To prevent fraudulent shipments of merchandise, organizations should:
match every outgoing shipment to a sales order.
all of the above.
make sure that all increases to perpetual inventory records are supported by proper source documents.
match every receiving slip to an approved purchase order.
According to the 2012 Report to the Nations on Occupational Fraud and Abuse, non-cash schemes occur more frequently than cash schemes.
The unaccounted-for reduction in the company's inventory that results from theft is called:
misappropriation of intangible assets.
Question 4 0 / 1 point
According to the 2012 Report to the Nations on Occupational Fraud and Abuse, cash schemes have a higher median loss than non-cash schemes.
Which of the following methods can be used to conceal inventory shrinkage on a company's books?
Writing off inventory as obsolete
Creating fictitious sales and receivables
All of the above
Borrowing a company asset for personal use without permission, even if it is returned unharmed, is a form of non-cash asset misappropriation.
Nicolette Garrison works part-time at an independent record store. Whenever her friend, Jacob Barker, comes into the store during one of her shifts, he picks up a CD and brings it to the register where Nicolette is stationed. After ringing a "no sale" transaction on the cash register, Nicolette pretends to swipe Jacob's credit card for payment. She puts the CD in a bag and gives it to Jacob, who walks out without actually paying for the merchandise. What kind of scheme is being committed?
To deter inventory theft schemes, organizations should install security cameras in the warehouses without the employees' knowledge.
According to the 2012 Report to the Nations on Occupational Fraud and Abuse, the theft of which type of non-cash asset was the least common but caused the highest median loss?
Which of the following is not a method used to conceal false shipments of inventory?
Writing off the inventory as scrap
Creating false sales orders
Falsely increasing the perpetual inventory
Running a computer program that identifies shipping documents with no associated sales order can detect which of the following non-asset cash misappropriation schemes?
Purchasing and receiving schemes
Unconcealed inventory larceny
Asset requisition schemes
Which of the following procedures would be least helpful in preventing larceny of non-cash assets?
Employing security guards at the entrance of the warehouse
Creating access logs to track employees that enter restricted areas
Installing surveillance cameras in the warehouse and on sales floors
Segregating the duties of sales and accounts payable
An employee causes his organization to purchase merchandise that it does not need. This is an example of what type of scheme?
Unconcealed larceny scheme
Purchasing and receiving scheme
Asset requisition scheme
False billing scheme
Manually altering entries in an organization's books in order to conceal fraud is called:
padding the books.
To facilitate a bribery scheme, a fraudster might divert company funds to a non-company account from which the illegal payments can be made. This account is called a:
petty cash fund.
none of the above.
The offering, giving, receiving, or soliciting of something of value for the purpose of influencing a business decision without the knowledge or consent of the principal is known as:
conflict of interest.
Which of the following is a type of kickback scheme?
The primary approach for preventing conflicts of interest schemes is to develop and implement which of the following?
An anonymous reporting mechanism to receive tips and complaints
A document retention program
A voucher system
A company ethics policy
If a government employee agrees to award a contract to a vendor in exchange for a promise of future employment, this is considered to be an illegal gratuity.
Ben Rogers works as a cashier for Tillis Sporting Goods. One afternoon, he asked his sister Dawn to come into the store. When she arrived, Ben put three watches, two fishing reels, and four pairs of sunglasses in a sack and gave it to her. Dawn walked out of the store, sold two of the watches, and returned to the store later to return the other items for a refund. What type of asset misappropriation has been committed?
Inventory larceny scheme
False refund scheme
Which of the following is not a type of corruption scheme?
Conflict of interest
The key component to most kickback schemes is:
stealing customer statements.
The typical bid-rigging scheme committed during the need recognition phase of the contract negotiation process involves defining a "need" that can be met only by a certain supplier or contractor.
Which of the following is a red flag that might indicate that a bid-rigging scheme is occurring?
A high bid is followed by amendments that reduce the payments to the contractor.
The contract price is unusually low.
The losing bidders become sub-contractors on the project.
Many more bidders responded to the request for proposals than expected.
To safeguard against kickback schemes, which of the following procedures should an organization implement?
All of the above.
Establish a written policy specifying that employees cannot accept more than $500 annually in gifts from customers or suppliers.
Have an employee in the purchasing department review the organization's payment patterns on a quarterly basis.
Prohibit employees from engaging in any transaction on behalf of the organization when they have an undisclosed personal interest in the transaction.
Which of the following would likely not be a potential target for accepting bribes in a big-rigging scheme?
A contracting official
The engineer in charge of the project's technical specifications
A product assurance representative
An accounts payable clerk
In one of the cases in the textbook, Swainler's Technology discovered that someone had stolen 1,400 hard drives from its computer warehouse.In order to collect on its theft insurance policy, the company had to show that the theft was an outside job. Before the insurance company paid Swainler's claim, it hired an independent investigator, who ultimately found that the hard drives were stolen and sold by Swainler's marketing manager, Frederic Boucher. Which of the following control weaknesses were present in the company?
The surveillance cameras on the loading dock didn't work.
Background checks were required only on senior executives and accounting personnel.
All of the above.
Because the company was run primarily on trust, many transactions were conducted without any documentation or controls.
Johanna Pye is a hair stylist at Mamon Salon. The salon's policy states that stylists receive 40 percent of the revenue they generate as their compensation. Johanna grew tired of sharing her income with the salon and decided she wanted to make more money. She continued seeing her existing clients at the salon, but when new clients called for an appointment, Johanna lied and told them the salon was completely booked for the next few months. She then offered to come to their homes and cut their hair for 10 percent less than what the clients would be charged at the salon. She did not report the house call appointments to the salon, and was therefore able to keep all the income she generated from these side clients. This is an example of what type of scheme?
Identifying trends in over-purchased and/or obsolete inventory over several periods is a proactive computer audit test that can be used to detect which of the following schemes?
None of the above
Julius Smith is a purchasing agent for a Louisiana state agency. He has a project budgeted for $24,000 that he would like to hire RGS Consultants to handle. Unfortunately for Julius and RGS Consultants, the state has a requirement that all projects over $10,000 must be sent out for competitive bids. In order to avoid the bidding process, Julius breaks the project into three component projects worth $8,000 each. RGS Consultants is subsequently awarded the contracts for all three projects. What type of bid-rigging scheme is this?
Which of the following schemes can be detected by identifying vendor addresses that are not designated as a business address?
Shell company schemes
Conflicts of interest
All of the above
Stanley Block works in the IT department at Towery, Inc. After finding out that the company is planning to purchase four more computers for the accounting department, Stanley bought four computers from a friend for $1,200. Then, using his brother's name and address as vendor information, he resold the computers to Towery for $2,300. This type of scheme is known as a(n):
resource diversion sale.
In one of the case studies in the textbook, Rita Mae King was a purchasing agent at an electronics and appliance chain. She frequently worked with travel vendors and managed to put Spicewood Travel on the top of the preferred vendor list. Upon investigation, the fraud examiners discovered that she ran her own travel agency out of her office at the store and received kickbacks from Spicewood Travel in return for having her company use them to book trips. What triggered the investigation of Rita Mae King's activities?
Her supervisor found an invoice for a trip that she booked showing she received an employee discount from Spicewood Travel.
An employee from Spicewood Travel called King's office and left an urgent message for King to call them concerning a travel problem with a group she booked to the Cayman Islands.
Her former boyfriend called the loss prevention department's hotline and informed them that she was receiving kickbacks from Spicewood Travel.
Another employee of her company found a business card that she had left in a fishbowl for a drawing showing that she was an employee of Spicewood Travel.
According to the 2010 Report to the Nations on Occupational Fraud and Abuse, schemes involving corruption were the least common of the three types of occupational fraud schemes.
In one of the case studies in the textbook, Rita Mae King was a purchasing agent at an electronics and appliance chain. She frequently worked with travel vendors and managed to put Spicewood Travel on the top of the preferred vendor list. Upon investigation, the fraud examiners discovered that she ran her own travel agency out of her office at the store and received kickbacks from Spicewood Travel in return for having her company use them to book trips. Why didn't the company pursue legal action against King?
Spicewood Travel agreed to reimburse the company for overcharges if they wouldn't pursue criminal action against King.
There was not enough evidence to pursue a conviction.
The vice president of loss prevention recommended against criminal action because of King's age and her husband's ill health.
The company didn't want the publicity so they quietly let her resign.
According to the 2012 Report to the Nations on Occupational Fraud and Abuse, the median loss due to corruption schemes was the highest of the three types of occupational fraud schemes.
Fred Weaver is the contracts manager for a city government. In order for anyone to do business with the municipality, he or she must pay Fred 10 percent of the total amount of the contract. This type of corruption is known as:
a conflict of interest.
Donna Boyd is an internal auditor for GDP, Inc., an electronics manufacturer. While conducting a routine review of the company's inventory costing, she discovers that the cost of one of the parts they use in manufacturing DVD players has been steadily increasing over the last six months and is now much higher than the general market price. Additionally, she notices that the company has been heavily favoring one specific supplier for that part. Based on these circumstances, what type of fraud scheme may be occurring at GDP?
Conflict of interest
Any of the above
In one of the case studies in the textbook, the General Services Administration (GSA), the federal government's bookkeeping agency, purchased more than $200 million worth of defective and useless furniture from a New Jersey furniture manufacturer. After reviewing the books of the furniture manufacturer, it was clear that the company was paying off GSA inspectors. What happened to the furniture manufacturing company?
It lost its contract with the GSA and went bankrupt.
It was charged with making false certifications and fined $2 million.
It was bought by another company.
All of the above.
In one of the case studies in the textbook, the General Services Administration (GSA), the federal government's bookkeeping agency, purchased more than $200 million worth of defective and useless furniture from a New Jersey furniture manufacturer. After reviewing the books of the furniture manufacturer, it was clear that the company was paying off GSA inspectors. The investigators eventually focused on one particular regional inspector because:
he purchased eleven race horses.
he paid cash for a new home on the Jersey shore.
he vacationed in Europe with the vendor and charged the trip back to the government as a business related trip.
he had credit card charges of more than twice his annual salary during a six-month period.