CFS Fraud Schemes & Classifications Flashcards

Which indicator is a classic red flag for a billing scheme involving fictitious vendors?

Answer: Vendors with physical addresses matching employee addresses

When a vendor's address matches an employee's home or personal address, it strongly suggests the employee created a fictitious vendor to divert company funds.

Which type of fraud involves an executive manipulating stock prices by misrepresenting the company's financial health?

Answer: Insider trading combined with financial statement fraud

Executives who manipulate financial statements to inflate stock prices and then trade on that misinformation commit both financial statement fraud and insider trading.

What distinguishes embezzlement from theft?

Answer: Embezzlement involves misappropriating property lawfully entrusted to the fraudster

Embezzlement involves the fraudulent conversion of property by someone who was lawfully entrusted with it, distinguishing it from ordinary theft where no prior lawful possession exists.

Healthcare fraud committed by a provider billing Medicare for services never rendered is an example of:

Answer: Phantom billing

Phantom billing involves submitting claims to insurers for services, procedures, or equipment that were never actually provided to the patient.

Which scheme involves a fraudster using a company's trade secrets or intellectual property for personal gain?

Answer: Economic espionage / IP theft

Economic espionage or IP theft involves stealing proprietary information, trade secrets, or intellectual property for competitive or personal financial advantage.

Advance fee fraud (also known as 419 fraud) primarily targets victims by:

Answer: Promising large returns in exchange for an upfront payment that is never returned

Advance fee fraud tricks victims into paying upfront fees with false promises of receiving much larger sums, after which the fraudster disappears with the fee.