Henrietta is engaging in a need recognition scheme. Procurement begins when the organization identifies a need for goods or services. In a fraudulent need recognition scheme, an employee creates, exaggerates, or falsely justifies a need so the organization will purchase unnecessary goods or services from a favored vendor. Henrietta fabricates beetle sightings to convince management that specialized pest control services are required. Her receipt of money from the contractor shows corrupt motivation and vendor collusion. This is not bid tailoring because the facts do not involve drafting specifications to favor a bidder. It is not nonconforming services because the issue is the false need, not defective performance. It is not bid manipulation because the bidding process itself is not the main misconduct.

================

Detailed Explanation:

Rationale for Correct Answer: In a false refund scheme , the fraudster enters a fictitious refund into the register system, making it appear that merchandise was returned. The register log reflects the fraudulent refund, so the cash on hand does balance with the adjusted log. Thus, the mismatch described in the question does not occur.

Analysis of Incorrect Option:

A. True – Incorrect because the log and cash are manipulated to match, concealing the theft.

Key Concept: Cash register fraud (false refunds vs. false voids).

The correct answer is D. For a ghost employee scheme to work, the fictitious or nonworking employee must be entered into the payroll system with sufficient payroll data to generate payment, including wage rate information. The ghost does not need to be a real person; the identity might be fabricated, stolen, or based on a former employee. Payment does not have to be made by direct deposit because checks, payroll cards, or other methods can also be used. The payment also does not need to be delivered to someone outside the victim company; insiders commonly collect or control the payments. The ACFE materials describe ghost employee schemes as payroll fraud involving adding the ghost, collecting timekeeping information, and issuing the paycheck.

================

Detailed Explanation:

Rationale for Correct Answer: This statement is False . Research in occupational fraud consistently shows that when employees believe there is a strong likelihood of being caught, they are less likely to engage in theft or deviant behavior. Deterrence theory emphasizes that perceived certainty of detection is one of the most effective controls against occupational fraud.

Key Concept: Deterrence through perceived detection .

Detailed Explanation:

Rationale for Correct Answer: Cash larceny is the theft of cash after it has been recorded in the company’s books. Skimming, in contrast, is theft of cash before recording .

Analysis of Incorrect Options:

B & D – Both describe forms of skimming (unrecorded or understated sales).

C – Kickback scheme is corruption, not cash theft.

Key Concept: Distinguishing cash larceny (on-book theft) from skimming (off-book theft).

Detailed Explanation:

Rationale for Correct Answer: This statement is False . According to ACFE studies, asset misappropriation is the most common but least costly category of occupational fraud. Fraudulent statements are the least common but most costly, while corruption falls in the middle in both frequency and cost.

Key Concept: Fraud Tree Statistics — frequency and cost comparison of asset misappropriation, corruption, and financial statement fraud.

Detailed Explanation:

Rationale for Correct Answer: An air loan is a mortgage fraud scheme where the borrower and sometimes insiders create completely fictitious properties or borrowers. Here, the nonexistent property and loan proceeds being pocketed fits this definition.

Analysis of Incorrect Options:

A. Property flopping – Involves short sales and undervaluing distressed property.

C. Phantom lien – False liens filed to collect fraudulent claims on real estate.

D. Daisy chain – Involves multiple property transactions between conspirators to inflate value.

Key Concept: Loan fraud schemes – fictitious property loans (air loans).

The correct answer is C. A Trojan horse is malware that appears to be legitimate, useful, or harmless software but contains hidden malicious code. Once installed or executed, it can damage systems, steal information, create unauthorized access, or perform other harmful actions. Option A describes ransomware, not a worm; ransomware restricts access to systems or files and demands payment. A worm is self-replicating malware that spreads across networks. Option B describes adware more closely than spyware. Spyware secretly monitors and reports user activity or information. Option D also describes spyware rather than ransomware. Professionally, the key distinction is the malware’s function: concealment and deception for Trojan horses, self-replication for worms, surveillance for spyware, and restriction or encryption for ransomware.

================

The correct answer is A. Holograms are specifically designed as anti-counterfeiting features and are among the most difficult physical card features for fraudsters to reproduce accurately. Counterfeit payment card schemes usually involve stolen account information being encoded or printed onto altered, blank, or counterfeit cards. Option B is incorrect because these schemes generally involve fraudsters, organized groups, or dishonest merchants, not collusion between card issuers and merchants. Option C is too absolute because modern technology allows counterfeit cards to be produced without traditional professional printing facilities. Option D is inaccurate because counterfeit cards usually rely on stolen or compromised active account data, not merely expired card numbers. The ACFE payment fraud materials emphasize card security features, counterfeit card production, and card-scrutiny controls.

================

Detailed Explanation:

Rationale for Correct Answer: Journal entries record business activity, and credits increase equity (while debits reduce equity). Thus, journal entries and credits are the mechanisms that directly affect the equity account.

Analysis of Incorrect Options:

A. Journal Entries & Debit – Debits decrease equity, not increase.

B. Journal Entries & Transactions – Transactions are general; credits specify the effect.

D. None of all – Incorrect since option C is correct.

Key Concept: Equity changes recorded through journal entries and credits.