ACCT 421 Quiz 2

Question 1

Skimming

Answer 1

Taking cash before it has been entered into the accounting information system

Question 2

Cash Larceny

Answer 2

Taking cash after it has been entered into the accounting information system

Question 3

Types of fraud schemes considered to be register disbursement schemes?

Answer 3

False Refunds- No actual return of goods or pricing adjustments are made-they are merely recorded

False voids- A legitimate sale is made and then the fraudster voids the sale

Question 4

Primary differences between skimming and cash larceny schemes and register disbursement schemes?

Answer 4

In skimming or cash larceny, there is no record of the transaction – the money is just missing; in cash register schemes the removal of the money is recorded on the register tape – the false transaction is recorded as though it were a legitimate disbursement to justify the removal of money

Question 5

Define how one creates z-scores?

Answer 5

Calculated by taking the difference between the number and the mean and then dividing the difference obtained by the standard deviation

Question 6

How to interpret z-scores?

Answer 6

For a given data value, the z-score gives the number of standard deviations above (positive) or below (negative) the mean.

99% of the time z-score will be between -3.00 and +3.00 and it will be between -2.00 and +2.00 95% of the time

Question 7

What factors allow fraud via false voids to be committed?

Answer 7

If internal control is lax, lack of the original receipts can be overlooked during the daily reconciliation process.

Question 8

For what reasons do register disbursement frauds need to be concealed?

Answer 8

Typically, fraudsters do not make any effort to conceal the shrinkage that results from their schemes. Some schemes are small enough that the amount of shrinkage does not raise concern. Scheme can be detected if there is a high number of voids or refunds.

1. Can keep the size of each disbursement small so that it is below the limit that requires management review
2. Destroy records to keep management from finding out

Question 9

How do z-scores help identify frauds related to cash larceny, skimming, and register disbursement schemes?

Answer 9

High negative z-scores should be examined for potential skimming and high positive z-scores should be examined for potential commission fraud.

Question 10

What are the transaction-related observations indicating potential register disbursement schemes?

Answer 10

Too many voids or false returns

Pattern between employee who entered the void and the manager who approved the void