If an entity does not have adequate controls over cash or the auditor suspects that some type of fraud of defalcation involving cash has occurred, it may be necessary to extend the normal cash audit procedures. Although many types of fraud, such as forgery or collusion, are difficult to detect, auditing standards indicate that the auditor has the responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by fraud or error. The Association of Certified Fraud Examiners (ACFE) divides fraudulent cash disbursements into five distinct subcategories.

1. List the five subcategories and describe an audit step or procedures that you would perform in order to test each of the five categories the ACFE identifies.