Practice Exam Questions Flashcards
1
Q
Traditional Identity theft
A
fraudster steals an individual’s personal information and pretends to be that individual.
Gains access to account = account takeover
2
Q
True name fraud
A
fraudster uses an individual’s personal information to open a NEW account in the individual’s name.
3
Q
Synthetic identity theft
A
use of entirely fabricated personal information or a combination of real and fabricated info to create a new identity.
4
Q
Shimmers vs. Skimmers
A
Both require a device (Skimmers, wedges, shimmers).
SHimmers - scan micro chips
SKimmers - scan magnetic strips.
5
Q
Construction Loan Advances - Draw Request
A
A Draw Request is the documentation substantiating that a developer has incurred the appropriate construction expenses and is now seeking reimbursement or direct payment.
Accompanied by the following documents:
- Paid invoices for raw materials
- Lien releases from each subcontractor
- inspection reports
- Canceled checks from previous draw requests
- Bank reconciliation for construction draw account for previous month.
- Loan balancing form demonstrating that the loan remains in balance.
- Change orders, if applicable.
- Wiring instructions, if applicable
- Proof of developer contribution
A developer’s personal account statements would never be included with a draw request.
Expenses from similar contracts are not included.
6
Q
Chances for being arrested and prosecuted for check fraud
A
Are low!
Penalties are mild in most jurisdictions.
7
Q
Timing differences = Income smoothing
A
Recording of revenues or expenses in improper periods. Shift revenues or expenses between one period and the next.
8
Q
Non-repudiation -
A
a method used to guarantee that the parties involved in an e-commerce transaction cannot repudiate ( deny) participation in that transaction.
Obtained through the use of digital signatures, confirmation services, and timestamps
Additional info security goals are
- confidentiality of data
- integrity of data
- Availability of data
- Authentication
9
Q
Unbundling
A
Because health care procedures often have special reimbursement rates for a group of procedures typically performed together, some providers
Simple unbundling occurs when a provider charges a comprehensive code, as well as one or more component codes.
10
Q
Common methods for concealing liabilities and expenses
A
- Omitting liabilities and or expenses
- Improperly capitalizing costs rather than expensing then
- Failing to disclose warranty costs and product return liabilities
11
Q
When an employee skims money by making off-book sales of merchandise,
A
it is impossible to detect theft by comparing the register to the cash drawer because the sales was not recorded on the register.
12
Q
Human intelligence
A
through direct contact with people,
- gathered from subject matter experts and informed individuals
13
Q
False sale scheme
A
depends on an accomplice
14
Q
Business identity theft occurs when
A
a fraudster impersonates a business to commit fraud
15
Q
a scavenger or revenge theme
A
double conning the consumer by using a different company’s name.
16
Q
quick ratio
A
(Cash + marketable securities, + receivables) / current liabilities
17
Q
Information security goals
A
- confidentiality of data
- integrity of data
- availability of data
- authentication
- non-repudiation
18
Q
Complementary bidding (protective / shadow / cover bidding)
A
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.
19
Q
Billing for experimental use of new medical devices that have not yet been approved by the jurisdiction’s health car authority is a type of
A
fraud.
20
Q
Upcoding
A
occurs when a provider bills for a higher level of service than actually rendered.
21
Q
Lapping customer payments
A
one of the most common methods used to conceal skimming.
- the crediting of one account through the abstraction of money from another account.
22
Q
Debt to equity ratio
A
Dividing total liabilities to total equity.
23
Q
Developer Overhead is to provide:
A
Operating Capital
The purpose of developer overhead is to supply the developer with operating capital while the project is under construction. This overhead allocation should not include a profit percentage, as the developer realizes profit upon completion.
24
Q
Horizontal Analysis vs. Vertical Analysis
A
Horizontal analysis - a technique for analyzing the percentage change in individual financial statement line items from one accounting period to the next. The first period in the analysis is considered the base period, and the changes in the subsequent period are computed as percentage of the base period.
Vertical analysis is a technique for analyzing the relationships among the items on an income statement, balance sheet, or statement of cash flows during a specific accounting period by expressing components as percentages of a specific base value. within the statement being analyzed.
25
Security goals for an e-commerce system
Confidentiality, integrity, availability, authentication, and non-repudiation.
26
A way that dishonest contractors collude to circumvent the competitive bidding process
submit token bids that are not serious attempts to win the contract.
27
Billing for experiments with new medical devices that have not yet been approved by a jurisdiction's health care authority is one form of medical fraud
True
28
Debt-to-equity
dividing total liabilities by total equity.
29
The purpose of developer overhead is to provide
operating capital
30
Statement of cash flows
cash flow statement:
- cash from operating activities
- cash from investing activities
- cash from financing activities
31
Not Electronic funds transfer
credit card.
32
Principle based vs. rule based
IFRS is considered more of a principle based
GAAP is more rules based
33
Kickback Scheme
improper, undisclosed payments made to obtain favorable treatment.
An employee receives a payment for directing excess business to a vendor
In such cases, there might not be any overbilling involved, the vendor simply pays the kickbacks to ensure a steady stream of business from the purchasing company.
34
Administrative security control
```
Examples of:
security policies and awareness training
separation of duties
Data classification
Computer security risk assessments
Security audits and tests
Incident response plans
```
consists of management constraints, operational procedures, accountability procedures, and supplemental administrative controls established to provide an acceptable level of protections for computing resources. In addition, administrative controls include procedures established to ensure that all personnel who have access to computing resources have the required authorizations and appropriate security clearances.
35
Draw request on a construction loan
documentation substantiating that a developer has incurred the appropriate construction expenses and is now seeking reimbursement or direct payment.
Accompanied by the following documents:
- Paid invoices for raw materials
- Lien releases from each subcontractor
- Inspection reports
- Cancelled checks from previous draw requests
- Bank reconciliation for construction draw account for previous month
- Loan balancing from demonstrating that the loan remains in balance
- Change orders, if applicable
- Wiring instructions, if applicable
- Proof of developer contribution, if applicable.
Does NOT include expenses from similar contracts
36
Phases in the Procurement Process
- the Presolicitation Phase
- Solicitation Phase
- Bid evaluation and award phase
- The post-award and administration phase.
37
Presolicitation phase (of Procurement Process)
procuring entity identifies its needs,
develops the bid specifications,
determines the method to use for acquiring the goods or services, and
develops the criteria used to award the contract.
38
Solicitation Phase (of Procurement Process)
i. procuring entity prepares the solicitation document, provides notices of solicitation, and issues the solicitation document.
ii. after the procuring entity issues the solicitation document, the bidders prepare and submit their bids or proposals.
39
bid evaluation and award phase
i. the procuring employees evaluate the bids or proposals, conduct discussions and negotiations, and give the bidders an opportunity to revise their proposals
ii. procuring employees then select the winning bid or proposal.
40
post-award and administration phase
i. the contracting parties fulfill their respective duties through the performance of their contractual obligations
ii. Activities that occur during this phrase include contract modifications; review of completed portions and release of monies, and assessment of deliverables for compliance with the contract terms, quality control.
41
Increasing the inventory record
would only worsen the shrinkage problem.
Instead, a fraudster seeking to conceal shrinkage would falsely decrease the perpetual inventory record to match the lower physical inventory count.
42
Financial statement fraud
deliberate misrepresentation of the financial condition of an enterprise accomplished through the intentional misstatement or omission of amounts or disclosure in the financial statements to deceive financial statement users.
43
Payroll Schemes
Ghost employees
Falsified hours and salary
Commission schemes
When an employee steals paychecks, the scheme is categorized as check tampering, not generating false payroll disbursements.
44
False sale scheme
The false sale is one method that depends on an accomplice.
The fake sale is not complicated. The employee-fraudster's accomplice pretends to buy merchandise, but the employee does not ring up the sale.
45
Fictitious expense reimbursement scheme
Ex. an employee generates a fake receipt using basic computer software and includes it with an expense report.
46
Quiet Room - purpose
an area that is acoustically and radio-frequency shielded so that conversations that occur within the room cannot be monitored or heard from outside the room.
47
Cash Larceny
theft of cash that has already been accounted for in the organization's books. It is a form of embezzlement limited to operations involving the original receipt of cash.
48
Skimming
taking cash "off the top" of the daily receipts of a business (or from any cash transaction involving a third interest party)
register records should NOT match up with the cash in the drawer when a cash larceny scheme has occurred.
49
Past posting
a person is involved in an automobile accident but does not have insurance. After the accident, the person gets insurance, waits a short time, and then reports the vehicle
50
Administrative security controls
consists of management constraints operational procedures, accountability procedures, and supplemental administrative controls established to provide and acceptable level of protection for computing resources.
Effective administrative controls for cybersecurity:
- Security policies and awareness training
- Separation of duties
- Data classification
- Computer security risk assessments
- security audits and tests
- incident response plans
51
Asset turnover ratio -
determine the efficiency with which asset resources are used by the entity.
one of the more reliable indicators of financial statement fraud.
52
Quick ratio -
used to assess a company's ability to meet sudden cash requirements. The quick ratio, commonly referred to as the acid test ratio.
53
Shell companies
are often fictitious entities created for the sole purpose of committing fraud.
54
Common red flags of bid splitting schemes:
- two or more consecutive related procurements from the same contractor that fall just below the competitive-bidding or upper-level review limits
- unjustified split purchases that fall under the competitive-bidding or upper-level review limits
- sequential purchase under the upper-level review or competitive-bidding limits that are followed by change orders.
55
Ponzi scheme
illegal business practice in which new investor's money is used to make payments to earlier investors. Investment opportunity is typically presented with the promise of uncommonly high returns.
56
Statement of changes in owners equity acts as the connecting link between:
Income statement and balance sheet.
57
Daniela, a plant manager for a utility company, has her own commercial cleaning business on the side. Daniela threatened to withhold business from any vendors of the utility company that did not hire her cleaning business for their office cleaning needs. Which of the following best describes the type of corruption scheme in which Daniela engaged?
A. Collusion scheme
B. Illegal gratuity schemeI
C. Economic extortion scheme
D. Kickback scheme
C. Extortion scheme
Extortion is defined as the obtaining of property from another, with the other party’s consent induced by wrongful use of actual or threatened force or fear. Economic extortion is present when an employee or official, through the wrongful use of actual or threatened force or fear, demands money or some other consideration to make a particular business decision. Thus, because Daniela threatened to withhold business from any vendors of the utility company that did not hire her cleaning business for their office cleaning needs, she engaged in an extortion scheme.
58
Reconciling the cash register total to the amount of cash in the drawer is an ineffective method of detecting a cash larceny scheme.
False - It is a good way because there is a record in cash larceny.
In contrast to skimming schemes, the register records should NOT match up with the cash in the drawer when a cash larceny scheme has occurred. For this reason, cash larceny schemes are much easier to detect than skimming schemes because they leave an audit trail. To detect a cash larceny scheme, one recommended practice is to perform independent reconciliations of the register totals to the amount of cash in the drawer.
59
Asset turnover ratio -
calculated by dividing net sales by average total assets.
60
Financial statement fraud
is the intentional or erroneous misrepresentation of the financial condition of an enterprise.
61
ABC company purchases a material amount of products from another entity whose operating policies can be controlled by ABC Company's management, but it does not disclose this situation on its financial statements. In which type of improper disclosure scheme has ABC Company engaged?
Related Party transaction.
- business deals or arrangements between two parties who hold a pre-existing connection prior to the transaction.
62
All of the following are payroll scheme types EXCEPT:
Ghost employees
Falsified hours and salary
Commission schemes
Stolen paychecks
Stolen Paychecks
When an employee steals paychecks, the scheme is categorized as check tampering, not payroll fraud. The reason is the heart of the scheme is stealing the check, not generating false payroll disbursements.
63
Early revenue recognition is classified as what type of financial fraud scheme?
timing differences.
64
Electronic payment tampering is more __(easier / harder)__ to detect than traditional check tampering because it leaves a clear audit trail.
HARDER
Electronic payment tampering is generally more difficult to detect than traditional check tampering schemes. As with other schemes, once the fraudulent payment has been made, the employee must cover their tracks.
65
A company must disclose potential losses from ongoing litigation only if the related liability is likely to result in a future obligation.
True or False?
True
Contingent liabilities are potential obligations that will materialize only if certain events occur in the future. a corporate guarantee of personal loans received by a company officer and potential losses from ongoing litigation are examples of contingent liabilities that must be disclosed.
66
Which of the following statements is true regarding a fictitious refund scheme?
A. The victim company’s inventory is understated
B. The amount of cash in the register balances with the register log
C. Inventory is returned to the store
D. All of the above
D. all of the above.
In a fictitious refund scheme, an employee processes a transaction as if a customer were returning merchandise, even though no actual return takes place.
The register log balances with the amount of cash in the register because the money that was taken by the fraudster is supposed to have been removed and given to the customer as a refund. Instead, however, the employee keeps this cash.
67
Pass-through schemes are usually undertaken by employees who receive inventory on the victim company's behalf?
True / False
Pass-through schemes are usually undertaken by employees in charge of purchasing on the victim company's behalf.
68
Quick Ratio
(Cash + marketable securities + receivables) / current liabilities
69
Which of the following describes the primary purpose of an automated clearing house (ACH) filter?
It enables account holders to provide their banks with a list of criteria to ensure only designated individuals get paid.
70
Elder Fraud
includes different types of consumer fraud schemes perpetrated against older individuals. in travel, vacation, and timeshare schemes, fraudsters post advertisements for vacation properties that are nonexistent, significantly different than promised , or not actually available for rent.
71
tech-support scheme
fraudster attempts to convince victims to pay for unnecessary computer services to repair nonexistent viruses or other problems.
72
grandparent scheme
a scammer calls an older individual and asks if the individual knows who is calling. When the grandparent guesses the name of a grandchild, the scammer pretends to be that grandchild. The scammer claims to be in a financial bind and asks if the grandparent can send money via the internet or a money transfer service.
73
Home improvement scheme,
fraudster recommends a friend who can perform needed home repairs for an older individual at a reasonable price.
74
Vacation Scheme
elder fraud schemes often involves property that does not exist or is significantly different than promised.
75
Loan brokering
applies to either packages of individual residential (consumer) loans or single commercial loans.
A variation of a brokered loan is loan participation, where multiple parties purchase and have interests in a loan or a package of loans. The fraud schemes associated with brokered loans or loan participation generally involve selling phony loans (packages) or selling participations in loans that have not been properly underwritten. Normally, a large fee is charged for these brokered loans. With residential loan packages, the broker sells the package, takes the money, and disappears. Brokered loans are not usually sold with any recourse to the broker. Therefore, the purchaser must look to the borrower and the underlying collateral for debt satisfaction. With loan participations, the lead bank generally performs the underwriting. However, this does not relieve the participating bank from its obligation to perform its own due diligence.
76
false appraisal report
Real estate transactions assume a willing buyer and a willing seller. Fraud can occur when the transaction breaks down or the expert assistance is not at arm's length (i.e., is not immediately attainable). Many real estate fraud schemes have a false appraisal report as a condition precedent.
77
All of the following measures are recommended to help mitigate the risk of billing schemes EXCEPT:
A. Implementing a hotline function
B. Prohibiting competitive bidding
C. Separating the purchasing function from the payment function
D. Providing objective compensation for purchasing staff
Prohibiting competitive bidding.
78
In a third-party health care fraud scheme perpetrated by a patient, the patient makes misrepresentations on an insurance application to circumvent coverage restrictions.
True / False
Third party fraud involves the unauthorized use of an insured identity to obtain their insurance benefits. Insured usually discovers the fraud when they receive a benefit statement containing medical services they did not receive.
79
Laura, the sales manager of Sam Corp., is afraid sales revenue for the period is not going to meet company goals. To make up for the shortfall, she decides to mail invoices to fake customers and credit (increase) revenue on the books for these sales. What account will she MOST LIKELY debit to balance these fictitious revenue entries and conceal her scheme?
Accounts receivable
Since no cash is received in a fictitious revenue scheme, increasing accounts receivable is the easiest way to get away with completing the entry. Unlike revenue accounts, however, accounts receivable are not reversed at the end of the accounting period. They stay on the books as an asset until collected. If the outstanding accounts never get collected, they will eventually need to be written off as bad debt expense. Mysterious accounts receivable on the books that are long overdue are a common sign of a fictitious revenue scheme.
80
Ditching
An insured falsely reports a vehicle as stolen to collect on an insurance policy or settle an outstanding loan.
81
Debits increase:
asset and expense accounts
82
Credits increase:
liability, owner's equity, and revenue accounts
83
Daisy Chain
a bank buys, sells, and swaps its bad loans for the bad loans of another bank, creating new documentation in the process.
The purpose is to mask or hide bad loans by making then look like are recent and good.
84
surety and performance bond schemes
Surety and performance bonds guarantee that cetain events will or will not occur.
85
twisting
the replacement, usually by high-pressure sales techniques, of existing policies for new ones.
86
Churning
Agents falsely tell customers that they can buy additional insurance for no cost by using built-up value in their current policies.
87
DRG Creep - Diagnostic-related groupings
Refers to the practices of healthcare providers that intentionally regroup patients according to more resource intensive DRG classifications in order to increase hospital income. Examples are ‘upgrading’ and ‘upcoding’
88
Bid suppression
Two or more contractors enter into an illegal agreement whereby at least one of the conspirators refrains from bidding or withdraws a previously submitted bid to ensure that a particular competitor's bid is accepted.
89
Coin miners (aka cryptojacking malware)
are programs that, upon infecting a computer, use the computer's processing power to mine for cryptocurrencies without the owner's knowledge or consent.
90
Pharming
a type of attack in which users are filled into entering sensitive data into a malicious website that imitates a legitimate website.
It is different from phishing in that in pharming schemes, the attacker does not have to rely on having users click on a link in an email or other message to direct them to the imitation website.
91
Business email compromise -
spear phishing attack that directly targets employees who have the ability to make large payments or who have access to sensitive proprietary information.
92
reverse social engineering
victim is tricked into contacting the attacker. Thus, a high degree of trust is established between the victim and the attacker.
93
Need recognition scheme
procurement employees who convince their employer, the procuring entity, that it needs excessive or unnecessary products or services.
94
intrusion detection systems
designed to supplement firewalls and other forms of network security by detecting malicious activity coming across the network or on a host.
device or software application that monitors an organization's inbound and outbound network activity and identifies any suspicious patterns of activity that might indicate a network or system attach or security policy violations.
95
Forms of credit and debit card fraud
advance payments, card counterfeiting, and skimming
profiling is not a type of credit or debit card fraud - the recording and analysis of a person's psychological and behavioral characteristics, so as to assess or predict their capabilities in a certain sphere or to assist in identifying a particular subgroup of people.
96
Overstated expense scheme
some employees overstate the cost of actual business expenses.
97
Criminal identity theft
fraudster falsely identify themselves as other people to law enforcement while being arrested or investigated for a crime. The crime is then incorrectly attributed to the other person instead of the fraudster.
98
A fraud scheme in which an accountant fails to write down obsolete inventory to its current fair market value has what effect on the company's current ratio?
The current ratio will be artificially inflated
Many schemes are used to inflate current assets at the expense of long-term assets.
By misclassifying long-term assets as short term, the current ratio will appeal artificially stronger.
99
Clinical lab schemes
advises a patient that additional medical testing is needed to diagnose a problem when the testing is not actually required or advisable.
100
Brittany, a cash register teller, signed onto her register, rang a "no sale" transaction to open the drawer, and then removed a large sum of money. What took place?
a cash larceny scheme.
one which the perpetrator just opens the register and removes the currency.
The scheme is not a register disbursement scheme. This involves a fraudulent transaction that justifies the removal of cash from the register, such as a false return or a voided sale.
101
____ is the deliberate misrepresentation of the financial condition of an enterprise accomplished through the intentional misstatement or omission of amounts or disclosures in the financial statements to deceive financial statement users.
Financial statement Fraud
- the deliberate misrepresentation of the financial condition of an enterprise accomplished through the intentional misstatement or omission of amounts or disclosures in the financial statements to deceive financial statement users.
102
Air loan
a loan for a nonexistent property - with air symbolizing the loan's fraudulent absence of collateral.
103
scavenging
collecting information left around computer systems
104
Dumpster diving
involves obtaining sensitive information by looking through someone else's trash
105
Electronic Funds Transfer
other than one originated by a check or similar paper instrument, that is initiated through an electronic terminal telephonic instrument, or computer or magnetic tape that orders or purports to authorize a financial institution to debit or credit an account.
106
Most indicative that the winning bid on an original construction project was not feasible and this a sign of potential loan fraud?
Increasing trend in the number of 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.
107
Fill - and split - schemes
are a type of pyramid scheme that uses gaming elements to keep the victims' attention and distract them from the absurdity of the scheme.
108
Pyramid schemes
designed to pay off its earliest investors.
Probability studies have shown that 93-95% of the participants in a pyramid scheme (all but those who join at the earliest stage) will lose most of their money. Half can expect to lose all the money the invest.
109
retainage
the amount withheld from each draw request until the construction is complete and the lien period has expired.
110
Second-hand computers, media drives, and mobile phones are safe from identity thieves if the former owner has manually deleted all personal information from such devices
False -
Like computers, some copiers and printers have internal hard drives that store sensitive data. Because it is possible to recover deleted data, fraudsters might search for sensitive information on second-hand devices that they purchase online or obtain from another source. Data can be permanently erased from such devices with specialized software.
111
What is a technical security control that involves application-level controls implemented to prevent data from being assessed stolen, modified, or deleted by unauthorized users?
Application security
encompasses controls implemented at the application level to prevent data from assessed, stolen, modified, or deleted by unauthorized users.
112
unauthorized withdrawal
make unauthorized withdrawals from customer accounts, they do not attempt to cover up the theft by adjusting the financial institution's general ledger
113
false accounting entry schemes
employees debit the general ledger to credit their own accounts or cover up a theft from customer account.
114
Linked financing loan fraud scheme
Large Deposits (usually brokered deposits) are offered to a bank on the condition that loans are made to particular individuals affiliated with the deposit broker.
115
workers' compensation schemes are generally broken into four categories:
Premium fraud
agent fraud,
Claimant fraud,
and organized fraud schemes
116
Many real estate fraud schemes have ________ as a condition precedent.
false appraisal report
117
rent - a - patient
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 singer payer system that allows private providers to bill health care programs.
118
logical access
The process by which users are allowed to use computer systems and networks.
119
Direct-action virus
load themselves onto the target system's memory, infect other files, and then unload themselves.
120
Positive pay
allows a company and its bank to work together to detect fraudulent items presented for payment.
121
smurfing
money-laundering technique involving the structuring of large amounts of cash into multiple small transactions.
