CFA Asset Misappropriation & Embezzlement Flashcards
6 cards from real CFA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CFA Asset Misappropriation & Embezzlement flashcards as text
Which of the following BEST describes a 'forced balancing' technique used to conceal embezzlement?
Answer: Altering journal entries so account totals appear correct despite missing funds
Forced balancing involves manipulating journal entries or account records to make totals reconcile even though assets have been removed.
An employee with sole check-signing authority who also reconciles the bank account creates a risk because:
Answer: They can write fraudulent checks and conceal them during reconciliation
When one person both signs checks and reconciles the bank account, they can create fraudulent disbursements and hide them during the reconciliation process.
Register disbursement fraud differs from skimming primarily because:
Answer: In register disbursements, the transaction IS recorded in the register but as a false refund or void
Register disbursement schemes create a false paper trail through fake refunds or voids in the register, unlike skimming which leaves no record at all.
When examining payroll fraud, a fraud examiner should be particularly alert to employees who:
Answer: Never take vacations and insist on handling their own payroll tasks
Refusing to take vacations is a classic red flag because temporary absence would expose ongoing fraud schemes maintained by that employee.
In the context of asset misappropriation, 'tunneling' refers to:
Answer: Diverting corporate opportunities or assets to benefit a controlling insider
Tunneling describes a controlling shareholder or manager diverting corporate resources, assets, or business opportunities for personal benefit at the expense of minority shareholders.
Which ratio analysis finding would MOST strongly suggest that accounts payable fraud (fictitious vendor payments) is occurring?
Answer: Accounts payable balances growing disproportionately to purchases
Accounts payable balances growing faster than actual purchase volume may indicate fictitious invoices inflating payables without corresponding goods or services received.