Which of the following does NOT happen in a fictitious refund scheme?

• A. The company's inventory is overstated.
• B. The register log balances with the amount of money in the register.
• C. A fraudster processes a transaction as if a customer were returning merchandise.
• D. Merchandise is returned to the stock room.

Answer: (D)

In a fictitious refund scheme, the fraudster uses fake returns to extract cash from the business, so no real merchandise is involved in the refund process. The goal is to obtain cash while the records make it look like a legitimate return occurred. Because of this, the fraud can still leave the register and inventory records imbalanced in various ways—e.g., inventory can appear overstated if the return is recorded in a way that increases stock on paper, and the cashier’s log can be made to balance with the cash on hand to avoid suspicion. The core action is processing a transaction as a customer return to obtain cash, which is exactly what happens.

However, merchandise being returned to the stock room does not occur in a fictitious refund scheme, since there is no actual merchandise being returned.