The examiner/FAA looks at your logbook to verify you have the required experience for a certificate/rating. Unless you give some reason to doubt the times in your logbook, it's going to be taken at face value. If the examiner just checked another guy that flew the same aircraft on the same day halfway across the country, that might get further investigation, ultimately if someone is falsifying their records, they may get revoked. Again though, it's taken at face value, unless something there triggers an examiner to question it. Just like if you were applying for an airline and they look at your thousands of whatever time, if you padded it and did it in a way that the reviewer "caught", maybe because he worked "there" or knew the chief pilot, you'd get thrown out of that interview and likely blacklisted for at least a while.

A lot of it rests on common sense. Most of this has already been covered well in this thread. If you ever suspect you are doing something that may not be "legit", ask the FSDO or for a legal interp. Document and record their answer. Document your own activities in that case to show your intent wasn't to deceive. This would be pretty rare, but there are some grey areas and if you end up there, it's best to be able to show you were trying to act within the intent of the rules.