

Question 4

Which of the following is not part of the fraud triangle?

A) Greed.
B) Pressure.
C) Opportunity.
D) Rationalization

Question 5

Unauthorized purchases, misappropriation of petty cash and abuse of company credit cards are all examples of:

A) Accounts receivable fraud.
B) Expenditure cycle fraud.
C) Custodial theft of money.
D) Lapping of accounts receivables.

Question 6

Whose responsibility is it to help assure that the audit trail is generated?

A) External auditor.
B) CEO.
C) CFO.
D) Internal auditor.

Question 7

Which of the following is actually part of the audit trail?

A) fraud reporting and education
B) chain of custody
C) authorization and approval
D) physical security and monitoring

Question 8

If a company has poor pay, high pressure to perform and a hostile work environment, they are said to have:

A) Poor corporate culture.
B) Increased morale.
C) Motivational management.
D) all of the above.

Question 9

The most important element in detecting and catching employee fraud is:

A) audit trail
B) chain of custody.
C) authorization and approval.
D) physical security and monitoring.

Question 10

An employee routinely throws excess raw materials in the dumpster outside the business and then takes it home with him after hours. This is an example of:

A) Accounts receivable fraud.
B) Expenditure cycle fraud.
C) Custodial theft of money.
D) Production cycle fraud.

Question 11

Which vendor fraud principle leads to $1,000 toilet seats?

A) short shipments.
B) balance billing.
C) cost-plus billing.
D) substandard goods.

Question 12

What are some rationalizations for people to commit fraud or steal from a company?

A) antisocial personality disorder.
B) dissocial personality disorder.
C) pressure to conform to a corporate environment.
D) all of the above.

Question 13

When an employee does not ring in a sale and simply pockets the cash, this is an example of:

A) advanced sales skimming.
B) basic sales skimming.
C) short-change sales.
D) cash stolen in transmission.

Question 14

"Skilled" cashiers can confuse or distract customers while they intentionally give them the wrong change. This is an example of:

A) advanced sales skimming.
B) robbing the till.
C) short-change sales.
D) cash stolen in transmission.

Question 15

How is non-custodial theft of money best prevented?

A) Through good internal controls.
B) Through good checks and balances.
C) Through good auditing practices.
D) Through good physical security.

Question 16

Insider trading is defined as:

A) The intentional act of manipulating financial statements in order to gain larger raises or bonuses.
B) Intentionally giving customers the wrong change and taking the excess at the end of the shift.
C) Ordering excess inventory and then taking it home when it arrives.
D) Knowing information prior to the general public and buying or selling company stock to protect personal gains.

Question 17

How does check washing occur?

A) False checks are submitted to banks within large batches of good checks in hopes that they will not be detected.
B) The ink from a good check is chemically removed and then a new check can be written from that check.
C) A check from one customer is stolen and the next check is used to cover that amount and so on.
D) The check is altered or tampered.

Question 18

If the employer doesn't reconcile sales and collections for the cash box at the end of each shift, then the cashier may be free to steal from the cash box without restraint. This is an example of:

A) advanced sales skimming.
B) robbing the till.
C) short-change sales.
D) cash stolen in transmission.

Question 19

Which of the following is an example of vendor fraud?

A) short shipments.
B) balance billing.
C) substandard goods.
D) all of the above.

Question 20

What is the estimated amount of loss due to fraud in the U.S. every year?

A) Hundreds of thousands
B) Hundreds of millions
C) Hundreds of billions
D) Hundreds of trillions

Question 21

How can a company prevent data theft?

A) By restricting access to only employees that need the data..
B) By limiting the e-mailing capabilities of employees to only certain file types.
C) Through effective management oversight of employee activity.
D) All of the above.

Question 22

Kickbacks are when inside information is given to one bidder so they can have a leg up on the bidding process.

Question 23

Why is input manipulation such a nightmare to prove?

A) A false audit trail could be created to point toward another employee.
B) The user could be inputting under another person's credentials.
C) The user could erase their audit trail in the accounting system.
D) All of the above.

Question 24

Vendor fraud may include balance billing, short shipments or fraudulent cost-plus billing.

Question 25

Corporate culture can help prevent employee fraud.

Question 26

Which of the following is NOT allowed when an employee is suspected of stealing corporate data?

A) Personally confronting them with the situation.
B) Reviewing their corporate E-mail history.
C) Monitoring their access and behavior at work.
D) Seizing their home computer without a court order.

Question 27

Data theft is typically easier to:

A) catch than prevent.
B) prevent than identify.
C) detect than prosecute.
D) prosecute than detect.

Question 28

How can a company detect data theft?

A) By reviewing suspected employee E-mail logs.
B) By reviewing suspected employee access logs.
C) By reviewing suspected employee building access logs.
D) All of the above.

Question 29

If bank deposit slips are not reconciled against bank deposit receipts, leakage can occur.

Question 30

Research has shown that about 35%-45% of employees are fundamentally dishonest and are likely to steal from the company if given a good opportunity.

Question 31

Why is program alteration so difficult to detect?

A) It leaves no audit trail.
B) It is only detectable if manual calculations are done to check each transaction..
C) Auditors are typically not trained to notice program alterations.
D) All of the above.

Question 32

Some employers are afraid to stop fraud they know about because the consequences of doing so may cost them even more money.

Question 33

How do encrypted files store temporary data in memory?

A) In an encrypted format.
B) In an unencrypted format.
C) Encrypted files do not use temporary memory.
D) Encrypted files use a special encrypted memory chip.

Question 34

The audit trail is the most important concept when catching employee fraud.

Question 35

Check laundering typically only occurs in small businesses.

Question 36

Why should all accounting data files be encrypted?

A) To prevent direct file alteration.
B) To prevent accidental invoices from being created.
C) To provide forensic accountants with an audit trail.
D) All of the above.

Question 37

The three element of the fraud triangle are pressure, opportunity, and manipulation.

Question 38

Many companies in the United States fail each year due to employee fraud.

Question 39

What type of employee typically sabotages files?

A) Management.
B) Clerical.
C) Disgruntled.
D) Programmers.

Question 40

How might a forensic accountant notice a program alteration?

A) By reviewing the programming knowledge of each employee.
B) By matching source code from the manufacturer to the program installed at the company.
C) Through interrogation of employees.
D) Through a program change log.

Question 41

What are the three elements of the fraud triangle? Describe each.

Question 42

What are some of the improper practices that are involved in payroll fraud?

Question 43

What are some rationalizations for an employee being fraudulent?

Question 44

Describe how the fraud schemes of basic sales skimming and advanced sales skimming work.

Question 45

How might a company prevent cash or checks from being stolen that are delivered in the mail?

Question 46

Describe the process of lapping of accounts receivables and explain which principle of internal control is violated?

Question 47

In terms of catching employee fraud, what is the most important concept and how can it assist in catching employees actions?

Question 48

Describe at least two methods that vendors could use to fraud a company.

Question 49

What are fraudulent credit approvals for accounts receivables and how can they be prevented?

Question 50

What are some examples of corporate culture that might lead to employee fraud?