Chapter 12
Critical Thinking Q&A
A clerk in the butcher shop is 5’ 10” tall. What does he weigh?
Review Questions & Answers
12-1. What are the five major categories of fraudulent disbursements?
12-2. What is a shell company and how is it formed?
Answer: Shell companies are fictitious entities created for the sole purpose of committing
12-3. How do pay-and-return schemes work?
Answer: In pay-and-return schemes employees intentionally mishandle payments that are
12-4. What are the five principal categories of check tampering?
Answer: The five principal categories of check tampering include: forged maker, forged
12-5. What are the differences between forged maker and forged endorsement schemes?
Answer: Both forged maker and forged endorsement schemes involve the false signing of
12-6. How may theft and alteration of outgoing company checks be prevented and detected?
Answer: It is very important that the functions of cutting checks, signing checks, and
12-7. What is a ghost employee and what are the four steps needed to make this scheme work?
Answer: The term ghost employee refers to someone on the payroll who does not actually
12-8. How do employees overstate legitimate expenses on their expense reports?
Answer: Some employees overstate the cost of actual business expenses by altering their
12-9. What red flags are commonly associated with fictitious expense schemes?
Answer: There are a number of red flags that may indicate an employee is seeking
12-10. How do fraudulent disbursements at the cash register differ from other register frauds?
Answer: When money is taken from a register in a skimming or larceny scheme, there is
no record of the transaction; the money is simply missing.