Table of Contents
Chapter 1 - Fraud Schemes by Employees1
| What is Fraud? | 1 |
| Cash Schemes | 2 |
| Skimming (No Recordation) | 2 |
| Discounted Sales (Partial Recordation) | 3 |
| 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 |
| Purchasing Card Fraud | 7 |
| Payables Schemes | 7 |
| Outbound Check Fraud | 7 |
| Diverted Payment Fraud | 8 |
| Petty Cash Fraud | 8 |
| 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 | 11 |
| Time Fraud | 11 |
| Executive-Level Fraud | 11 |
| Abuse of a Position of Trust | 11 |
| Executive and Related Party Loan Fraud | 12 |
| Insider Trading Fraud | 12 |
| Stock Option Backdating Fraud | 12 |
| General Employee Fraud Observations | 13 |
Chapter 2 - Financial Statement Fraud Schemes16
| Sales Inflation | 17 |
| Expenses Falsification | 19 |
| Marketable Securities Falsification | 20 |
| Prepaid Expenses Falsification | 20 |
| Receivables Falsification | 20 |
| Loss Reserves Falsification | 21 |
| Inventory Falsification | 21 |
| Fixed Asset Falsification | 22 |
| Liability Falsification | 23 |
| Debt Falsification | 24 |
| Discontinued Operations Stuffing | 25 |
| Cash Flow Reclassifications | 25 |
| Acquisition Falsification | 26 |
| Financial Statement Disclosure Fraud | 27 |
Chapter 3 - Fraud Schemes by Outsiders30
| Imposter Schemes | 30 |
| Application Fraud | 30 |
| Bank Account Fraud | 30 |
| CEO Fraud | 31 |
| Redirected Payments Fraud | 31 |
| Software Service Fraud | 31 |
| Triangulation Fraud | 32 |
| Bust-Out Fraud | 32 |
| Misrepresentation Schemes | 32 |
| Advance-Fee Loan Fraud | 32 |
| Investor Marketing Fraud | 33 |
| Business Directory Fraud | 33 |
| Substandard Goods Fraud | 33 |
| Counterfeit Schemes | 34 |
| Counterfeit Goods Fraud | 34 |
| Coupon, Rebate, and Loyalty Points Fraud | 34 |
| Gift Certificate Fraud | 35 |
| Inbound Check Fraud | 35 |
| Money Laundering Schemes | 35 |
| Fraud Tools used by Outsiders | 36 |
| Social Engineering Fraud | 36 |
| Temporary Business Address | 37 |
Answers to Chapter Questions39
Glossary43
Index45
Course Details
Author: Steven M. Bragg, CPA
Steven Bragg, CPA, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young. He received a master’s degree in finance from Bentley College, an MBA from Babson College, and a Bachelor’s degree in Economics from the University of Maine. He has been a two-time president of the Colorado Mountain Club, and is an avid alpine skier, mountain biker, and certified master diver. Mr. Bragg resides in Centennial, Colorado. He has written more than 300 books and courses, including New Controller Guidebook, GAAP Guidebook, and Payroll Management.
Publication/Revision Date: 4/14/2026
Course Exam Questions (online): 15 (multiple-choice)
Program Delivery Method: NASBA QAS Self-Study
Available Formats of Course Text: PDF or PDF plus printed copy sent in the mail
Course Level, Prerequisites, and Advance Preparation Requirements
| License | Course Level | Prerequisites | Advance Preparation Requirements |
|---|
| CPA | Overview | None | None |
* This program is appropriate for professionals at all organizational levels.
Sponsor ID Numbers
National Registry of CPE Sponsors ID: 107615
State CPA Board Sponsor ID Numbers (where applicable)
Florida Division of Certified Public Accounting: 0004761
Hawaii Board of Public Accountancy: 14003
New York State Board for Public Accountancy: 002146
Ohio Accountancy Board: CPE .51 PSR
Pennsylvania State Board of Accountancy: PX178025
Texas State Board of Public Accountancy: 009349
Learning Objectives
As a result of studying the course material, you should be able to meet the objectives listed below:
- Identify the characteristics of each type of employee fraud scheme.
- Recognize the methods used by employees to falsify their expense reports.
- Recognize the techniques used to artificially assist suppliers in winning bids.
- Specify how a payables clerk can obtain a valid signature on a check intended for personal use.
- Describe how stock option backdating can benefit employees.
- Identify the tools available to a management team that wants to inflate sales.
- Specify how the reported asset balances in the balance sheet can be artificially altered.
- Point out the circumstances in which a management team is more tempted to set up a large loss reserve.
- Recognize the methods available for using fixed assets to alter reported expense levels.
- Identify the methods available for falsely reducing reported liability levels.
- Describe the reasons why cash flows may be mis-reported.
- Specify the possible indicators of application fraud.
- Describe the controls that can be used to mitigate the effects of outsider fraud schemes.
- Cite the underlying mechanics of a bust-out scam.
- Point out the indicators of a possible money laundering scheme.
