Table of Contents

Chapter 1 - Fraud Schemes by Employees. 1

What is Fraud?. 1

Cash Schemes. 2

Skimming (No Recordation) 2

Discounted Sales (Partial Recordation) 2

Modification of Receipts (Altered Recordation) 3

Fake Refunds (Subsequent Recordation) 3

Receivable Schemes. 3

Diversion of Collections on Old Receivables. 4

Lapping. 4

Inventory Schemes. 4

Incorrect Receipt Fraud. 4

Product Replacement Fraud. 5

Diversion of Scrap Payments. 5

Procurement Schemes. 5

Fake Invoice Fraud. 5

Diverted Purchases Fraud. 6

Kickbacks. 6

Bid Rigging. 6

Payables Schemes. 7

Outbound Check Fraud. 7

Petty Cash Fraud. 7

Expense Report Fraud. 8

Human Resources Schemes. 9

Job Application Fraud. 9

Compensation Fraud. 9

Dependent Fraud. 10

Workers’ Compensation Fraud. 10

Self-Insurance Fraud. 10

Time Fraud. 10

Executive-Level Fraud. 11

Abuse of a Position of Trust 11

Executive and Related Party Loan Fraud. 11

Insider Trading Fraud. 11

Stock Option Backdating Fraud. 12

General Employee Fraud Observations. 12

Chapter 2 - Financial Statement Fraud Schemes. 15

Sales Inflation. 16

Expenses Falsification. 18

Marketable Securities Falsification. 19

Prepaid Expenses Falsification. 19

Receivables Falsification. 19

Loss Reserves Falsification. 20

Inventory Falsification. 20

Fixed Asset Falsification. 21

Liability Falsification. 22

Debt Falsification. 23

Discontinued Operations Stuffing. 24

Cash Flow Reclassifications. 24

Acquisition Falsification. 26

Financial Statement Disclosure Fraud. 26

Chapter 3 - Fraud Schemes by Outsiders. 29

Imposter Schemes. 29

Application Fraud. 29

Bank Account Fraud. 29

CEO Fraud. 30

Redirected Payments Fraud. 30

Software Service Fraud. 30

Bust-Out Fraud. 30

Misrepresentation Schemes. 31

Advance-Fee Loan Fraud. 31

Investor Marketing Fraud. 31

Business Directory Fraud. 32

Substandard Goods Fraud. 32

Counterfeit Schemes. 32

Counterfeit Goods Fraud. 32

Gift Certificate Fraud. 33

Inbound Check Fraud. 33

Money Laundering Schemes. 33

Fraud Tools used by Outsiders. 34

Social Engineering Fraud. 34

Temporary Business Address. 35

Answers to Chapter Questions. 37

Glossary. 42

Index. 44