CFS CFS Fraud Schemes & Classifications 2 — Questions and Answers
Question 1: Check kiting exploits which banking vulnerability?
- Weak password authentication
- The float period between check deposit and fund clearance (Correct answer)
- ATM withdrawal limits
- Wire transfer delays
Correct 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.
Question 2: Which fraud scheme involves artificially inflating a company's reported revenue through fictitious sales?
- Channel stuffing
- Round-tripping
- Revenue recognition fraud
- Fictitious revenue scheme (Correct answer)
Correct answer: Fictitious revenue scheme
A fictitious revenue scheme records sales that never occurred, directly inflating reported revenue and assets on the financial statements.
Question 3: Bid rigging in a procurement fraud context most commonly involves:
- Stealing from the petty cash fund
- Colluding with vendors to predetermine the winning bidder (Correct answer)
- Forging vendor invoices for goods not received
- Redirecting customer payments to personal accounts
Correct 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.
Question 4: Which expense reimbursement fraud involves an employee submitting the same expense more than once?
- Fictitious expense scheme
- Altered receipt scheme
- Duplicate reimbursement scheme (Correct answer)
- Overstated expense scheme
Correct 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.
Question 5: Which term describes a fraud where management intentionally records expenses in the wrong period to smooth earnings?
- Channel stuffing
- Income smoothing / timing differences (Correct answer)
- Embezzlement
- Conversion
Correct 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.
Question 6: A conflict of interest fraud scheme is classified under which ACFE Fraud Tree branch?
- Asset misappropriation
- Financial statement fraud
- Corruption (Correct answer)
- Tax fraud
Correct 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.
CFS CFS Fraud Schemes & Classifications 2
Check kiting exploits which banking vulnerability?