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Fraud
Chapter 5 Check Tampering
30
Accounting
Undergraduate 4
05/07/2010

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Term

 

Define Check Tampering?

 

Definition
A type of fraudulent disbursement that occurs when an employee converts an orgaination's funds by either (1) fraudulently preparing a check drawn on the organization's account for his own benefit, (2) intercepting a check drawn on the organizaion's account that is intended for a third party and converting that check to his own benefit.
Term

 

 

What is Forgery?

Definition

 

The signing of another person's name to a document (such as a check) with a fraudulent intent, or the fraudulent alteration of a genuine instrument.

Term

 

 

What is a Maker?

Definition

 

 

The person who signs a check.

Term

 

What are some of the methods of preventng and detecting forged maker schemes?

Definition

1. Safeguard the organization's check stock

2.Overriding controls through Intimidation

3.Third person reconcile the bank statement

4. Good controls

5. Separation of Duties

6. Rotation of Duties

7. Vacations

8. Dual balancing by two employees

Term

 

 

What are the 5 principal categories of check tampering?

Definition

 

1. Forged maker schemes.

2. Forged endorsement schemes.

3. Altered payee schemes.

4.Concealed check schemes.

5. Authorized maker schemes.

Term

 

 

What type of fraud is check tampering?

Definition

 

Disbursement

Term

 

What is an "Authorized maker scheme"?

Definition

 

A check tampering scheme in which an employee with signature authority on a company account writes fraudulent checks for his own benefit and signs his own name as the maker. Meaning the fraudster is the one who has authority to write the checks and they just start writing checks to themselves.

Term

 

What is the "Universal Problem" in check tampering?

Definition

 

Concealment

If the fraudster cannot hide his crime from his employer, then the scheme is sure to be short lived.

Term

 

What is the best way to stop

Check tampering. 

 

Definition

 

Review the canceled checks

for endorsement and payees.

Term

 

In a Forged Maker scheme who is the forged

check made out to?

Definition

1.Payable to the perpetrator

2. Payable to an Accomplice

3. Cash

4.Payable to Vendor

 

Term

 

In Fraud Examination

"forgeries" are limited to?

Definition

 

In this text remember that "Forgeries" are constrained to thoses cases in which an individual signs another person's name on a check.

Term

 

What is the first hurdle that a fraudster must overcome in committing a forgery scheme?

Definition

 

Gain access to a check, checks

Term

 

What is difference between "Authorized maker scheme, from other check tampering schemes?

Definition

 

In an Authorized Maker scheme the fraudster has the power to sign the check, therefore it is not a forgery.

Term

 

What is a Forged Maker Scheme?

Definition

 

A forged maker scheme is a check tampering scheme in which the employee misappropriates a check and fraudulenty affixes the signature of an authorized maker on the check.

Term
In the case study of Melissa Robinson, she was able to steal over $60,000 from her employer. Why was she able to commit the fraud without detection?
Definition
She had total control over the accounting records. She forged the signature of another member of the board of directors. No one balanced the accounting records, but her.  She had access to all the checks.
Term
What are some ways bland checks can be frauduently obtained?
Definition

 

1. steal the checks, using checks from the bottom of the box, or out of sequence.

2. Produce the checks, on the company computer or at home, or have the checks printed

Term

 

What do Forged endorsement schemes and Altered payee schemes both have in common?

Definition

 

Both involve the theft of outgoing checks that are intended for third parties for some legitimate purpose.

Term
In altered payee schemes, the perpetrator changes the name of the intended third party and negotiates the check himself. This can be done by adding a second payee or changing the original payee's name. What is the best method for detecting this type of fraud?
Definition

 

The person who prepares the checks or payment should not have access to the checks once they have been signed. A third person should always balance the bank statement.

Term

 

What are some of the ways "Forged Endorsement schemes are carried out?

Definition

 

1. The fraudster is involved in delivering the check, and keeps the check

2. Theft of returned checks in the mail room

3. Rerouting the delivery of checks to a new address or payee

Term

 

In the Check Tampering scheme Ernie Philips case $109,000 was stolen through check tampering. How was this scheme accomplished?

Definition

He forged boss's name, he was able to use the signature stamp. He took checks out of sequence.He took the bank statements. He had a heated exchange when the manager retrieved some account papers from Ernie's desk. The operations manager discovered a check in Ernie's desk made out to himself.

 

Term

 

What happen to the check tampering fraudster, "What are friends for?" Ernie Philips?

Definition

While he was out on bail for the criminal charges against him, he and his family fled.

He was located through an internet search. He lost everything, his house, his CPA license. He died in May of 1996.

Term

 

What are the methods of used to affix a signature to a check.

Definition

 

1. Free-Hand signatures

2. Automatic check-signing instruments

3. Signature stamps

Term

 

Concealing Check Tampering

 

How do Authorized Maker and forged endorsement schemes and altered payee schemes differ?

Definition

 

Altered payee & Forged endorsement schemes differ because someone has already coded the checks on the accounting records, in authorized maker schemes the fraudster must explain the check on the books themselves.

 

Term

 

What is the main method of

concealing check tampering?

Definition

 

 

Reconciling the bank statement

Re-Altering the checks

Falsifying the disbursement journal

reissuing intercepted checks

creating bogus supporting documents

Term

 

 

What makes Check Tampering

different from fraudulent Billing Schemes?

 

Definition

 

In a fraudulent Billing scheme the fraudster submits billing information for payment, and another employee issues the check. In check tampering the fraudster has access to the check and issues the check.

Term

 

What is the order of frequency of

Fraudulent Disbursements

in order

of most frequent to least

frequent

Definition

 

Billing

Expense Reimbursement

Check Tampering

Payroll

Register Disbursement

Term

 

In the Median Loss of Fraudulent Disbursements

in order from highest loss to

least amount

Definition

 

Billing

Check Tampering

Payroll

Register Disbursement

Expense Reimbursement

Term

 

What are the main

topics of the 2nd

Test?

Definition

 

Chapter 5 Check Tampering

Chapter 6 Payroll schemes

Chapter 7 Expense Reimbursement Schemes

Chapter 8 Register Disbursement Schemes

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