Forensic Accounting Terms(with Errorless answers)
Skimming correct answers Theft of cash prior to its entry into the accounting system
Sales Skimming correct answers Skimming that involves the theft of sales receipts, as opposed to
payments on accounts receivable. Sales skimming schemes leave the victim organization's books
in balance, because neither the sales transaction nor the stolen funds are ever recorded.
Off-book fraud correct answers A fraud that occurs outside the financial system and therefore
has no direct audit trail. There are several kinds of off-book frauds that will be discussed in this
book. Skimming is the most common off-book fraud.
Understated Sales correct answers A variation of a sales skimming scheme in which only a
portion of the cash received in a sales transaction is stolen. This type of fraud is not off-book,
because the transaction is posted to the victim organization's books but for a lower amount than
the perpetrator collected from the customer.
Check-for-currency substitution correct answers A skimming method whereby the fraudster
steals an unrecorded check and substitutes it for recorded currency in the same amount.
Receivables Skimming correct answers Skimming that involves the theft of incoming payments
on accounts receivable. This form of skimming is more difficult to detect than sales skimming,
because the receivables are already recorded on the victim organization's books. In other words,
the incoming payments are expected by the victim organization. The key to a receivables
skimming scheme is to conceal either that the payment was stolen or that the payment was due.
Lapping correct answers A method of concealing the theft of cash designated for accounts
receivable by crediting one account while abstracting money from a different account. This
process must be continuously repeated to avoid detection.
Force Balancing correct answers A method of concealing receivables skimming whereby the
fraudster falsifies account totals to conceal the theft of funds. This is also sometimes known as
"plugging." Typically, the fraudster will steal a customer's payment but nevertheless post it to the
customer's account so that the account does not age past due. This causes an imbalance in the
cash account.
Cash Larceny correct answers The theft of an organization's cash after it has been recorded in the
accounting system.
Cash receipts schemes correct answers Frauds that target incoming sales or receivables.
Typically, the perpetrators in these schemes physically abscond with the victim organization's
cash instead of relying on phony documents to justify the disbursement of the funds. Cash
receipts frauds generally fall into two categories: skimming and cash larceny.
Deposit Lapping correct answers A method of concealing deposit theft that occurs when an
employee steals part or all of the deposit from one day and then replaces it with receipts from
subsequent days.
, Fraudulent Disbursements correct answers Schemes in which an employee illegally or
improperly causes the distribution of funds in a way that appears to be legitimate. Funds can be
obtained by forging checks, submitting false invoices, or falsifying time records.
Reversing Transactions correct answers A method used to conceal cash larceny. The perpetrator
processes false transactions to void a sale or to refund cash, which causes sales records to
reconcile to the amount of cash on hand after the theft.
Billing Scheme correct answers A scheme in which a fraudster causes the victim organization to
issue a fraudulent payment by submitting invoices for fictitious goods or services, inflated
invoices, or invoices for personal purchases.
Collusion correct answers A situation in which two or more employees work together to commit
fraud by overcoming a well-designed internal controls system
Pass-Through-Scheme correct answers A subcategory of a shell company scheme in which
actual goods or services are sold to the victim company, with the fraudster acting as a middleman
and inflating the prices of the goods or services.
Pay-and-return scheme correct answers a fraud in which an employee intentionally mishandles
payments that are owed to legitimate companies, then steals the excess payments when they are
returned by the vendor
Personal purchases scheme correct answers A category of billing scheme in which an employee
simply buys personal items with his company's funds, credit card, or purchasing card.
Shell company correct answers a fictitious entity created for the sole purpose of committing
fraud
Check Tampering correct answers A type of fraudulent disbursement that occurs when an
employee converts an organization's funds by either (1) fraudulently preparing a check drawn on
the organization's account for his own benefit or (2) intercepting a check drawn on the
organization's account that is intended for a third party, and converting that check to his own
benefit.
Forged Maker Scheme correct answers a check tampering scheme in which an employee
misappropriates a check and fraudulently affixes the signature of an authorized maker thereon
Forged Endorsement Scheme correct answers A check tampering scheme in which an employee
intercepts a company check intended for a third party and converts the check by signing the third
party's name on the endorsement line of the check.
Forced Reconciliation correct answers a method of concealing a check tampering scheme by
manipulating the bank reconciliation so that the bank balance and the book balance match
Skimming correct answers Theft of cash prior to its entry into the accounting system
Sales Skimming correct answers Skimming that involves the theft of sales receipts, as opposed to
payments on accounts receivable. Sales skimming schemes leave the victim organization's books
in balance, because neither the sales transaction nor the stolen funds are ever recorded.
Off-book fraud correct answers A fraud that occurs outside the financial system and therefore
has no direct audit trail. There are several kinds of off-book frauds that will be discussed in this
book. Skimming is the most common off-book fraud.
Understated Sales correct answers A variation of a sales skimming scheme in which only a
portion of the cash received in a sales transaction is stolen. This type of fraud is not off-book,
because the transaction is posted to the victim organization's books but for a lower amount than
the perpetrator collected from the customer.
Check-for-currency substitution correct answers A skimming method whereby the fraudster
steals an unrecorded check and substitutes it for recorded currency in the same amount.
Receivables Skimming correct answers Skimming that involves the theft of incoming payments
on accounts receivable. This form of skimming is more difficult to detect than sales skimming,
because the receivables are already recorded on the victim organization's books. In other words,
the incoming payments are expected by the victim organization. The key to a receivables
skimming scheme is to conceal either that the payment was stolen or that the payment was due.
Lapping correct answers A method of concealing the theft of cash designated for accounts
receivable by crediting one account while abstracting money from a different account. This
process must be continuously repeated to avoid detection.
Force Balancing correct answers A method of concealing receivables skimming whereby the
fraudster falsifies account totals to conceal the theft of funds. This is also sometimes known as
"plugging." Typically, the fraudster will steal a customer's payment but nevertheless post it to the
customer's account so that the account does not age past due. This causes an imbalance in the
cash account.
Cash Larceny correct answers The theft of an organization's cash after it has been recorded in the
accounting system.
Cash receipts schemes correct answers Frauds that target incoming sales or receivables.
Typically, the perpetrators in these schemes physically abscond with the victim organization's
cash instead of relying on phony documents to justify the disbursement of the funds. Cash
receipts frauds generally fall into two categories: skimming and cash larceny.
Deposit Lapping correct answers A method of concealing deposit theft that occurs when an
employee steals part or all of the deposit from one day and then replaces it with receipts from
subsequent days.
, Fraudulent Disbursements correct answers Schemes in which an employee illegally or
improperly causes the distribution of funds in a way that appears to be legitimate. Funds can be
obtained by forging checks, submitting false invoices, or falsifying time records.
Reversing Transactions correct answers A method used to conceal cash larceny. The perpetrator
processes false transactions to void a sale or to refund cash, which causes sales records to
reconcile to the amount of cash on hand after the theft.
Billing Scheme correct answers A scheme in which a fraudster causes the victim organization to
issue a fraudulent payment by submitting invoices for fictitious goods or services, inflated
invoices, or invoices for personal purchases.
Collusion correct answers A situation in which two or more employees work together to commit
fraud by overcoming a well-designed internal controls system
Pass-Through-Scheme correct answers A subcategory of a shell company scheme in which
actual goods or services are sold to the victim company, with the fraudster acting as a middleman
and inflating the prices of the goods or services.
Pay-and-return scheme correct answers a fraud in which an employee intentionally mishandles
payments that are owed to legitimate companies, then steals the excess payments when they are
returned by the vendor
Personal purchases scheme correct answers A category of billing scheme in which an employee
simply buys personal items with his company's funds, credit card, or purchasing card.
Shell company correct answers a fictitious entity created for the sole purpose of committing
fraud
Check Tampering correct answers A type of fraudulent disbursement that occurs when an
employee converts an organization's funds by either (1) fraudulently preparing a check drawn on
the organization's account for his own benefit or (2) intercepting a check drawn on the
organization's account that is intended for a third party, and converting that check to his own
benefit.
Forged Maker Scheme correct answers a check tampering scheme in which an employee
misappropriates a check and fraudulently affixes the signature of an authorized maker thereon
Forged Endorsement Scheme correct answers A check tampering scheme in which an employee
intercepts a company check intended for a third party and converts the check by signing the third
party's name on the endorsement line of the check.
Forced Reconciliation correct answers a method of concealing a check tampering scheme by
manipulating the bank reconciliation so that the bank balance and the book balance match
