Deck 11: Cash Receipt Schemes and Other Asset Misappropriations

Question 1

"Death by a thousand cuts" involves stealing cash one thousand dollars at a time.

Answer 1

False

Question 2

Another way to conceal cash larceny is to use reversing transactions, such as false voids or refunds, which cause the register tape to reconcile to the amount of cash on hand after the theft.

Answer 2

True

Question 3

Which internal control procedure is most effective in preventing skimming?

A) Video cameras
B) Segregation of duties
C) Good records
D) Cash accounts

Answer 3

B

Question 4

Misuse of company assets, like personal use of automobiles and company office supplies is not considered inappropriate by most companies.

Question 5

Trend analysis on aging of customer accounts can't be used to highlight a skimming scheme.

Question 6

Skimming schemes can be subdivided based on whether they target sales or receivables.

Question 7

An employee who would probably not be involved in skimming would be:

A) The president of the company
B) The cashier
C) The accounts receivable manager
D) The petty cash clerk

Question 8

Most cash larceny occurs at the point of sale.

Question 9

Video cameras can be installed at cash entry points, but serve little use as a deterrent against theft.

Question 10

Writing off inventory and other assets is a relatively common way for fraudsters to remove assets from the books before or after they are stolen.

Question 11

In order to prevent cash larceny at the point of sale, organizations should enforce separation of duties in the cash receipts process and make sure there are independent checks over the receipting and recording of incoming cash.

Question 12

Force balancing is one of the least dangerous receivables skimming schemes. In this technique the perpetrator is in charge of collecting payments.

Question 13

Software like IDEA and ACL is generally not suitable to detect skimming of cash.

Question 14

Lapping is the crediting of one account through the abstraction of money from another account.

Question 15

A common skimming scheme is to take unrecorded checks that the perpetrator has stolen and substitute them for receipted currency.

Question 16

Perhaps the biggest key to preventing skimming of any kind is to maintain a viable oversight presence at any point where cash enters an organization.

Question 17

In order to conceal their thefts, some employees might ring a "no sale" or other noncash transaction on their cash registers to mask the theft of sales.

Question 18

To prevent fraudulent shipments of merchandise, organizations should make sure that every packing slip sales order is matched to an approved purchase order and that every outgoing shipment is matched to the sales order before the merchandise goes out.

Question 19

Another method used by employees to conceal the misapplication of customer payments is the theft of alteration of account statements.

Question 20

When an employee skims money off-book sales of merchandise, the theft can be detected by comparing the register tape to the cash drawer.

Question 21

What is the best proactive computer test to detect skimming where an employee with low sales may be a suspect?

A) Summarize the top ten receivables accounts
B) Summarize sales by locations
C) Summarize net sales by employee, and list the lowest ten employees
D) Summarize by employee discounts

Question 22

The process of ______ occurs when an employee steals the deposit from day one then replaces it with day two's deposit. Day tow is replaced with day three, and so on.

A) Lapping
B) Kiting
C) Coring
D) Padding

Question 23

Clothing store employees typically get significant 30 - 50% employee discounts on store purchases for personal clothing purchases. How can management audit employee discounts to insure the clothing discounts are not given to friends and family?

A) Compare adjustments to inventory to the void transactions of the employee
B) Extract sales with over 30& discount and summarize by employee
C) Summarize user access for the sales and inventory systems
D) Extract invoices with partial payments

Question 24

A final concealment strategy with stolen deposits is to carry the missing money as:

A) Outstanding checks
B) Open receivables
C) Closes receivables
D) Deposits in transit

Question 25

If a fraudster has a hand in both ends of the receipting process, he or she can falsify records to conceal the theft of receivables payments. This technique is called:

A) Lapping
B) Kiting
C) Force balancing
D) Debiting the wrong account

Question 26

A sales employee created a "dummy" customer record. The sales employee then recorded phony refunds and then pocketed the cash. What procedure would likely catch this fraud?

A) Extract customers with no telephone numbers or tax ID number
B) Summarize user access to accounts receivable
C) Summarize user access to the sales account
D) Review business logs for phone calls during non-business hours.

Question 27

In general, noncash misappropriations fall into all but one of the following categories:

A) Asset requisition and transfers
B) Purchasing and receiving schemes
C) Fraudulent shipments
D) Lapping

Question 28

Which of the following is not typical receivables skimming scheme?

A) Lapping
B) Force balancing
C) Cashier theft
D) Fraudulent write offs

Question 29

User access to systems may identify segregation of duties issues. Review of which files can detect problems?

A) System user access master file
B) Accounts Receivable master file
C) General ledge master file
D) Accounts payable master file

Question 30

Service employees that are completing transactions during non-business hours could possibly use the non-business hours to sell company assets to their own benefit. This fraud could be caught by:

A) Comparing sales by employee on a year-to-year basis
B) Review company telephone logs for calls made during non-business hours
C) Comparing utility bills on a month-to-month basis
D) Comparing sales per location on a year-to-year basis

Question 31

Which of the following methods is not commonly used to conceal larceny that occurred at the point of sale?

A) Thefts from other register
B) Reversing transactions
C) Substituting phone check for the stolen money
D) Altering cash accounts

Question 32

The use of a company office supplies for personal use would be:

A) Permissible in most circumstances
B) A misuse of assets
C) A purchasing scheme
D) Allowable under Sarbanes-Oxley

Question 33

A computer audit test for detecting cash larceny where employees have high dollar differences between the cash count and sales register tape would include:

A) Summarize by employee the difference between the cash receipt report and the sales register system
B) Summarize by store the difference between the cash receipt report and the sales register system
C) Summarize by location the discounts and returns
D) Compare adjustments to inventory

Question 34

An employee in a small company was responsible for preparing and making the deposits, recording the deposits in the company's books, and reconciling the bank statements. This situation is an example of:

A) Strong internal control
B) Weak internal control because of improper segregation of duties
C) Weak internal controls because of a lack of supervision
D) Weak internal controls because the employees are bonded

Question 35

A retail store has a number of inventory adjustments at the end the last ten accounting periods. What computer audit step should be taken to detect any fraud?

A) Summarize user access to the sales register
B) Compare adjustment to inventory to the void/refund transactions summarized by employee
C) List the top ten employees in sales by location
D) List the top ten inventory items by sales totals

Question 36

What is the best proactive computer test to detect skimming where an employee with high discounts may be a suspect?

A) Summarize the top employees giving discounts
B) Summarize sales by location
C) Summarize inventory by employee, and list the lowest ten employees
D) Summarize by employee discounts the highest ten employees

Question 37

Larceny of receivable is generally not concealed through which method?

A) Force balancing
B) Reversing entries
C) Destruction of records
D) Including phone checks in the bank deposits

Question 38

What computer audit steps could catch a scheme in which inventory is shipped directly to an employee address?

A) List top ten employees by sales adjustments
B) Join an employee home address file to a shipment address file
C) List tope tem employees in respect to asset transfers
D) Summarize user access to the sales file

Question 39

This procedure involves the crediting of one account through the abstraction of money from another account.

A) Kiting
B) Lapping
C) Force balancing
D) Stolen statements

Question 40

A billing manager in a hospital was authorized to write off certain patient balances as hardship allowances without further review by management. This practice could lead to:

A) Theft of patient payments
B) Double-counting of receivables
C) Overstatement of receivables
D) Overstatement of cash

Question 41

How are noncash assets misappropriated?

Question 42

Inventory with a negative quantity balance may indicate:

A) Fraudulent cash receipts
B) Fraudulent cash payments
C) False shipments
D) Improper access of accounts receivable system

Question 43

Why is sales skimming called an "off-book" fraud?

Question 44

List three proactive audit tests to detect noncash misappropriations.

Question 45

Far off in the woods, there is a cabin. The cabin contains three people. Two are in one room; the other is alone in another room. All doors to the cabin are locked tight and have not been opened. All three people are dead. There was no sign of violence in this cabin. How did they die?

Question 46

In cash larceny schemes, what methods may be used to conceal these schemes at the point of sale?

Question 47

What techniques are generally used to conceal a receivables skimming scheme?

Question 48

What types of company assets are typically misused?

Question 49

What is the difference between skimming and cash larceny?

Question 50

Which computer audit step could catch a false shipment scheme?

A) Shipping documents with no associated sales order
B) Shipping documents with an associated sales order
C) Shipping documents that have been independently approved by management
D) Receipts in the receiving system that do not agree to the payables invoice

Question 51

What is meant by inventory "shrinkage"?

Question 52

List three proactive computer audit steps for detecting skimming from page 304 - 306.

Question 53

What steps should an organization take to prevent fraudulent shipments of merchandise?

Question 54

Which is the most effective control to prevent receivables skimming?

Question 55

How may the larceny of noncash assets be prevented?