Fraud Examiners Manual 2022
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Questions and Answers

What type of fraud involves the theft of funds or assets by an individual or group of individuals?

  • Loan Fraud
  • Real Estate Fraud
  • Embezzlement Schemes (correct)
  • Money Transfer Fraud Schemes
  • What type of fraud occurs when an individual or group of individuals create a new account in someone else's name?

  • Inside/Outside Frauds
  • Letter-of-Credit Fraud
  • New Account Fraud Schemes (correct)
  • Account Takeover
  • What type of fraud involves the use of stolen or fake identification to obtain loans or credit?

  • Money Transfer Fraud Schemes
  • Advance-Fee Fraud
  • Loan Fraud (correct)
  • Real Estate Fraud
  • What type of fraud involves the theft of funds or assets through fraudulent means, such as forged checks or documents?

    <p>Embezzlement Schemes</p> Signup and view all the answers

    What is a common red flag associated with fictitious revenues?

    <p>Premature revenue recognition</p> Signup and view all the answers

    What is a technique used to detect cash larceny?

    <p>Analytical review</p> Signup and view all the answers

    What is a type of fraud scheme that involves concealing liabilities and expenses?

    <p>Concealed liabilities and expenses</p> Signup and view all the answers

    What is a qualitative characteristic of useful financial information?

    <p>Comparability</p> Signup and view all the answers

    What is a type of asset misappropriation?

    <p>All of the above</p> Signup and view all the answers

    What is a technique used to prevent cash larceny?

    <p>All of the above</p> Signup and view all the answers

    What is a type of financial statement fraud?

    <p>All of the above</p> Signup and view all the answers

    What is a step in the fraud examination methodology?

    <p>Investigation of fraud</p> Signup and view all the answers

    What is a type of ratio analysis used in financial statement analysis?

    <p>Ratio analysis</p> Signup and view all the answers

    What is a technique used in forensic accounting?

    <p>Journal entry review</p> Signup and view all the answers

    What is a key component of fraud investigation planning?

    <p>Identifying the potential fraud schemes involved</p> Signup and view all the answers

    Which skill is most critical for testifying as an expert witness in fraud cases?

    <p>Ability to communicate complex ideas clearly</p> Signup and view all the answers

    What is a characteristic of fraud examination methodology?

    <p>It generally starts with the examination of financial statements</p> Signup and view all the answers

    In forensic accounting, which of the following is a primary objective?

    <p>Recovering misappropriated funds</p> Signup and view all the answers

    What is a common technique used for fraud detection?

    <p>Application of predictive analytics</p> Signup and view all the answers

    Which type of fraud is commonly associated with vulnerabilities in electronic claims?

    <p>Health care fraud</p> Signup and view all the answers

    What distinguishes consumer fraud schemes from business-related fraud?

    <p>Consumer fraud schemes often target vulnerable populations</p> Signup and view all the answers

    Which characteristic is NOT typically associated with cyberfraud?

    <p>Immediate physical presence required</p> Signup and view all the answers

    Study Notes

    Accounting Concepts

    • Accounting basics: accounts and the accounting cycle, journal entries, accounting methods (cash-basis and accrual-basis)
    • Financial statements: balance sheet, income statement, statement of changes in owners' equity, and statement of cash flows
    • Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS)
    • Key characteristics of useful financial information: qualitative characteristics, recognition, measurement, and materiality

    Financial Statement Fraud

    • Definition: fraudulent activities that alter financial statements to deceive stakeholders
    • Cost: significant financial losses and damage to reputation
    • Why committed: pressures to meet expectations, opportunities, and rationalization
    • Trends: fictitious revenues, timing differences, improper asset valuation, concealed liabilities and expenses, and improper disclosures
    • Schemes:
      • Fictitious revenues: false sales, channel stuffing, and premature revenue recognition
      • Timing differences: improper revenue recognition, and recording expenses in the wrong period
      • Improper asset valuation: inventory valuation, accounts receivable, business combinations, and fixed assets
      • Concealed liabilities and expenses: liability/expense omissions, improperly capitalized costs, and unrecorded warranty costs
      • Improper disclosures: contingent liabilities, subsequent events, management fraud, related-party transactions, and accounting changes

    Detection of Financial Statement Fraud

    • Red flags: unusual transactions, inconsistencies, and anomalies in financial statements
    • Financial statement analysis: vertical, horizontal, and ratio analysis
    • Tax return review: review of tax returns to identify inconsistencies
    • Interviews: techniques for interviewing individuals involved in fraudulent activities
    • Prevention: strengthening internal controls, reducing situational pressures, and promoting ethical behavior

    Asset Misappropriation: Cash Receipts

    • Skimming: theft of cash receipts, often through manipulation of sales records or cash handling procedures
    • Cash larceny: theft of cash from the register or deposits
    • Detection: receipt-level detection, journal entry review, and analytical review
    • Prevention: separation of duties, assignment rotation, surprise cash counts, and physical security of cash### Financial Institutions Fraud
    • Embezzlement schemes involve stealing of money or assets by an individual who has access to them
    • Loan fraud occurs when an individual or entity misrepresents information to obtain a loan
    • Real estate fraud involves illegal activities such as property flipping and mortgage fraud
    • New account fraud schemes involve the creation of new accounts with false information
    • Money transfer (wire) fraud schemes involve the theft of money through fraudulent wire transfers
    • Automated teller machine (ATM) fraud involves the use of stolen card information to withdraw money
    • Account takeover involves gaining unauthorized access to an individual's account information
    • Advance-fee fraud involves charging individuals for services that are not provided

    Healthcare Fraud

    • Agent fraud occurs when an agent misrepresents information to obtain benefits
    • Electronic claims fraud involves the submission of false claims electronically
    • Healthcare compliance programs aim to prevent fraud and ensure compliance with regulations

    Consumer Fraud

    • Consumer fraud schemes involve deceptive business practices that result in financial losses
    • Elder fraud targets elderly individuals, often through telemarketing or email scams
    • Telemarketing fraud involves fraudulent activities conducted over the phone
    • Ponzi and pyramid schemes are investment scams that promise high returns with little risk

    Cyberfraud

    • Cyberfraud involves the use of technology to commit fraudulent activities
    • Recognizing computer intrusion is crucial to preventing cyberfraud

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    Description

    Fraud Examiners Manual is a comprehensive guide for fraud examiners. This 2022 edition provides expert knowledge on fraud examination.

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