Identifying Employee Embezzlement and Mitigating Risks | CFE Exam Practice

C

The correct answer is C. Short-term skimming.

Skimming is a type of fraud in which cash or other valuable items are stolen before they are recorded on a company's books. In this case, employees steal an incoming payment, which could be a check or cash, and then deposit the funds into an interest-bearing account.

The purpose of depositing the stolen funds into an interest-bearing account is to earn additional income from the stolen funds, while concealing the fraud from the company's accounting records. By depositing the stolen funds into an account that earns interest, the employee can increase the amount of money they steal from the company over time.

Short-term skimming refers to a type of skimming in which the theft is discovered relatively quickly, usually within a few days or weeks. This is because the stolen funds are not being concealed in the company's accounting records, but are instead being held in an interest-bearing account.

In contrast, long-term skimming involves concealing the theft in the company's accounting records, which can allow the fraud to go undetected for a longer period of time.

Converting stolen checks, as mentioned in option A, is a type of check fraud in which a stolen check is altered to change the payee or the amount of the check. This is not the same as short-term skimming, which is the focus of this question.

Option B, concealing the fraud, is also not correct. While the employee is attempting to conceal the theft from the company's accounting records, the act of depositing the stolen funds into an interest-bearing account is not specifically designed to conceal the fraud, but rather to earn additional income from the stolen funds.