Fraud Detection and Deterrence (ACCT320 6980) QUIZ # 2
Multiple Choice Questions (1 point each)
1. A _______________ is an individual on the payroll who does not actually work for the organization.
a. Falsified employee
b. Phantom employee
c. Ghost employee
d. Shell employee
2. Which of the following is not a type of payroll scheme?
a. Ghost employee scheme
b. False deduction scheme
c. Falsified hours and salary scheme
d. Commission scheme
3. Marsha Wood added her one-year-old niece, Jackie, to the payroll at JNC Company and began issuing paychecks in Jackie’s name, even though Jackie did not work for the organization. Marsha’s niece is not considered a ghost employee because she is a real individual rather than a fictitious person.
a. True
b. False
4. Which of the following is not necessary for a ghost employee scheme to succeed?
a. Timekeeping and wage rate information must be collected.
b. The ghost must be added to the payroll.
c. The perpetrator must have access to a bank account in the ghost employee’s name.
d. A paycheck must be issued to the ghost.
5. To safeguard against ghost employee schemes, the person in charge of entering new employees in the payroll system should also distribute the paychecks so that he or she can look for payments to unauthorized employees.
a. True
b. False
6. If a fraudster fails to remove a terminated employee from the payroll and collects the former employee’s fraudulent paychecks, he or she is committing a:
a. Payroll larceny scheme
b. Falsified hours and salary scheme
c. Forged endorsement scheme
d. Ghost employee scheme
7. Salaried ghost employees are generally easier to create and more difficult to conceal than hourly ghost employees
a. True
b. False
8. Which of the following analyses can be used to identify ghost employee schemes?
a. Identifying employees who have no withholding taxes taken out
b. Comparing actual payroll expenses to budgeted expenses
c. Comparing employees who have the same Social Security number, bank account, or physical address
d. All of the above
9. Which of the following procedures will not help prevent ghost employee schemes?
a. The personnel records are maintained separately from the payroll and timekeeping functions.
b. The personnel department conducts background and reference checks on all prospective employees before hiring them.
c. The person responsible for hiring new employees also supervises the payroll function.
d. The personnel department verifies all changes to the payroll.
10. The most common method of misappropriating funds from the payroll is:
a. Overpayment of wages
b. Using a ghost employee
c. Overstating commissions
d. Theft of payroll deductions
11. Which of the following is not a method typically used by an employee to fraudulently inflate his or her hours in a manual timekeeping system?
a. Collusion
b. “Lazy manager” method
c. Forging the supervisor’s signature
d. Manipulating the pay grade
12. If an employee generates a much higher percentage of uncollected sales than his coworkers, what type of scheme might he be committing?
a. Sales skimming
b. Commission scheme
c. Multiple reimbursement scheme
d. Shell company scheme
13. Which of the following controls will help prevent and detect falsified hours and salary schemes?
a. The duties of payroll preparation, authorization, and distribution are segregated.
b. Sick leave and vacation time are monitored for excesses by the payroll department.
c. Supervisors return authorized timecards to the employees for review before they are sent to the payroll department.
d. All of the above
14. Which of the following computer audit tests can be used to detect ghost employee schemes?
a. Extract users who can write checks and also add new employees in the payroll and timecard system.
b. Extract all employees without a social security number.
c. Compare employees reported per timecard system to the payroll system.
d. All of the above
15. Which of the following can be used to test for commission schemes?
a. Extract manual checks and summarize by salesperson and amount.
b. Compare hours reported per timecard system to payroll system.
c. Extract customer sale balances that exceed the customer credit limit.
d. None of the above
16. Comparing actual payroll expenses to budget projections can help identify falsified hours and salary schemes.
a. True
b. False
17. Comparing salaried employees’ gross pay from one pay period to the next is one way of testing for payroll fraud.
a. True
b. False
18. According to the 2012 Report to the Nations on Occupational Fraud and Abuse, payroll frauds are the most common type of fraudulent disbursement schemes.
a. True
b. False
19. According to the 2012 Report to the Nations on Occupational Fraud and Abuse, payroll frauds are the least costly type of fraudulent disbursement schemes.
a. True
b. False
20. Jim Stevens is a payroll manager for a mid-sized insurance company in the southeast. Last year, his performance review was conducted late, so he received a retroactive pay increase. Because he was not authorized to access his own employee records, Stevens stole another employee’s password and logged into the payroll system. He manipulated his records to keep the retroactive pay increase in effect in future periods, effectively doubling his intended pay raise. What type of fraud is this?
a. Larceny of wages
b. Falsified hours and salary scheme
c. Commission scheme
d. Ghost employee scheme
21. Ellie Weaver works for the JAG Group as the customer service supervisor. When Joel Carter was hired into her department, she listed his start date as one month before he actually began work. Accordingly, the payroll department generated an extra paycheck for Carter, which Weaver intercepted and cashed at a liquor store. What type of fraud is this?
a. Forged endorsement scheme
b. Ghost employee scheme
c. Altered payee scheme
d. Falsified wages scheme
22. Jed Butler is an internal auditor for Billings Industries. Recently he ran a program that identified customer accounts which had previously been dormant for six months or more but had sales in the last two months of the year. What type of fraud would this test most likely reveal?
a. Shell company scheme
b. Pay-and-return scheme
c. Commission scheme
d. Personal purchases scheme
23. During a review of A+ Service’s payroll records, Judy Penney, an internal auditor, noticed that Bradley Banks has no deductions taken from his paychecks for withholding taxes or insurance. She then searched for Banks in the personnel records, but could not locate him. Based on this information, what type of scheme did Penney most likely uncover?
a. Ghost employee scheme
b. Falsified salary scheme
c. Fictitious vendor scheme
d. None of the above
24. Orange Publishing hired Moe McDonnell, CFE, to investigate some large variances in the company’s labor costs. While looking through the payroll records for the shipping department, McDonnell noticed several employees who claimed extensive overtime during pay periods in which the company’s incoming and outgoing shipments were minimal. McDonnell pulled the timesheets for these pay periods and noticed that those belonging to the suspect employees had signatures that didn’t match the signatures on the other timesheets. What type of fraud might these findings indicate?
a. Ghost employee scheme
b. Commission scheme
c. Falsified hours and salary scheme
d. Overstated expenses scheme
25. Allison Duval, CFE, has been retained by National Mortgage Company to investigate some suspicious activity. As part of her examination, Duval compares the company’s payroll expenses to budgeted projections and to prior years’ totals. She also runs an exception report looking for any employees whose compensation has increased disproportionately over the prior year. She then compares the payroll files to the human resource files to test for differing salary rates. What type of scheme is Duval most likely looking for?
a. Ghost employee scheme
b. Payroll tampering scheme
c. Commission scheme
d. Falsified hours and salary scheme
26. Register disbursement schemes are different from skimming and larceny at the register in that they:
a. Are on-book schemes, where as skimming and larceny are off-book schemes
b. Require the use of an accomplice
c. Leave a record of the removal of money on the register tape
d. All of the above
27. Which of the following is a type of register disbursement scheme?
a. Fictitious refunds
b. Overstated refunds
c. False voids
d. All of the above
28. When an employee perpetrates a credit card refund scheme, the perpetual inventory will show a greater amount than the physical inventory.
a. True
b. False
29. An excessive number of reversing sales transactions at the register is an indicator of which of the following schemes?
a. Skimming
b. Register disbursement
c. Pass-through scheme
d. Multiple reimbursements
30. Register disbursement schemes are difficult to conceal because they cause the cash drawer to be out of balance with the cash register tape.
a. True
b. False
31. Which of the following can be used to conceal a false refund scheme?
a. Destroying register tapes
b. Issuing refunds below the review limit
c. Forcing inventory totals
d. All of the above
32. For the perpetrator, the most dangerous part of a typical register disbursement scheme is often:
a. Physically removing the cash from the register and carrying it out of the store
b. Adjusting the cash register tape to match the cash count
c. Replacing the returned merchandise in the physical inventory
d. Forging the customer receipt as documentation for the reversing transaction
33. To safeguard against false voids schemes, companies should require a copy of the customer’s receipt from the initial purchase as documentation for voided sales.
a. True
b. False
34. Which of the following tests can be used to detect register disbursement schemes?
a. Extract the top 10 employees with the lowest sales activity.
b. Identify and examine unique journal entries in the cash accounts.
c. Identify customer sales posted to one credit card and refunds posted to another credit card.
d. None of the above
35. Running a computer program that compares adjustments to inventory to the void/refund transactions summarized by employee can detect which of the following schemes?
a. Register disbursement schemes
b. Cash larceny schemes
c. Skimming schemes
d. All of the above
36. According to the textbook, the best way for an organization to prevent fraudulent register disbursements is to:
a. Have each employee compare the cash in his or her register drawer to the register tape at the end of each shift.
b. Maintain appropriate separation of duties.
c. Have a policy requiring photocopied receipts for sales refunds.
d. All of the above
37. Which of the following procedures can be used to prevent and detect a register disbursement scheme?
a. Randomly call customers who have returned merchandise or voided sales.
b. Restrict access to the control key or management code that authorizes reversing transactions.
c. Place signs around the store encouraging customers to ask for and examine their receipts.
d. All of the above
38. Sara Michaels works as a sales associate in the shoe department at a large chain department store. To supplement her income, Sara processed multiple fictitious refunds on sales made to customers. This is an example of what type of asset misappropriation?
a. Register disbursement fraud
b. Pay and return scheme
c. Skimming scheme
d. Cash larceny scheme
39. Billy Mitchell is the head cashier for a clothing store that specializes in men’s silk suits. After losing big at the local dog track, Billy was in the hole financially. To cover his gambling debts, he started issuing numerous refund credits to his own credit card for amounts just below the store’s review limit. This is an example of a __________________ scheme.
a. Cash larceny
b. Credit card skimming
c. Fictitious refunds
d. Understated reimbursement
40. Leslie White, CFE, was called in to investigate suspicious activity at Anderson’s Department Store. During her investigation, she ran a test to search for customer sales and refunds that occurred on the same day. She also summarized refunds by employee and extracted the names of all employees who can post both refunds and inventory adjustments. What type of scheme is Leslie most likely looking for?
a. Skimming
b. Unconcealed larceny
c. Fraudulent reimbursements
d. Fictitious refunds
41. Meredith Chapman works as a retail clerk at a children’s clothing store. When a customer returns an item for a cash refund, Meredith enters an amount greater than the actual refund into the register, pays the customer the amount owed for the returned merchandise, and keeps the excess cash for herself. What type of scheme is Meredith committing?
a. Overstated expenses
b. Cash larceny
c. Overstated refunds
d. Skimming
42. Greg Manor is the sales manager at County Arts & Crafts Supply. Recently he has received several complaints from customers who claim they were not given a receipt for their purchases. What type of scheme might this situation indicate?
a. Skimming
b. False refunds
c. False voids
d. All of the above
43. Nicolas Barrens conspired with his manager to steal nearly $6,000 over 2 months from the grocery store where they worked. Each time Nicolas rang up a customer at the register, he asked the customer if he’d like a receipt. When a customer said no, Nicolas pretended to discard the receipt in the trash, but actually slipped the receipt into his pocket. At the end of his shift, he filled out a void slip for each of these sales and submitted them to his supervisor for approval. With the original receipt and the approved void slip, Nicolas removed cash from the register in the amount of the voided sales and split the proceeds with his supervisor. Nicolas committed what type of fraud scheme?
a. Fictitious expenses
b. False voids
c. Skimming
d. None of the above
44. According to the 2012 Report to the Nations on Occupational Fraud and Abuse, register disbursement schemes were the most frequently reported type of fraudulent disbursement scheme.
a. True
b. False
45. According to the 2012 Report to the Nations on Occupational Fraud and Abuse, median losses due to register disbursement schemes were the highest of all the fraudulent disbursement schemes.
a. True
b. False
46. In one of the case studies in the textbook, Bob Walker was the head cashier for a discount drug store who perpetrated his fraud scheme by issuing fictitious refunds. What was Walker’s motive for committing the crime?
a. His wife became ill and needed money to pay for prescription drugs.
b. He had been demoted from a management position and wanted to get back at the store.
c. He lost a lot of money gambling and was too embarrassed to tell his wife.
d. He had accumulated nearly $60,000 in credit card debt and was about to lose his house.
47. In one of the case studies in the textbook, Bob Walker was the head cashier for a discount drug store who perpetrated his fraud scheme by issuing fictitious refunds. How was the fraud discovered?
a. The bookkeeper noticed an unusually large number of policy overrides by Walker.
b. The internal auditor developed a computer program that identified cashiers with an unusually high number of returns.
c. The store manager caught Walker pocketing cash.
d. An anonymous tip from the company’s hotline came into the asset protection department.
48. In one of the case studies in the textbook, Bob Walker was the head cashier for a discount drug store who perpetrated his fraud scheme by issuing fictitious refunds. What happened to Walker?
a. He was placed on probation and ordered to make full restitution.
b. The store terminated his employment and accepted a promissory note for the amount stolen in return for not turning him over to the police.
c. His parole for a previous conviction was revoked and he was returned to prison.
d. He was arrested, but disappeared after making bail.
49. In one of the cases in the textbook, Joe Anderson, a part-time shoe salesperson at a department store, perpetrated a fictitious returns scheme using third-party credit cards. Why was a fraud examination initiated?
a. Another employee witnessed Anderson pocketing cash and reported the incident.
b. The shoe department was losing money and had a high rate of returns on its shoes.
c. The store’s surveillance camera caught Anderson pocketing the money.
d. Anderson credited the wrong account and the customer called up to inquire as to why her credit card had been credited.
50. In one of the cases in the textbook, Joe Anderson, a part-time shoe salesperson at a department store, perpetrated a fictitious returns scheme using third-party credit cards. What happened as the result of the investigation?
a. Anderson was terminated and promised to pay back all the fraudulent proceeds.
b. The department store recovered most of its losses through its bonding company.
c. Local and federal charges for embezzlement and financial transaction card fraud were brought against Anderson and 27 co-conspirators.
d. All of the above
51. Check tampering is unique from other fraudulent disbursement schemes because in a check tampering scheme:
a. The perpetrator physically prepares the fraudulent check.
b. The perpetrator must have access to a signature stamp in order to conceal the crime.
c. The perpetrator submits a phony document in order to generate the fraudulent payment.
d. The perpetrator must endorse the check in order to cash or deposit it.
52. Check tampering includes both fraudulently preparing a company check for one’s own benefit and intercepting a company check that is intended for a third party and converting it for one’s own benefit.
a. True
b. False
53. To successfully carry out and conceal a check tampering scheme, the fraudster must have:
a. Access to the check stock
b. Access to the bank statements
c. The ability to forge signatures or alter other information on the check
d. All of the above
54. Check tampering schemes involving checks made payable to “cash” are extremely difficult to resolve, as there is no way to tell who converted the check.
a. True
b. False
55. Which of the following choices is not a category of check tampering?
a. Forged maker schemes
b. Altered payee schemes
c. Unauthorized endorsement schemes
d. Concealed check schemes
56. The person who prepares and signs the check is known as the ______________ of the check.
a. Author
b. Endorser
c. Payer
d. Maker
57. In which of the following schemes does the fraudster intercept and convert a company check made payable to a third party?
a. Forged maker scheme
b. Authorized maker scheme
c. Altered payee scheme
d. Concealed check scheme
58. In a forged maker scheme, the perpetrator fraudulently affixes the signature of an authorized maker to a check.
a. True
b. False
59. Producing a counterfeit check using the company’s logo and bank account number is one type of concealed check scheme.
a. True
b. False
60. Which of the following is not an effective control mechanism to safeguard an organization’s check stock?
a. Boxes of blank checks should be sealed with security tape.
b. Organizations should use check stock that is high-quality and distinctly marked.
c. The employee in charge of the check preparation function should periodically verify the security of unused checks.
d. Voided checks should be promptly destroyed.
61. To prevent and detect forged maker schemes, an organization should:
a. Separate the duties of check preparation and check signing.
b. Rotate authorized check signers.
c. Maintain a usage log for the signature stamp.
d. All of the above
62. Which of the following procedures can help prevent and detect the theft and conversion of outgoing company checks?
a. Train employees to look for dual endorsements on canceled checks.
b. Chart the date of mailing for every outgoing check.
c. Track changes made to vendor records.
d. All of the above
63. Which of the following is not a type of altered payee scheme?
a. “Tacking” on
b. Forged maker
c. Using erasable ink
d. Leaving the payee designation blank
64. To prevent altered payee schemes, the person who prepares the check should also review the check after it has been signed.
a. True
b. False
65. Which of the following computer audit tests can be used to detect forged maker schemes?
a. Extract checks that are out of sequence
b. Extract manual checks and summarize by vendor and issuer
c. Extract all checks payable to “cash” and summarize by issuer for reasonableness
d. All of the above
66. Which type of check tampering scheme is usually the most difficult to defend against?
a. Authorized maker
b. Forged endorsement
c. Concealed check
d. Altered payee
67. Concealing a check tampering scheme generally means hiding both the identity of the perpetrator and the fact that the fraud ever occurred.
a. True
b. False
68. Methods used to conceal check tampering schemes include all of the following except:
a. Falsifying the disbursements journal
b. Forced reconciliation
c. Check kiting
d. Re-altering the canceled checks
69. Methods used to manipulate electronic payments include which of the following?
a. Abusing legitimate access to the employer’s payment system
b. Gaining access to the employer’s payment system through social engineering
c. Exploiting weaknesses in the employer’s internal control over its electronic payment system
d. All of the above
70. According to the 2012 Report to the Nations on Occupational Fraud and Abuse, check tampering is the most common fraudulent disbursement fraud.
a. True
b. False
71. According to the 2012 Report to the Nations on Occupational Fraud and Abuse, check tampering has the lowest median loss of all fraudulent disbursement frauds.
a. True
b. False
72. Mavis Bosman works as an accounts receivable clerk at Brooks Publishing. She steals an incoming check from a customer and cashes it at a grocery store by forging the endorsement on the back of the check. This is an example of a check tampering scheme.
a. True
b. False
73. Kristen Diamond worked in the mailroom at B&R Industries. When attaching postage to the outgoing mail, she would search for payments being sent to a specific vendor, K. D. Sand. She intercepted these checks and carefully changed them to appear payable to K. Diamond. She then endorsed the checks with her own name and deposited them into her personal bank account. What type of scheme did Kristen commit?
a. Concealed check
b. Payables skimming
c. “Tacking on”
d. Forged endorsement
74. Vicky Rogers works in the accounts payable department at HDU, Inc. When checks are returned to the company for incorrect vendor addresses, she is supposed to research them, correct them, and then forward them to the proper address. Instead, Rogers decided to convert some of the returned checks for her own use. Based on the information provided, what type of check tampering scheme is this likely to be?
a. Forged maker
b. Forged endorsement
c. Concealed check
b. Authorized maker
75. Melanie Diggers is an internal auditor for Atlantic Equipment Rental and Sales. While performing a routine review of one of the company’s bank accounts, she noticed an unusual “adjusting entry” to the account on the general ledger. She also found that several checks that had cleared the bank in the last few months were absent from the stack of canceled checks. She requested copies of these checks from the bank and discovered that they were all made payable to the company’s controller who has check signing authority on the account. The controller is also responsible for performing the bank reconciliation and recording month-end journal entries. Which of the following schemes do these signs most likely indicate?
a. Concealed check scheme
b. False voids scheme
c. Authorized maker scheme
d. Forged maker scheme
76. Because they leave a solid audit trail, expense reimbursement schemes are generally easier to detect than other types of fraud schemes.
a. True
b. False
77. Expense reimbursement schemes include which of the following?
a. Multiple reimbursements
b. Mischaracterized expenses
c. Overstated expenses
d. All of the above
78. Claiming personal travel as a business expense is an example of what type of expense reimbursement scheme?
a. Multiple reimbursements
b. Overstated expense reimbursements
c. Mischaracterized expense reimbursements
d. Altered expense reimbursements
79. Which of the following procedures can be used to prevent mischaracterized expense reimbursement schemes?
a. A policy should be established and communicated to employees regarding what types of expenses will and will not be reimbursed.
b. Employees should be required to sign their expense reports before being reimbursed.
c. The internal audit department should review all expense reports under a certain dollar amount.
d. None of the above
80. Which of the following procedures can be used to detect mischaracterized expense reimbursement schemes?
a. Compare the dates of claimed reimbursable business expenses to the employees’ work schedules.
b. Compare current expense reimbursement levels to amounts for prior years.
c. Compare current expense reimbursement levels to budgeted amounts.
d. All of the above
81. If an employee submits a photocopy of a receipt as support for a business expense, the expense should be independently verified before it is reimbursed.
a. True
b. False
82. An altered or forged receipt can indicate what type of expense reimbursement scheme?
a. Mischaracterized expense reimbursements
b. Fictitious expense reimbursements
c. Overstated expense reimbursements
d. All of the above
83. Permitting employees to book their own travel using their own credit card is an effective internal control over expense reimbursement schemes.
a. True
b. False
84. Which of the following methods can be used to perpetrate a fictitious expense reimbursement scheme?
a. Creating counterfeit receipts
b. Stealing blank receipts
c. Submitting expenses that were paid by a third party
d. All of the above
85. What type of expense reimbursement scheme occurs when an employee submits a receipt for an entertainment expense that a client paid for?
a. Mischaracterized expense reimbursement
b. Overstated expense reimbursement
c. Fictitious expense reimbursement
d. Duplicate reimbursement scheme
86. Which of the following is not considered a red flag of a fictitious expense reimbursement scheme?
a. An employee repeatedly uses the company credit card for business travel expenses.
b. An employee’s reimbursement requests are always for round-dollar amounts.
c. An employee submits reimbursement requests that consistently fall just below the reimbursement limit.
d. An employee frequently requests reimbursement for high-dollar items that he claims were paid for in cash.
87. To safeguard against expense reimbursement schemes, organizations should require that employee expense reports be reviewed and approved by a supervisor outside the requestor’s department.
a. True
b. False
88. According to the 2012 Report to the Nations on Occupational Fraud and Abuse, expense reimbursement schemes are the least common type of fraudulent disbursement schemes.
a. True
b. False
89. According to the 2012 Report to the Nations on Occupational Fraud and Abuse, expense reimbursement schemes have a lower median loss than check tampering schemes.
a. True
b. False
90. Donna Holbrook, an administrative assistant at Mason Enterprises, charged some office supplies to the company credit card. Several weeks later, she attached the store receipt from the purchase to an expense report and requested reimbursement from the company. This is an example of which type of expense reimbursement scheme?
a. Overstated expense
b. Multiple reimbursement
c. Mischaracterized expense
d. Over-purchased reimbursement
91. Daniel Isley works as an internal auditor for Atlantic Insurance Co. While reviewing the company’s travel and entertainment expenses, Isley noticed that one employee had submitted several receipts from Chase’s Restaurant for round-dollar amounts just under the company’s reimbursement limit. Further, the receipts were consecutively numbered, but were submitted over a six-month period. What type of scheme did Isley most likely uncover?
a. Fictitious expense reimbursement
b. Multiple reimbursement
c. Mischaracterized reimbursement
d. None of the above
92. Charlene DiAngelo is a sales manager for Northwest Paper & Plastics. On April 11, she took some clients out for a business lunch to discuss a potential contract. When she returned to the office, she made a photocopy of her restaurant receipt. Using correction fluid, she changed the date on the photocopy to read June 11. She submitted the original restaurant receipt with a reimbursement request on April 11 and held on to the photocopy for 2 months. On June 12, she submitted the altered photocopy along with a second reimbursement request. What type of fraud scheme did DiAngelo commit?
a. Altered receipt
b. Fictitious expense reimbursement
c. Billing
d. Multiple reimbursement
93. Kevin Chitry, a sales executive for CIT Manufacturing, frequently took clients out for dinner and shows when they came to town to tour the plant. He usually paid for these expenses himself and submitted the receipts to his supervisor for approval and reimbursement. Occasionally, however, he also took his family out to restaurants and rock concerts and included these expenses in his reimbursement requests by indicating that he was entertaining a client. This type of fraud is known as a(n):
a. Overstated expense reimbursement
b. Mischaracterized expense reimbursement
c. Fictitious expense reimbursement
d. Altered receipt reimbursement
94. Linda Dudley, an employee of Bingham Company, was sent to an out-of-state conference to learn about the latest innovations in computer security. While she was at the seminar, her meals were picked up by a vendor hoping to get business from Bingham. Dudley also turned in receipts and requested reimbursement from her company for the same meals that the vendor paid for. What type of expense reimbursement fraud is this?
a. Mischaracterized expense
b. Overstated expense
c. Fictitious expense
d. None of the above
95. Daisy McMillan works as the office manager for Timball and Lewis, a medium-sized law firm. One afternoon, she went to the hardware store to purchase a few maintenance items for the office. While there, she also bought her husband a hammer as a birthday present. At the register, the items, including the hammer, totaled $63. She paid for all the items together and received both a carbon copy receipt and a separate credit card receipt. Back at the office, she carefully scratched additional numbers on to the carbon copy receipt to increase the total price to $168 and turned in the altered receipt for reimbursement. Several weeks later, she turned in the credit card receipt along with another reimbursement request for the $63. What type of expense reimbursement fraud did she commit?
a. Overstated expense reimbursement
b. Multiple reimbursements
c. Mischaracterized expense reimbursement
d. All of the above
96. As the manager of a local auto-parts store, Manny Ortega was responsible for reimbursing employees when they purchased supplies for the store with their own money. When employees brought Ortega their receipts for reimbursement, he would often alter the receipts to show a larger amount. Then he would ring a “no sale” on the cash register, remove the full amount per the altered receipt, and pocket the excess. Because the employee received the expected amount and the register totals remained in balance, Ortega was able to continue this scheme for nearly 2 years before being caught. What type of fraud did Ortega commit?
a. Overstated expense reimbursement scheme
b. Mischaracterized expense reimbursement scheme
c. Register disbursement scheme
d. None of the above
97. Phil O’Hara is an internal auditor for the Shield Corporation. Recently he ran a report that listed payments to employees for business expenses that occurred while the employee was on vacation. What type of fraud scheme is Phil most likely to find?
a. Cash larceny
b. Forged expenses
c. Overstated expense reimbursement
d. Mischaracterized expense reimbursement
98. Remy Lewis has just started working as a marketing research analyst for Commercial Casting Company in New York City. He is relocating his family to New York from North Carolina, but they haven’t moved yet. Twice a month, the company pays for Lewis to travel to North Carolina to visit his family and help with the move. During the month of September, Lewis only visited his family once; however, he submitted expense reports for mileage for two separate trips to North Carolina and back. What type of scheme is this?
a. Mischaracterized expense reimbursement
b. Billing
c. Fictitious expense reimbursement
d. None of the above
99. In one of the case studies in the textbook, Marcus Lane, a geologist for an environmental management and engineering services firm, traveled all over North and South America as part of his job, resulting in numerous expense reimbursements. Unfortunately, Lane went too far and began to double book his air travel using his personal credit card. He booked two separate flights to the same location, but with a huge cost difference. He used the cheaper ticket for the actual flight and returned the more expensive ticket for credit. And, of course, he submitted the more expensive ticket for reimbursement. How was his scheme detected?
a. The internal auditor discovered it during a routine audit of expense reimbursements.
b. The department’s administrative assistant took a message from the travel agency about a trip that she knew Lane didn’t take.
c. Lane’s manager received an anonymous tip.
d. The external auditors discovered it while sampling expenses during their annual audit.
100. In one of the case studies in the textbook, Marcus Lane, a geologist for an environmental management and engineering services firm, traveled all over North and South America as part of his job, resulting in numerous expense reimbursements. Unfortunately, Lane went too far and began to double book his air travel using his personal credit card. He booked two separate flights to the same location, but with a huge cost difference. He used the cheaper ticket for the actual flight and returned the more expensive ticket for credit. And, of course, he submitted the more expensive ticket for reimbursement. What changes to internal controls were made as a result of Lane’s fraud?
a. Enforcement of a new policy that business expenditures other than travel be charged to personal credit cards only
b. Clarification and better enforcement of the policy that all travel be booked through the company travel agent using a designated company credit card
c. Enforcement of a new policy that employees submit their travel expense reports for reimbursement within five days of returning from a trip
d. All of the above
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