CFS Fraud Schemes & Classifications Flashcards

Check kiting exploits which banking vulnerability?

Answer: The float period between check deposit and fund clearance

Check kiting exploits the bank float by writing checks between accounts before funds are cleared, artificially inflating balances to withdraw nonexistent funds.

Which fraud scheme involves artificially inflating a company's reported revenue through fictitious sales?

Answer: Fictitious revenue scheme

A fictitious revenue scheme records sales that never occurred, directly inflating reported revenue and assets on the financial statements.

Bid rigging in a procurement fraud context most commonly involves:

Answer: Colluding with vendors to predetermine the winning bidder

Bid rigging is a form of corruption where competitors or insiders collude to ensure a predetermined vendor wins a contract, typically in exchange for kickbacks.

Which expense reimbursement fraud involves an employee submitting the same expense more than once?

Answer: Duplicate reimbursement scheme

Duplicate reimbursement fraud occurs when an employee submits the same receipt or expense claim multiple times, often through different channels or time periods.

Which term describes a fraud where management intentionally records expenses in the wrong period to smooth earnings?

Answer: Income smoothing / timing differences

Income smoothing through timing differences involves shifting revenues or expenses between periods to present a more stable earnings picture, constituting financial statement fraud.

A conflict of interest fraud scheme is classified under which ACFE Fraud Tree branch?

Answer: Corruption

Conflict of interest schemes fall under the corruption branch, where an employee uses their position to benefit personally at the expense of their employer's interests.