CFE

Question 1

What are two types of Cash Receipts schemes

Answer 1

Skimming and Larceny

Question 2

What is skimming?

Answer 2

The removal of cash from a victim entity before it is recorded in the victims organizations account.

Known as: OFF BOOK FRAUD.

Question 3

What is a Lapping Scheme

Answer 3

Steal from various people to cover up theft. Robbing Peter to pay Paul

Question 4

No disclosure agreement

Answer 4

Information learned must be kept confidential and not disclosed.

Question 5

Non competition agreement.

Answer 5

Employee agrees to not work at a competing companies for X period of time or distance.

Used as-needed basis.

Question 6

What is an advanced fee schemes

Answer 6

You Pay a fee to do work, they don’t do the work. Pay us $500 we’ll consolidate all your debt into one easy payment, then they don’t consolidate

Question 7

What is a scavenger or revenge scheme

Answer 7

Call and ask if you were ripped off by ABC company… yes, pay us $500 with all the other victims to pay and hire an attorney to go after ABC

Question 8

Affinity fraud

Answer 8

Someone known to you asks for investment.

Question 9

What is the definition of a Ponzi scheme

Answer 9

Illegal business practice in which new investors money is used to make payments to earlier investors.

Key element is that initial investors are paid with subsequent investors money, with little or no legitimate commerce actually occurring.

Question 10

Synthetic ID theft

Answer 10

Fraudster using fabricated personal information or a combination of real and fabricated information to create a new identity

Question 11

The accounting equation

Answer 11

Assets= liabilities + Owners Equity

Question 12

What is owners equity

Answer 12

Represents the investment of a company’s owners plus accumulated profits.

Question 13

Cash based accounting vs accrual basis accounting

Answer 13

Cash based: records revenues and expenses when the company received or pays cash.

Accrual basis accounting: recording revenue when they are earned. Provides immediate feedback on expected cash inflows and outflows.

Question 14

What is a balance sheet

Answer 14

A snap shot of a company’s financial situation at a specific point in time, generally the last day of the accounting period.

Assists on one side; liabilities and equity on the other.

Question 15

What is an assets and long term assets. On a balance sheet

Answer 15

Anything owned that can be converted to cash within a year.

Long term assets.anything turned into cash that will TAKE LONGER than a year: land, buildings, patents

Question 16

What are liabilities on a balance sheet.

Answer 16

Current Liabilities expected to be paid with one year: includes account payable and the portion of long term debts that will come due within the next year.

Long term liabilities: not due within a year. Bonds, notes, mortgage payables

Question 17

What is owners equity. Two sources

Answer 17

Owner contributions: capital stock or paid in capitol.

Undistributed earnings: don’t pay myself invest in company.

Question 18

Accounts receivables vs payables.

Answer 18

Receivables is what customers owe me.

Payable is what I owe venders

Question 19

What is a income statement.

Answer 19

Revenue: net sales, minus what it cost to make item sold called. GROSS PROFIT OR GROSS MARGIN

Operating expenses: minus payroll, taxes, utilities.

Equals net income

Question 20

What is net profit.

Answer 20

The amount after subtracting operating expenses from gross profit.

Question 21

What is on a statement of cash flow. And what is it.

Answer 21

It reports the company’s sources and uses of cash during the accounting period.

Comprised of three main sections:
Cash flow for OPERATING activities: cash received from customers minus cash paid for merch.
For INVESTING activities: cash paid to purchase equipment. Minus net cash flow from investing
for FINANCING activities: cash received from owner investment. Cash from note: IE got a loan. Minus Cash paid on loan and cash dividends paid. Equals net cash flow from financing.

Question 22

Difference between US GAAP and IFRS

Answer 22

US GAAP: RULES-BASED accounting framework.

International financial reporting standards: IFRS: PRINCIPLE BASED accounting frame work.

Publicly traded companies must adhere to the practices of their jurisdiction

Question 23

Why would I want to depart from GAAP

Answer 23

Concern for overstatement of assists or income
Common practice
Substance better reflected by no following
Immaterial
Expected costs exceed the benefits of compliance.

Must notate departure in financial statement s

Question 24

Definition of financial statement fraud

Answer 24

The DELIBERATE MISREPRESENTATION of the financial condition of an enterprise accomplished through the INTENTIONAL MISS-STATEMENT OR OMISSION of accounts or disclosures in the financial statement to DECEIVE statement users

Question 25

Typical forms of financial statement fraud

Answer 25

Overstated assets and revenue Understate liabilities and expenses

Question 26

What are the 5 classifications of financial statement schemes

Answer 26

``` Fictitious revenues Timing differences Improper asset valuations Concealed liabilities and expenses Improper disclosures ```

Question 27

Common methods for concealing liabilities.

Answer 27

Liability /expense omissions Improperly capitalized costs Failure to disclose or improper recording of warranty costs and product return liabilities

Question 28

What is a contingent liability

Answer 28

Potential obligation that will materialize only if certain events occur in the future. ( being sued). Typical omission

Question 29

What are three types of accounting changes

Answer 29

Accounting principles Estimates Reporting entities

Question 30

Vertical analysis and horizontal

Answer 30

Vertical: relationships between income sheet, balance sheet or statement of cash flows during a accounting period by percentages. Horizontal: analyzing the percentage change in financial statement from one period to the next

Question 31

Financial ratios definition

Answer 31

Means Of measuring the relationship between any two different financial statement amounts Current ratio. Current assets divided by Current liabilities 1.5 and up. Healthy Quick ratio. Cash+ securities+ receivables devised by current liabilities.

Question 32

Types of fraudulent disbursement schemes

Answer 32

``` Register disbursement schemes Electronic payment scheme Billing schemes Payroll schemes Expense reimbursement scheme ```

Question 33

What can you do to prevent electronic payment tampering. Other banking ideas

Answer 33

ACH blocks ACH filters Positive pay- provide list of know monthly ACH debits. If not on list contact customer Other ideas. Have a spectate bank account for checks and ACH

Question 34

Billing schemes

Answer 34

Invoicing via shell company: employee creates she’ll company. Purchases usually for services rather than goods. Invoicing via non accomplice vendors: purposely pay vendor twice, pocket refund from vendor. Or pay wrong vendor and pocket return. Personal purchase with company funds: use business funds to buy personal stuff

Question 35

Pass through scheme

Answer 35

Actual goods or services purchased through shell company. Instead of buying direct from vendor. Company buys from shell company for more money

Question 36

Prevention of billing schemes.

Answer 36

Separation of duties Fraud HOT LINES competitive bidding

Question 37

What is social engineering

Answer 37

Tricking someone into giving you access. Deceives victim into disclosing personal information or convinces them to commit acts that facilitates the attackers intended scheme

Question 38

Definition of Administrative security

Answer 38

Policies and awareness training Separating of duties Incident response plans. Computer risk assessment.

Question 39

Def of corruption

Answer 39

The wrongful use of influence to procure a benefit for the actor or another person, contrary to the duty and rights of others

Question 40

4 types of corruption

Answer 40

Bribery Kickback: payments made to obtain favorable treatment. Illegal gratuities: things given to you Economic extortion: demand for payment

Question 41

Methods for proving corrupt payments

Answer 41

Turn inside witness Secretly infiltrate or record ongoing transaction Identify and trace corrupt payments through audit steps

Question 42

Phases of procurement process

Answer 42

Pre-solicitation: needs, what we need Solicitation: prepare and submit ion Bid evaluation and award phase: evaluate and award bid The post award and administrative phase: contracted parties do the work or give you the items.

Question 43

Schemes involving. Collusion among contractors: 4 types

Answer 43

Complementary bidding: competitors submit token bids Bid rotation: take turns submitting the low bid. Bid suppression: agree not to bid on certain jobs Market division: agreee to only bid on jobs in a certain area.

Question 44

What are the three types of accounting changes.

Answer 44

Accounting principals. estimates Reporting entities. Must be disclosed

Question 45

Debt to equity ratio | Assets turnover ratio

Answer 45

Debt to equity: total liabilities Divided by total equity Assets turnover: net sales DIVIDED by AVERAGE total assets.

Question 46

What is an air loan

Answer 46

Typically done by mortgage brokers | Gets a loan for a non existent property.

Question 47

What is farming | What is smishing

Answer 47

Farming: Hijack domain name. Smishing: send text fishing message.

Question 48

What is a false sale scheme

Answer 48

The employee- fraudster’s outside accomplice pretends to buy merchandise but the employee does not ring up the sale.

Question 49

Falsifying incoming shipment scheme

Answer 49

A person charged with receiving goods on the victim company’s behalf Such as a warehouse supervisor or receiving clerk falsifies the records of incoming shipments.

Question 50

What is physical padding.

Answer 50

Making it appear as though there are more assets present in the west house or stockroom than there actually are.

Question 51

How can a crook fix the problem of fictitious sales and accounts receivable.

Answer 51

Suspect will enter a debit to accounts receivable and a corresponding credit to the sales account so that it appears the missing goods have been sold.

Question 52

What is a clinical lab scheme

Answer 52

Doctors tells patient to get more testing when it’s not really needed

Question 53

What is data classification? | What is data minimization?

Answer 53

Placing data into different security levels based on their value and sensitivity. Collecting and storing the minimal amount of information necessary to perform a task or function.

Question 54

What equation is the balance sheet?

Answer 54

Asset= liabilities + owners equity

Question 55

What is the equation for income statement?

Answer 55

Revenue- expenses = net profit. Income statement is temporary. Go to zero at end of fiscal year. Net sales ( minus returns and bad inventory) then minus costs of good to buy or make. Then minus operating expenses: bills. ROE