CFE Asset Misappropriation Schemes 4 — Questions and Answers
Question 1: An employee steals a company laptop and then signs a surplus property disposal form to make it appear the laptop was properly scrapped. Which category of asset misappropriation does this represent?
- Cash larceny
- Fraudulent disbursement
- Non-cash asset larceny (Correct answer)
- Skimming
Correct answer: Non-cash asset larceny
Theft of physical non-cash assets such as equipment, combined with falsified disposal documentation, falls under the non-cash larceny branch of asset misappropriation.
Question 2: Which of the following best describes a 'pass-through' vendor scheme?
- A vendor invoices for goods delivered through a third-party shipper
- An employee-controlled entity buys goods and resells them to the employer at an inflated price (Correct answer)
- A vendor is paid before goods are received to take advantage of early-payment discounts
- An employee reroutes vendor payments through their personal bank account
Correct answer: An employee-controlled entity buys goods and resells them to the employer at an inflated price
In a pass-through scheme, the fraudster's entity purchases goods at market price and resells them to the employer at a markup, capturing the profit as illicit gain.
Question 3: Data analytics used to detect payroll fraud would most likely flag which of the following as suspicious?
- Employees with the same last name in different departments
- Two employees sharing the same bank account routing and account number (Correct answer)
- Employees who consistently use direct deposit
- A high ratio of salaried to hourly employees
Correct answer: Two employees sharing the same bank account routing and account number
Duplicate bank account numbers on different employee records indicate a ghost employee whose pay is being diverted to a real person's account.
Question 4: A buyer at a manufacturing company receives cash payments from a supplier in exchange for steering contracts to that supplier. Under the ACFE classification, this is best described as:
- Asset misappropriation — billing scheme
- Corruption — bribery/kickback (Correct answer)
- Financial statement fraud — revenue manipulation
- Asset misappropriation — non-cash scheme
Correct answer: Corruption — bribery/kickback
Receiving payments for influencing business decisions on behalf of another party is a corruption scheme (bribery/kickback), not asset misappropriation, under the ACFE fraud tree.
Question 5: Which of the following payroll schemes is most likely to be revealed by comparing current payroll records to terminated employee files?
- Wage rate alteration
- Fictitious hours scheme
- Ghost employee scheme using former employee identities (Correct answer)
- Commission fraud
Correct answer: Ghost employee scheme using former employee identities
Continuing to pay a terminated employee's record after separation, and diverting the funds, is detected when active payroll is compared against the HR termination list.
Question 6: The Benford's Law analysis technique is used in fraud examinations primarily to:
- Identify duplicate invoice numbers in accounts payable
- Detect anomalies in the natural distribution of leading digits in financial data (Correct answer)
- Compare vendor addresses against employee addresses
- Calculate the expected loss from an asset misappropriation scheme
Correct answer: Detect anomalies in the natural distribution of leading digits in financial data
Benford's Law predicts the frequency of leading digits in naturally occurring datasets; deviations from this distribution can signal fabricated or manipulated numbers.
Question 7: An employee forges a supervisor's signature on a check made payable to herself. To conceal the theft, she records the disbursement as a payment to a legitimate vendor. This concealment technique is known as:
- Fictitious debit entry
- Journal entry manipulation (Correct answer)
- Forced account balance
- Ledger entry suppression
Correct answer: Journal entry manipulation
Recording the fraudulent disbursement as a payment to a real vendor through a journal entry masks the theft within routine operating transactions.
CFE Asset Misappropriation Schemes 4
An employee steals a company laptop and then signs a surplus property disposal form to make it appear the laptop was properly scrapped.
Which category of asset misappropriation does this represent?