In an overstated refund scheme, an employee does what?

In an overstated refund scheme, the key action taken by the employee is to overstate the value of a legitimate refund. This means that when a customer returns a product, the employee manipulates the financial records to reflect a higher refund amount than what is actually owed to the customer.

By doing this, the employee can effectively steal the difference between the actual refund and the inflated amount. The scheme often relies on the legitimacy of the original transaction; that is, the return is based on a real purchase which lends a false credibility to the inflated refund. This method helps the perpetrator exploit the company's trust in legitimate transactions, making it more difficult to detect the fraud compared to completely fictitious returns.

In contrast, other options do not accurately describe the mechanics of an overstated refund scheme. Creating fictitious returns lacks the legitimacy aspect since there wouldn’t be a real transaction from which to derive a refund. Recording a legitimate transaction correctly does not involve any fraudulent activity. Colluding with customers might be part of various kinds of fraud but isn't specifically characteristic of an overstated refund scheme, which primarily centers on the inflation of refund amounts within the confines of legitimate transactions.