Deck 14: Fraud Against Organizations

Question 1

The following are different types of corruption EXCEPT:

A)extortion.
B)conflict of interest.
C)lapping.
D)bribery.

Answer 1

C

Question 2

Frauds against the organization are most likely to be perpetrated by _____.

A)customers
B)vendors
C)competitors
D)employees

Answer 2

D

Question 3

Lapping is:

A)embezzling one customer's payment and then crediting that customer's account when a subsequent customer pays.
B)stealing cash from an organization before it is recorded on the organization's books and records.
C)helping a vendor illegally obtain a contract that should have involved competitive bidding.
D)demanding a payment from a vendor in order to make a decision in that vendor's favor.

Answer 3

A

Question 4

In asset misappropriation,the fraudsters most often target ______.

A)inventory
B)cash
C)equipment
D)valuable information

Question 5

The 2010 ACFE Report to the Nation on Occupational Fraud & Abuse covers three types of fraud against organizations: Which of the following is one of them?

A)Corruption
B)Bid-rigging
C)Check tampering
D)Lapping

Question 6

Check tampering is a type of _____.

A)larceny
B)skimming
C)fraudulent disbursement scheme
D)fraudulent statement scheme

Question 7

Which is the least common expense disbursement scheme?

A)Mischaracterizing expenses
B)Submitting the same expenses multiple times
C)Submitting fictitious expenses
D)Overstating expenses

Question 8

According to the ACFE study,the most common form of occupational fraud is:

A)bid-rigging.
B)fraudulent statements.
C)corruption.
D)asset misappropriation.

Question 9

________ occurs when an employee demands a payment from a vendor in order to make a decision in that vendor's favor.

A)Bribery
B)Larceny
C)Economic extortion
D)Illegal gratuity

Question 10

Larceny is easier to detect than skimming because:

A)larceny involves stealing cash after it has already been recorded in the company's accounting system.
B)larceny involves fraudulent disbursements of cash,while skimming involves fraudulent receipts of cash.
C)larceny involves stealing cash before it has been recorded in the company's accounting system.
D)larcenies can take place in any circumstance in which an employee has access to cash.

Question 11

According to the ACFE study,________ comprises by far the highest percentage of asset misappropriation.

A)larceny
B)skimming
C)delayed payment recognition
D)fraudulent disbursement

Question 12

All of the following are possible ways to commit fraud by using a payroll scheme EXCEPT:

A)overstating expenses.
B)falsifying hours worked.
C)creating ghost employees.
D)producing false worker compensation claim.

Question 13

A conflict of interest occurs when:

A)an employer knows of an employee's interest in a business deal or negotiation.
B)an employee has an undisclosed economic or personal interest in a transaction that adversely affects the company.
C)employees offer,give,receive or solicit anything of value in order to influence an official act.
D)employees demand payments from vendors for deciding in the vendors' favor.

Question 14

The least costly disbursement scheme is:

A)check tampering.
B)billing scheme.
C)register disbursement scheme.
D)expense scheme.

Question 15

An ice cream store cashier sells two-scoop ice cream cones to customers and enters the sales as single-scoop sales,while keeping the difference for himself.Which fraud is being committed here?

A)Larceny
B)Disbursement
C)Skimming
D)Illegal gratuities

Question 16

Which of the following is more likely to help detect occupational frauds?

A)An internal audit
B)An external audit
C)A tip
D)Internal controls

Question 17

Bid-rigging is a type of _______ .

A)skimming
B)bribery
C)extortion
D)illegal gratuity

Question 18

Which of the following statements regarding larceny is NOT true?

A)Larceny is easier to detect than skimming and is less common.
B)Larceny occurs when employees steal cash before the amounts have been recorded in the accounting system.
C)Smaller occurrences of larceny are often written off as "shorts" or "miscounts."
D)Perpetrators of larcenies must have direct access to inventory or other assets.

Question 19

Asset misappropriation is defined as:

A)a scheme that involves offering,giving,receiving,or soliciting anything of value to influence an official act.
B)demanding payment from a vendor in order to make or influence a decision in a vendor's favor.
C)deceiving individuals in putting their money into a fake investment.
D)any scheme that involves the theft or misuse of an organization's assets.

Question 20

Which fraud is committed by an employee who doesn't record customer sales and pockets the payment?

A)Larceny
B)Disbursement
C)Skimming
D)Illegal gratuities

Question 21

Thefts of inventory are divided into two groups.Identify them.

A)Corruption and bribery
B)Expense scheme and skimming
C)Economic extortion and illegal gratuities
D)Larceny and misuse

Question 22

Which of the following is the best example of theft of cash through skimming?

A)Preparing fraudulent checks.
B)Understating sales by recording larger-than reality sales discounts.
C)Setting up dummy companies.
D)Stealing cash after it has already been recorded.

Question 23

The most common occupational frauds in small businesses involve employees doing all of the following EXCEPT:

A)skimming revenues.
B)fraudulently writing company checks.
C)processing fraudulent invoices.
D)altering financial statement.

Question 24

What is known as the net asset value (NAV)?

A)The closing price of the securities that comprise a particular fund's portfolio plus the value of any uninvested cash that the fund manager maintains for the fund.
B)A concept used in finance and economics,defined as a rational and unbiased estimate of the potential market price of a good,service,or asset.
C)The value of an entity's assets plus the value of its liabilities at the end of the trading day.
D)The difference between the replacement cost of a fixed asset and its book value appearing on the balance sheet.

Question 25

Identify the two basic bribery schemes.

A)Larceny and skimming
B)Kickbacks and bid-rigging
C)Economic extortion and illegal gratuity
D)Lapping and extortion

Question 26

According to the ACFE study described in the text,which fraudulent disbursement scheme occurs most frequently?

A)Billing scheme
B)Wire transfers
C)Payroll scheme
D)Register disbursements

Question 27

For ghost-employee fraud schemes to work,four things must happen.Which of the following is NOT one among them?

A)The ghost must be added to the payroll.
B)Timekeeping and wage rate information must be collected.
C)A paycheck must be issued to the ghost.
D)The payment must be made based on an employee's revenue output.

Question 28

Identify the statement that does NOT represent one of the four types of corruption.

A)Offering,giving,receiving,or soliciting anything of value in order to influence an official act.
B)Overbilling the company for travel and other related business expenses,such as business lunches,hotel bills,and air travel.
C)The employee demands a payment from a vendor in order to make a decision in that vendor's favor.
D)The exertion of an employee's influence to the detriment of his or her company.

Question 29

Identify the most common conflict of interest schemes.

A)purchase schemes and sales schemes
B)bid-rigging schemes and kickbacks
C)ghost employees and commission schemes
D)false refunds and false voids.

Question 30

Check tampering is unique among the disbursement frauds because:

A)the fraud perpetrator processes the transaction as if a customer were returning merchandise,even though there is no actual return.
B)it is the one group of schemes in which the perpetrator physically prepares the fraudulent check.
C)it is the one group of schemes in which the culprit generates a payment to himself or herself by submitting some false document to the victim company,such as an invoice or a timecard.
D)the perpetrator does not have to undergo the risk of taking company cash or merchandise.

Question 31

Employees,vendors,and customers of organizations have three opportunities to steal assets.Which of the following is NOT one among them?

A)Steal receipts of cash and other assets as they are coming into an organization.
B)Steal cash,inventory,and other assets that are on hand.
C)Commit disbursement fraud by having the organization pay for something it shouldn't pay for or pay too much for something it purchases.
D)Paying off public officials or company insiders for preferential treatment.

Question 32

Claiming personal travel as a business expense,a personal lunch as a business lunch,altering a receipt to reflect a higher amount than was actually paid,or submitting fictitious receipt is an example of ________.

A)a billing scheme
B)a payroll disbursement scheme
C)a register disbursement scheme
D)an expense reimbursement scheme

Question 33

Which department or group accounted for the maximum percentage of fraud incidents according to the study conducted by ACFE in 2010?

A)sales
B)accounting
C)human resources
D)top management

Question 34

Which of the following is NOT one of the most common types of billing schemes?

A)Setting up dummy companies (shell companies)to submit invoices to the victim organization.
B)Altering or double-paying a nonaccomplice vendor's statements
C)Overbilling the company for travel and other related business expenses,such as business lunches,hotel bills,and air travel.
D)Making personal purchases with company funds.

Question 35

Two basic fraudulent register disbursement schemes are:

A)purchase schemes and sales schemes.
B)bid-rigging schemes and kickbacks.
C)ghost employees and commission schemes.
D)false refunds and false voids.

Question 36

Which of the following statements with reference to extortion is true?

A)It is a crime even if the extortion message is only sent but not received.
B)It is a crime only if the extortion message has reached the recipient.
C)It is a crime even if the extortion message is sent either unwillingly or without the knowledge of the sender.
D)An extortionate threat made to another in jest is not extortion.

Question 37

Kickback schemes almost always attack the _____ function of the victim company.

A)sales
B)accounting
C)human resources
D)purchasing

Question 38

Which of the following examples is NOT a billing scheme?

A)Mary purchases a new laptop for her brother-in-law with company's funds.
B)Mark submits a receipt of his cab fare for reimbursement,which includes an extra $10.
C)Joven double pays a vendor for the purchase of inventory and then pockets the second payment when it is returned.
D)Harry submits invoices in the name of the dummy company and collects the amount.

Question 39

Which of the following is an example of a register-disbursement scheme?

A)A perpetrator who processes transactions as if a customer were returning merchandise,even though there is no actual return.
B)A perpetrator uses the expense register to falsely record expenses that are then paid out by the A/P department.
C)A perpetrator physically prepares a check from the check register claiming it is a legitimate expense when it is not.
D)A perpetrator slowly takes money from the register drawer after making regular sales,showing that a discount was given to a customer on the receipt.

Question 40

Of all payroll fraud schemes,______ schemes tend to generate the largest losses.

A)commission
B)falsified hours and salary
C)ghost employee
D)false worker compensation

Question 41

Orders placed for buying shares of a mutual fund any time up to 4:00 p.m.are priced at that day's NAV,and orders placed after 4:01 p.m.are priced at the next day's NAV.What is this practice known as?

A)Forward pricing
B)Late trading
C)Price arbitrage
D)Price dealing

Question 42

Which of the following is NOT an example of a commission-based payroll fraud?

A)Creating fictitious sales.
B)Manipulating the number of hours worked and the rate of pay.
C)Falsifying the value of sales made by altering prices listed on sales documents.
D)Overstating sales by claiming sales made by another employee or in another period.

Question 43

Commercial bribery is similar to the traditional definition of bribery except that in commercial bribery:

A)something of value is offered to influence a business decision
B)payment is received by an employee with the employer's consent.
C)the employee extorts money from a potential purchaser or supplier.
D)something of value is offered to influence an official act of government.

Question 44

Identify the unlawful trading schemes engaged in by mutual funds.

A)Leveraging and layering
B)Commission fraud and speculative trading
C)Market timing and late trading
D)Circular trading and NAV manipulation

Question 45

The primary victim of a workers' compensation fraud is ______.

A)the government
B)the employer
C)the vendor
D)the insurance carrier

Question 46

_____ allowed selected investors to purchase mutual funds after 4:00 p.m. ,using that day's NAV,rather than the next day's NAV,as required under the law.

A)Forward pricing
B)Late trading
C)Backdating
D)Circular trading

Question 47

What is known as dilution?

A)The artificial difference between the NAV and the fair value of the securities.
B)An investment technique that involves short-term "in-and-out" trading of mutual fund shares.
C)The loss resulting from "forward pricing" requirements.
D)The harm caused by the transfer of wealth from long-term investors to market timers.

Question 48

What is the point of difference between illegal gratuity and bribery scheme?

A)Compared to illegal gratuities,briberies occur relatively infrequently and are usually quite small.
B)Illegal gratuities do not necessarily involve an intent to influence a business decision but rather to reward someone for making a favorable decision.
C)Illegal gratuities always involves the use of actual or threatened force,fear,or economic duress.
D)Illegal gratuities are made before deals are approved.