ACFE Asset Misappropriation Schemes 5 — Questions and Answers
Question 1: A cashier voids a legitimate sale transaction after collecting payment from the customer and pockets the cash. This is BEST described as:
- Skimming
- Register disbursement fraud
- Voiding and cash theft (larceny) (Correct answer)
- Refund scheme
Correct answer: Voiding and cash theft (larceny)
Voiding a legitimate transaction after collecting cash and stealing the proceeds is a form of cash larceny because the sale was recorded before being reversed.
Question 2: Which of the following scenarios represents a 'fictitious refund' scheme?
- A manager approves refunds for returns that never occurred and routes the cash to herself (Correct answer)
- A customer requests a refund for a defective product
- A vendor credits the company for returned goods
- An employee falsifies her expense report
Correct answer: A manager approves refunds for returns that never occurred and routes the cash to herself
Fictitious refund schemes involve employees generating fraudulent refund transactions for non-existent returns and diverting the cash or credit to themselves.
Question 3: An employee misappropriates company funds over three years before detection. The ACFE data shows that longer-duration schemes tend to cause:
- Smaller losses due to smaller individual transactions
- Larger median losses than schemes detected quickly (Correct answer)
- No difference in loss amounts
- Lower losses because auditors catch them sooner
Correct answer: Larger median losses than schemes detected quickly
ACFE research consistently shows that fraud schemes lasting longer cause significantly higher median losses because the fraud compounds over time before detection.
Question 4: A payroll clerk adds a deceased employee to the payroll for two months after death, depositing checks into a joint account. This is BEST classified as:
- Falsified hours scheme
- Ghost employee scheme (Correct answer)
- Commission scheme
- Expense reimbursement fraud
Correct answer: Ghost employee scheme
Continuing to pay a deceased employee without authorization creates a ghost employee—a fraudulent payroll record for a person who cannot work.
Question 5: Which of the following is the PRIMARY reason asset misappropriation schemes are so prevalent compared to other occupational fraud categories?
- They cause the greatest financial losses per incident
- They are the easiest to prosecute criminally
- They are the most numerous and accessible to employees at all levels (Correct answer)
- They are the hardest to detect by auditors
Correct answer: They are the most numerous and accessible to employees at all levels
Asset misappropriation is the most common fraud category because opportunities exist at virtually every organizational level wherever employees handle cash, inventory, or other assets.
Question 6: A company implements a hotline allowing anonymous reporting of suspected fraud. According to the ACFE, this control primarily reduces fraud by:
- Deterring fraud through fear of detection (Correct answer)
- Automatically detecting financial statement anomalies
- Eliminating the need for internal audits
- Reducing the number of external audits required
Correct answer: Deterring fraud through fear of detection
Fraud hotlines deter potential perpetrators by increasing the perceived likelihood of detection through peer reporting, which is the primary preventive mechanism.
Question 7: Which document comparison would BEST help detect an altered payee check tampering scheme?
- Comparing vendor invoices to purchase orders
- Comparing original check images from the bank to the amounts in the cash disbursements journal (Correct answer)
- Comparing payroll registers to HR headcount
- Comparing inventory counts to purchase records
Correct answer: Comparing original check images from the bank to the amounts in the cash disbursements journal
Retrieving original cancelled check images and comparing payee names and amounts to recorded disbursements reveals alterations made after a check left the organization.
ACFE Asset Misappropriation Schemes 5
A cashier voids a legitimate sale transaction after collecting payment from the customer and pockets the cash.
This is BEST described as: