Question 1

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

Accepted Answer

Summarizing net sales by employee and listing the lowest ten employees would be the best proactive computer test to detect skimming by an employee with low sales. Skimming involves stealing cash from sales transactions and not recording them, leading to lower net sales for the employee. By analyzing net sales by employee, the low performing employees can be identified and investigated for potential skimming activities. Summarizing receivables or discounts may not directly detect skimming. Summarizing sales by location may be useful but may not directly identify skimming by a particular employee.

Question 2

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.

Accepted Answer

The process described in the question is lapping, which involves the theft of one day's deposit and the subsequent replacement with the following day's deposit. Kiting involves creating false credit balances by transferring funds between accounts, coring involves stealing the center of a roll of cash (leaving the outer bills intact), and padding involves inflating expenses to receive extra funds.

Question 3

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?

Accepted Answer

By extracting and summarizing sales with over 30% discount by employee, management can easily identify if an employee is giving unauthorized discounts to friends or family members. This method allows for targeted auditing rather than auditing every employee transaction. The other options do not directly address the issue of unauthorized employee discounts.

Question 4

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

Accepted Answer

Deposits in transit are amounts that have been received and recorded by a business but not yet recorded by its bank, making them an effective way to conceal missing money temporarily. This is because they can create the appearance that funds are on their way to the bank account when, in reality, they have been misappropriated.

Question 5

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:

Accepted Answer

The answer of If a fraudster has a hand in...

Question 6

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?

Accepted Answer

Extracting customers with no telephone numbers or tax ID number can help identify fake or "dummy" customer records, which are often created without complete details to facilitate fraudulent activities like phony refunds.

Question 7

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

Accepted Answer

Lapping is a method of covering up embezzlement of funds, not a noncash misappropriation. It involves delaying the recording of cash receipts to hide the theft of funds, which is distinct from the direct misappropriation of noncash assets.

Question 8

Which of the following is not typical receivables skimming scheme?

Accepted Answer

Skimming is a type of fraud that involves stealing money before it is recorded on the books. Lapping, force balancing, and fraudulent write-offs are all methods that can be used to conceal skimming. Cashier theft, while it involves stealing money, does not specifically relate to the concealment methods used in skimming schemes.

Question 9

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

Accepted Answer

The system user access master file would contain information on which users have access to what systems and functions. Reviewing this file can identify any users who have access to functions that should be segregated among different users, indicating a potential segregation of duties issue. The other files listed may contain useful information for other purposes, but would not be as effective in detecting segregation of duties issues.

Question 10

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:

Accepted Answer

Reviewing company telephone logs for calls made during non-business hours would provide insight into any potential fraudulent activity by service employees. If they are using these non-business hours to make personal sales or arrangements, their phone calls would be logged and could be investigated. The other options do not directly address the issue of employees selling company assets during non-business hours.

Question 11

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

Accepted Answer

Substituting phone check for the stolen money is not a commonly used method to conceal larceny at the point of sale. Methods like thefts from another register, reversing transactions, and altering cash accounts are more directly related to manipulating sales or cash records to hide theft. Substituting a phone check does not directly relate to the concealment of larceny at the point of sale in the same way, as it involves a different form of transaction that is less directly connected to cash handling and sales transactions.

Question 12

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

Accepted Answer

Using company office supplies for personal use would constitute a misuse of assets, as these supplies are intended for business purposes only. Some companies may have specific policies regarding personal use of office supplies, but generally it is not permissible. Sarbanes-Oxley is a law that addresses financial reporting and corporate governance, and does not relate to the use of office supplies.

Question 13

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

Accepted Answer

Summarizing by employee will help identify individuals who have consistently high cash count discrepancies, which may indicate cash larceny. Summarizing by store or location may not capture the specific employee responsible for the theft. Comparing adjustments to inventory is not relevant to detecting cash larceny. Summarizing discounts and returns may be relevant for detecting theft through falsified returns, but not for cash larceny specifically.

Question 14

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:

Accepted Answer

This situation represents a weak internal control because it lacks proper segregation of duties. One employee is responsible for three critical tasks that should ideally be handled by separate individuals to reduce the risk of errors or fraud.

Question 15

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?

Accepted Answer

Comparing inventory adjustments to void/refund transactions by employee can help identify fraudulent behavior such as an employee purposely recording false inventory adjustments to cover up theft. The other options do not directly relate to detecting inventory fraud.

Question 16

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

Accepted Answer

Summarizing by employee discounts would allow for identification of the top employees with high discounts, which could potentially indicate skimming behavior. This proactive approach would allow the organization to detect and prevent any fraudulent activity before it becomes a larger issue.

Question 17

Larceny of receivable is generally not concealed through which method?

Accepted Answer

Larceny of receivable is the theft of cash that has already been recorded in the company's books. Including phone checks in the bank deposits is not a method of concealing larceny of receivable because phone checks are not related to accounts receivable. Force balancing, reversing entries, and destruction of records are all methods that can be used to conceal larceny of receivable.

Question 18

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

Accepted Answer

By joining an employee home address file with a shipment address file, any shipments made to an employee's personal address will be flagged, indicating a potential scheme involving unauthorized inventory transfers. The other choices are not directly related to this type of scheme.

Question 19

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

Accepted Answer

The answer of This procedure involves the crediting of one...

Question 20

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:

Accepted Answer

Allowing a billing manager to write off patient balances as hardship allowances without further oversight can lead to theft of patient payments, as the manager could potentially write off balances and then divert the payments for personal use.

Quiz 11: Cash Receipt Schemes and Other Asset Misappropriations