CFS Asset Misappropriation 1 — Questions and Answers
Question 1: According to ACFE research, approximately what percentage of occupational fraud cases involve asset misappropriation?
- Approximately 40%
- Approximately 60%
- Approximately 86% (Correct answer)
- Approximately 95%
Correct answer: Approximately 86%
The ACFE Report to the Nations consistently shows asset misappropriation represents approximately 86% of all occupational fraud cases, making it the most frequent category.
Question 2: Which of the following best defines a 'skimming' scheme?
- Stealing cash after it has been recorded in the accounting system
- Taking cash before it is entered into the accounting system (Correct answer)
- Altering checks to redirect payments to a fraudster
- Creating fictitious vendors to receive payments
Correct answer: Taking cash before it is entered into the accounting system
Skimming is an off-book scheme where cash is stolen before any record of the receipt is created, making detection through records alone nearly impossible.
Question 3: The 'lapping' scheme is primarily used to:
- Inflate inventory counts to cover physical theft
- Conceal a cash shortage by applying subsequent customer payments to offset prior thefts (Correct answer)
- Create fictitious employee records in payroll
- Generate false invoices through shell companies
Correct answer: Conceal a cash shortage by applying subsequent customer payments to offset prior thefts
In a lapping scheme, an employee steals one customer's payment and covers it by applying the next customer's payment, creating a perpetual cycle of misapplication.
Question 4: A billing scheme using a shell company typically involves:
- Overstating legitimate vendor invoices by a small percentage
- Submitting invoices from a fictitious company controlled by the fraudster (Correct answer)
- Using company credit cards for personal purchases
- Falsifying expense reports for non-existent travel
Correct answer: Submitting invoices from a fictitious company controlled by the fraudster
Shell company billing schemes involve the fraudster establishing a fictitious vendor entity and submitting invoices for goods or services never actually provided.
Question 5: What is the critical difference between cash larceny and skimming?
- Cash larceny always involves larger dollar amounts
- Cash larceny occurs after the cash is recorded; skimming occurs before it is recorded (Correct answer)
- Cash larceny always involves check manipulation
- Skimming requires collusion while cash larceny does not
Correct answer: Cash larceny occurs after the cash is recorded; skimming occurs before it is recorded
The timing distinguishes these schemes: skimming is off-book theft before recordation, while cash larceny involves stealing cash that has already been entered into the accounting records.
Question 6: Which control is most effective at preventing payroll fraud involving fictitious (ghost) employees?
- Mandatory direct deposit for all employees
- Segregation of duties between HR and payroll combined with periodic headcount verification (Correct answer)
- Fully automated payroll processing systems
- Management approval of all overtime requests
Correct answer: Segregation of duties between HR and payroll combined with periodic headcount verification
Segregating HR functions (adding/removing employees) from payroll processing, combined with physical headcount verification, prevents one person from unilaterally creating and paying ghost employees.
Question 7: An employee submits claims for reimbursement of 500 miles of business driving that never actually occurred. This is classified as:
- A fictitious expense scheme (Correct answer)
- An inflated expense scheme
- A mischaracterized expense scheme
- A multiple reimbursement scheme
Correct answer: A fictitious expense scheme
Claiming reimbursement for expenses that never occurred constitutes a fictitious expense scheme, as the underlying cost was entirely fabricated rather than merely exaggerated.
CFS Asset Misappropriation 1
According to ACFE research, approximately what percentage of occupational fraud cases involve asset misappropriation?