Financial T&FS Flashcards
\_\_\_\_\_\_\_\_\_\_\_ involve paying individuals to undergo unnecessary medical procedures that are then billed to the patient's insurer or health care program. A. False cost reporting schemes B. Rent-a-patient schemes C. DRG creep schemes D. Fictitious patient schemes
Rent-a-patient schemes
So-called rent-a-patient schemes involve paying individuals to undergo unnecessary medical procedures that are then billed to the patient’s insurer or health care program. These schemes occur in countries using a third-party-payer system or single-payer system that allows private providers to bill health care programs.
Which of the following statements is TRUE with regard to a fictitious revenue scheme?
A. Uncollected accounts receivable are a red flag of fictitious revenue schemes.
B. Fictitious revenues must involve sales to a fake customer.
C. The debit side of a fictitious sales entry usually goes to accounts payable.
D. If a fictitious revenue scheme has taken place, there will typically be no accounts receivable on the books.
Uncollected accounts receivable are a red flag of fictitious revenue schemes.
Fictitious or fabricated revenues involve the recording of sales of goods or services that did not occur. Fictitious sales most often involve fake customers, but can also involve legitimate customers. At the end of the accounting period, the sale will be reversed (as will all revenue accounts), which will help to conceal the fraud.
Which of the following activities are included in the solicitation phase of procurements involving open and free competition?
A. The prospective contractors prepare and submit their bids.
B. The procuring entity identifies its needs and develops the criteria used to award the contract.
C. The procuring entity performs its contractual obligations.
D. The procuring entity determines the method for acquiring the goods or services.
The prospective contractors prepare and submit their bids.
The solicitation phase involves the bid solicitation, bid preparation, and bid submission. During this phase, the procuring entity prepares the solicitation document, provides notices of solicitation, and issues the solicitation document. After the procuring entity issues the solicitation document, the bidders prepare and submit their bids or proposals.
Which of the following is a way that dishonest contractors collude to circumvent the competitive bidding process?
A. Submit bids that are competitive in price.
B. Submit token bids that are not serious attempts to win the contract.
C. Use obscure publications to publish bid solicitations.
D. Submit invoices for work that was not performed or materials that were not delivered.
Submit token bids that are not serious attempts to win the contract.
Schemes involving collusion among contractors seek to circumvent the competitive bidding process. In these schemes, competitors in the same market collude to defeat competition or to inflate the prices of goods and services artificially.
Complementary bidding (also known as protective, shadow, or cover bidding) is a common form of collusion between competitors, and it occurs when competitors submit token bids that are not serious attempts to win the contract. Token bids give the appearance of genuine bidding, but, by submitting token bids, the conspirators can influence the contract price and who is awarded the contract
Horizontal analysis is a technique for analyzing the relationships among the items on an income statement, balance sheet, or statement of cash flows by expressing line items as percentages of a specific base item.
A. True
B. False
False
Horizontal analysis is a technique for analyzing the percentage change in individual income statement or balance sheet items from one year to the next. The first period in the analysis is considered the base period, and the changes in the subsequent period are computed as a percentage of the base period.
Vertical analysis is the expression of the relationship or percentage of component items to a specific base item on the income statement or balance sheet. Ratio analysis is a means of measuring the relationship between any two different financial statement amounts. The relationship and comparison are the keys to any of these types of financial analyses.
Which of the following activities are included in the post-award and administration phase of procurements involving open and free competition?
A. The procuring entity performs its contractual obligations.
B. The procuring entity evaluates the bids or proposals.
C. The procuring entity develops the bid specifications.
D. The procuring entity issues the solicitation document.
The procuring entity performs its contractual obligations.
During the post-award and administration phase, the contracting parties fulfill their respective duties through the performance of their contractual obligations. Activities that occur during this phase include contract modifications (i.e., change orders); review of completed portions and release of monies; and assessment of deliverables for compliance with the contract terms, including quality control.
Which of the following is most indicative that the winning bid on an original construction project was not feasible?
A. Increasing trend in the number of change orders
B. High turnover in developer’s personnel
C. Draw requests
D. Missing documentation
Increasing trend in the number of change orders
An increasing trend in the number of change orders or amounts on change orders might be an indication that construction changes have taken place that would alter the originally planned project to such an extent as to render the underwriting inappropriate. Alternatively, some projects—especially large projects—tend to have many change orders. It might be more abnormal in situations like these to have few change orders or none at all than to have many. For instance, a lack of change orders for a large project might suggest that progress is not actually being made. Ultimately, the key characteristic that the fraud examiner should look for in change orders is abnormality, which can come in many forms. Fraud examiners should discover what the normal trend for change orders is in terms of both quantity and content with the particular type of industry and project, and then they can look for deviations from those trends.
The asset turnover ratio is calculated by dividing net sales by average total assets.
True
The asset turnover ratio is used to determine the efficiency with which assets are used during the period. The asset turnover ratio is typically calculated by dividing net sales by average total assets (net sales / average total assets). However, average operating assets can also be used as the denominator (net sales / average operating assets).
Which of the following are information security goals that an e-commerce system should endeavor to meet for its users and asset holders?
I. Penetrability of data
II. Materiality of data
III. Integrity of data
IV. Availability of data
III. Integrity of data
IV. Availability of data
All branches of an information system, including the e-commerce branch, strive to provide security to their users and asset holders. The following is a list of common information security goals that should be achieved to ensure the security of information systems for users and account holders: •Confidentiality of data •Integrity of data •Availability of data •Authentication •Non-repudiation
All of the following are payroll scheme types EXCEPT: A. Falsified hours and salary B. Commission schemes C. Stolen paychecks D. Ghost employees
Stolen paychecks In general, payroll schemes fall into one of the following categories: •Ghost employees •Falsified hours and salary •Commission schemes
If an employee stole paychecks, this would fall under check tampering, not payroll fraud. The reason is that the heart of the scheme is stealing the check, not generating false payroll disbursements.
or corporate espionage purposes, technical surveillance generally consists of gathering documentary evidence or information that can be found via open sources.
False
Technical surveillance is the practice of covertly acquiring audio, visual, or other types of data from targets through the use of technical devices, procedures, and techniques. When corporate spies resort to the use of technical surveillance, it is usually to gather nondocumentary evidence, or information that cannot be found through open sources.
Favorite targets for intelligence-gathering purposes include employees in all of the following departments EXCEPT: A. Research and development B. Marketing C. Shipping and receiving D. Manufacturing and production
Shipping and receiving
Some of the favorite targets of intelligence gatherers include employees in the following departments: research and development, marketing, manufacturing and production, human resources, sales, and purchasing
Karl finds a residential property with a non-resident owner. He then forges contractual property documents showing that the owner is transferring ownership of the property completely to Karl, such as would normally happen during a property sale. The property owner is unaware that Karl has created and filed the documents. Later, Karl takes the falsified documents to a lender and borrows money against the property. Which of the following best describes Karl’s scheme?
A. Unauthorized draw on home equity line of credit
B. Fraudulent sale
C. Property flipping
D. Air loan
Fraudulent sale
Fraudulent sale scams are particularly harmful because they involve the fraudulent acquisition of real estate by filing a fraudulent deed or respective real estate document that makes it appear that the property legally belongs to the criminal. This scam does not happen at the origination of the loan, but rather might occur without the homeowner’s knowledge decades after the property was originally sold.
The perpetrator identifies a property—typically belonging to an estate or non-resident owner—that is owned free and clear. He then creates fictitious property transfer documents that purport to grant all rights and title on the property to the fraudster. The true owner’s signature is forged on the documents, and the scammer files them in the jurisdiction’s real property records. Once the ownership documents are filed, he applies for and executes a loan on the property (using a straw borrower). Often, the value is inflated. He absconds with 100 percent of the loan proceeds.
What happens when an employee records a fictitious refund of goods at the employee’s cash register?
A. The victim company’s inventory is overstated
B. Inventory is returned to the store
C. The register total is out of balance with the register log
D. None of the above
The victim company’s inventory is overstated
A refund shows a disbursement of money from the register as the customer gets his money back. In a fictitious refund scheme, an employee processes a transaction as if a customer were returning merchandise, even though no actual return takes place. Two things result from this fraudulent transaction. First, the employee takes cash from the register in the amount of the false return. Since the register log shows that a merchandise return has been made, it appears that the disbursement is legitimate. The second thing that happens in a fictitious refund scheme is that a debit is made to the inventory system showing that the merchandise has been returned. Since the transaction is fictitious, no merchandise is actually returned. The result is that the company’s inventory is overstated.
Failure to record corresponding revenues and expenses in the same accounting period will result in an understatement of net income in the period when the revenue is recorded and an overstatement of net income in the period in which the corresponding expenses are recorded.
False
According to generally accepted accounting principles, revenue and corresponding expenses should be recorded or matched in the same accounting period. The timely recording of expenses is often compromised due to pressures to meet budget projections and goals, or due to lack of proper accounting controls. As the expensing of certain costs is pushed into periods other than the ones in which they actually occur, they are not properly matched against the income that they help produce. For example, revenue might be recognized on the sale of certain items, but the cost of goods and services that went into the items sold might intentionally not be recorded in the accounting system until the following period. This might make the sales revenue from the transaction almost pure profit, inflating earnings. In the next period, earnings would have fallen by a similar amount.
