ACFE Asset Misappropriation Schemes 3 — Questions and Answers
Question 1: Which type of check tampering scheme involves an employee intercepting outgoing checks and forging the payee's endorsement to deposit them personally?
- Forged maker scheme
- Altered payee scheme
- Authorized maker scheme
- Forged endorsement scheme (Correct answer)
Correct answer: Forged endorsement scheme
A forged endorsement scheme occurs when an employee intercepts a legitimately issued check and forges the payee's signature to redirect the funds.
Question 2: A sales representative collects customer cash payments and records them as 'sales returns' to balance the books. This concealment technique is known as:
- Lapping
- Conversion
- False account entries
- Write-off scheme (Correct answer)
Correct answer: Write-off scheme
Recording stolen cash as fictitious write-offs, returns, or discounts is a false account entries concealment method used in skimming schemes.
Question 3: Under the ACFE Fraud Tree, which of the following is a sub-category of payroll schemes?
- Ghost employees (Correct answer)
- Shell companies
- Skimming
- Larceny of cash on hand
Correct answer: Ghost employees
Ghost employees—fictitious workers added to payroll to divert paychecks—are a recognized sub-category under payroll fraud in the ACFE Fraud Tree.
Question 4: An employee uses a company credit card for personal purchases and submits the statements for payment. This scheme is BEST categorized as:
- Misuse of company property
- Expense reimbursement fraud (Correct answer)
- Non-cash misappropriation
- Check tampering
Correct answer: Expense reimbursement fraud
Charging personal expenses to a company credit card and seeking reimbursement or payment is classified as expense reimbursement fraud.
Question 5: Benford's Law is most effective as an analytical tool for detecting asset misappropriation because:
- It identifies vendors without tax ID numbers
- It reveals unusual digit distributions in financial data suggesting manipulation (Correct answer)
- It compares headcount to payroll totals
- It matches purchase orders to receiving reports
Correct answer: It reveals unusual digit distributions in financial data suggesting manipulation
Benford's Law predicts natural digit frequency distributions, and deviations—such as an excess of numbers just below approval thresholds—can signal fabricated transactions.
Question 6: A supervisor approves overtime for employees who did not actually work those hours, splitting the fraudulent pay. This is classified as:
- Commission scheme
- Falsified hours and salary scheme (Correct answer)
- Ghost employee scheme
- Expense reimbursement fraud
Correct answer: Falsified hours and salary scheme
Falsified hours and salary schemes involve misrepresenting time worked or pay rates to fraudulently increase payroll disbursements.
Question 7: Which asset misappropriation scheme would MOST likely be uncovered by comparing the vendor master file to the employee master file?
- Lapping
- Ghost employee scheme
- Shell company/fictitious vendor scheme (Correct answer)
- Register disbursement fraud
Correct answer: Shell company/fictitious vendor scheme
Matching vendor addresses, phone numbers, or bank accounts against employee records can expose shell companies controlled by insiders.
ACFE Asset Misappropriation Schemes 3
Which type of check tampering scheme involves an employee intercepting outgoing checks and forging the payee's endorsement to deposit them personally?