Ch4 Cash Receipt Schemes and Other Test Questions & Answers

CHAPTER 4

1. Known as “off-book” frauds, skimming schemes involve the theft of cash before it is recorded in the victim company’s books. As a result, __________________________.

A. Such schemes are typically used by corrupt CEOs/CFOs

B. It may be difficult to detect that money has been stolen

C. SOX standards impose stricter penalties on skimmers

D. Salespeople, tellers, and wait staff are obviously not the most likely candidates to skim funds because they need their jobs

2. A cashier at Pretty Good Shoes, Inc. sold a pair of shoes to a cash paying customer who did not wait for a receipt. Instead of ringing up the sale and placing the cash in the drawer, the cashier rang “no sale” and then pocketed the cash after the customer left. Which type of fraud strategy did the cashier utilize?

E. Skimming

F. Lapping

G. Filching

H. Layering

3. Perhaps the key to preventing sales skimming is to maintain a _________________ at any point where cash enters an organization.

I. Viable oversight presence

J. Dispersion of cash registers throughout the store

K. Continuous presence of management

L. Roster of trustworthy employees

4. One simple measure that makes it easy to detect off-hours sales is to compare the organization’s hours of operation to cash register _________________.

A. Same store daily average sales totals

B. Voided transaction totals

C. Beginning/ending cash in the drawer compared to daily deposit slips

D. User log-in/log-out time records

5. Skimming receivables requires _________ than skimming sales.

A. Less risk of detection

B. More opportunity

C. More effort

D. Less effort

6. You have been hired by the owner/CEO of Tread Lightly Tires, a family held private company in the automotive tire business, to investigate whether a back office receivables clerk has been skimming customer payments. Which of the following, if it exists, will greatly aid in your investigation?

A. Accurate inventory records

B. Surveillance footage from the cash register area

C. Whether the clerk has an unusually close relationship with one or more large vendors

D. A second set of books

7. As the bookkeeper for Somewhat Healthy Foods, Inc., Ted stole $250,000 over four years (using an intricate lapping scheme). In cases such as this, it is common for the perpetrator to have developed a reputation as a/an ________________.

A. Substandard employee because they have a bad attitude and are disliked by co-workers

B. Average employee because they do what they’re supposed to do, but will not go the extra mile or put in overtime if needed

C. Model employee because they put in a lot of overtime and rarely take vacations

D. Dangerous individual because they often threaten people around them

8. If the accounting duties associated with accounts receivable are properly __________ so that there are independent checks of all transactions, skimming payments is very difficult to commit and very easy to detect.

A. Regulated

B. Separated

C. Ordered

D. Documented

9. Whereas skimming schemes involve the theft of ___________, cash larceny schemes involve the theft of money ___________.

A. Checks only; and checks

B. Off-book funds; that has already appeared on a victim company’s books

C. Cash at the point of sale; during the bookkeeping process

D. Company assets; with criminal intent

10. In the occupational fraud setting, a cash larceny may be defined as the ____________________ without the consent and against the will of the employer.

E. Intentional taking away of an employer’s cash

F. Theft of more than $1,000 (in either currency or checks)

G. Skimming of cash before it hits the company’s books

H. The theft of more than $10,000 (in either currency or checks)

11. A large percentage of cash larceny schemes occur at the point of sale because ______________.

A. Skimming, by comparison, is much more difficult

B. It is easy to conceal

C. Low level employees are typically less honest than management

D. That’s where the money is

12. If a retail cashier perpetrates larceny, there will be an imbalance between the _________ and the ____________.

E. Register tape; cash drawer

F. Register user log-in/log out records and store hours

G. Cash drawer; bank deposit slips

H. Register sales; store’s inventory

13. In point of sale cash larceny schemes, several methods are used by fraudsters to conceal their thievery. These include thefts from other registers, death by a thousand cuts, reversing transactions, altering cash counts or register tapes, and _________________.

I. Padding the perpetual inventory

J. Volunteering to work overtime and rarely taking vacations

K. Appearing to be a model employee

L. Destroying register tapes

14. Most cash larceny schemes only succeed because of a lack of ____________.

A. Qualified people

B. Internal controls

C. Training

D. Trust (in the organization)

15. Not all cash larceny schemes occur at the point of sale. Larceny of receivables is generally concealed through one of three methods: force balancing, reversing entries and _____________.

A. Thefts from other registers

B. Skimming

C. Destruction of records

D. Appearing to be a model employee

16. Within the context of concealing larceny, adjusting customer accounts with unauthorized “courtesy discounts” is an example of _____________.

E. Reversing entries

F. Destruction of records

G. Force balancing

H. Shrinkage

17. Within the context of concealing larceny, making unsupported entries in the company’s books to produce a fictitious balance between receipts and the ledger is an example of:

A. Destruction of records

B. Force balancing

C. Lapping

D. Reversing entries

18. The most important factor in preventing cash larceny from deposits is ______________.

A. Separating duties

B. To hire honest people

C. Entrusting new employees

D. Requiring the person who prepares the deposit to also receive and log incoming payments

19. A key anti-fraud control in preventing/detecting deposit larceny and lapping is:

A. Placing surveillance cameras at each point of sale

B. Assigning unique ID numbers to cashiers

C. Prohibiting deposits from being made in night drops

D. Itemizing deposit slips

20. In general, noncash misappropriations fall into one of the following categories: misuse, unconcealed larceny, asset requisitions and transfers, purchasing and receiving schemes, and _______________.

A. Vendor fraud

B. Deposit larceny

D. Fraudulent shipments

E. Bribery and corruption

21. There are essentially two ways a person can misappropriate a company asset: the asset can be ____________, or it can be _______________.

A. Misused; stolen

B. Misclassified in inventory; “borrowed”

C. Misstated (on the balance sheet); concealed altogether

D. Misdirected to a shell company; deposited in an offshore account

22. Most noncash larceny schemes are not very ____________.

A. Logical

B. Easy to perpetrate

D. Complicated

E. Easy to prevent/detect

23. To prevent larceny of noncash assets, the duties of requisitioning, purchasing, and ___________ the assets should be segregated.

A. Inventorying

B. Classifying

C. Tagging

D. Receiving

24. When inventory is stolen, the key concealment issue for the fraudster is _________.

A. Shrinkage

B. Removing the stolen inventory from the premises

C. Trust

D. Physical access (to secure areas)

25. While inventory shrinkage may be a red flag that fraud is occurring, it is not _______________.

A. An indicator with which management should be overly concerned

B. A reliable indicator of anything other than normal business fluctuations

C. An unambiguous signal

D. An anomaly

26. One of the simplest methods for concealing shrinkage is to change the ___________ inventory record so that it matches the ____________ inventory count.

A. Warehouse; sales floor

B. Digital; manual

C. Perpetual; physical

D. Inspection of the; random

27. _____________ inventory and other assets is a relatively common way for fraudsters to remove assets from the books before or after they are stolen.

A. Writing off

B. Fictitious sales of

C. Simply walking off with

D. False shipments of

28. To prevent fraudulent shipments of merchandise, organizations should make sure that every ___________ is matched to an approved _________ before the merchandise goes out.

E. Transaction; system

F. Warehouse worker; supervisor of shift leader

G. Sales record; order form

D. Packing slip; purchase order

29. A significant increase in ___________ could indicate an inventory theft scheme.

E. Warehouse employee turnover

B. Scrap levels

C. Changing usual vendors

D. Perpetual inventory

30. Assets should be removed from operations only with _______________.

E. The proper authority

F. An internal auditor’s approval

G. Verification of perpetual inventory

H. Proper adjustments to journal entries

31. In the purchasing function, it is important to separate the duties of requesting (requisitioning) goods, ordering goods, receiving goods, maintaining perpetual inventory records, and _______________.

I. Verifying of physical (against the perpetual) inventory

J. Executing purchasing

K. Spot checking supporting documents

D. Issuing payments