Financial Transactions & Fraud Schemes Flashcards
7 cards from real ACFE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Transactions & Fraud Schemes flashcards as text
In a Ponzi scheme, returns paid to earlier investors are funded by:
Answer: Capital contributions from new investors
Ponzi schemes use money from new investors to pay returns to earlier investors, creating the illusion of a profitable investment when no real returns are generated.
Which financial ratio anomaly might suggest that a company is inflating its reported revenue through fictitious sales?
Answer: DSO increasing significantly while revenue rises
Rising DSO alongside revenue growth suggests customers are not actually paying, which is consistent with fictitious or prematurely recognized sales.
A 'bid-rigging' scheme in procurement fraud most commonly involves:
Answer: Colluding with vendors to predetermine the winning bidder
Bid rigging is a form of corruption where competitors collude to ensure a predetermined vendor wins a contract, often at an inflated price.
Under the ACFE's fraud tree, 'corruption' schemes are distinct because they:
Answer: Involve the fraudster using their influence rather than taking assets directly
Corruption schemes involve employees misusing their position and influence—such as through bribery or conflicts of interest—rather than directly stealing assets.
Which document is most useful for detecting a disbursement fraud scheme involving fictitious vendors?
Answer: Vendor master file compared against employee data
Comparing the vendor master file to employee records (names, addresses, SSNs, bank accounts) can reveal shell companies set up by insiders.
A company controller books journal entries to reduce the allowance for doubtful accounts, thereby increasing net income. This is an example of:
Answer: Improper asset valuation
Manipulating the allowance for doubtful accounts affects asset valuation by overstating net receivables, which in turn inflates reported net income.
The primary purpose of the 'integration' stage in money laundering is to:
Answer: Reintroduce laundered funds into the legitimate economy
Integration is the final stage where laundered funds re-enter the legitimate financial system, appearing as normal business income or legitimate assets.