Asset Misappropriation Schemes Flashcards

A purchasing manager splits a $45,000 purchase order into three $15,000 orders to avoid the $20,000 competitive bidding threshold. This is known as:

Answer: Bid splitting (or 'structured' purchasing)

Bid splitting involves breaking a large purchase into smaller amounts specifically to circumvent procurement thresholds that require competitive bidding.

Which of the following is a characteristic behavioral red flag ('red flag') of an employee committing asset misappropriation?

Answer: Refusing to take vacation or cross-train colleagues on their duties

Employees who refuse vacations or resist having others learn their duties often do so to prevent the discovery of ongoing fraud schemes.

The Occupational Fraud and Abuse classification system developed by the ACFE categorizes asset misappropriation into two main branches. These are:

Answer: Cash schemes and non-cash schemes

The ACFE's fraud tree divides asset misappropriation into cash schemes (skimming, larceny, fraudulent disbursements) and non-cash schemes (misuse and larceny of non-cash assets).

An employee uses a company credit card to purchase personal electronics and then submits the expense report listing the items as 'office supplies.' This is best classified as:

Answer: Personal purchase scheme using company funds

A personal purchase scheme involves using a company-issued payment method to buy items for personal benefit, regardless of how it is labeled on the expense report.

During a fraud examination, an examiner discovers that a company's accounts payable aging report shows many vendor invoices paid within one day of receipt, all approved by the same manager. This pattern is most consistent with:

Answer: A kickback or billing fraud scheme requiring rapid payment

Unusually rapid invoice approvals by a single individual suggest the approver has a personal interest in ensuring the vendor is paid quickly, a hallmark of kickback arrangements.

Which type of documentary evidence is typically most useful in proving a check tampering scheme?

Answer: Original cancelled checks, bank statements, and signature cards

Cancelled checks reveal alterations to payee names or amounts, and comparison to signature cards shows unauthorized endorsements or forged signatures.

A cash register operator voids a transaction after a customer has paid and then pockets the cash. This scheme is most accurately described as:

Answer: Skimming via false voids

Recording a false void after cash is received removes the sale from the register tape, allowing the employee to steal the cash while the records appear balanced.