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24 Cards in this Set
- Front
- Back
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Auditing |
Expressing an option on a set of financial statements |
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Forensic Accounting |
Use of any accounting knowledge for courtroom purposes |
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Fraud Examination |
-Methodology of resolving fraud allegations from inception to disposition -Obtaining evidence -Interviewing witnesses -Writing investigative reports -Testifying to findings -Assisting in the detection and prevention of fraud |
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Fraud Examination- Prediction |
-Totality of circumstances that would lead a reasonable, professionally trained and prudent individual to believe a fraud has occurred, is occurring and/or will occur -Fraud examination must be based on prediction |
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Fraud Examination- Scientific Approach |
1) Analyze available data 2) Create a hypothesis 3) Test the hypothesis 4) Refine and amend the hypothesis |
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Fraud Examination- Essential Tools |
-Examine documents -Observe behavior -Interview witnesses, co-conspirators, targets |
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Fraud Examiner- Components |
Must be: -Cop -Accountant -Psychologist -Lawyer |
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Types of Fraud |
-External: -Individual against individual (con schemes) -Individual against organization (insurance fraud) -Organization against individual (consumer fraud) Internal: -Employee(s) against employer (occupational & abuse) |
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Occupational Fraud and Abuse |
The use of one's occupation for personal enrichment through deliberate misuse or misapplication of the employing organization's resources or assets |
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Occupational Fraud and Abuse- Key elements |
-Clandestine -Violates the employee's fiduciary duties -Committed for the purpose of direct or indirect financial benefit to the employee -Costs the employer assets, revenues or reserves |
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Legal elements of fraud |
1. A material false statement 2. Knowledge that the statement was false when it was uttered (intent) 3. Reliance on the false statement by the victim 4. Damages resulting from the victim's reliance on the false statement |
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Proving Intent |
-Evidence that the suspect -Could not have a legitimate motive for his or her actions -Altered documents, or took steps to conceal his actions by destroying evidence or attempting to obstruct the investigation -Gave false, misleading statements concerning the matters under investigation -Repeatedly engaged in activity of an apparent wrongful nature -Personally gained from the fraudulent act |
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Occupational Abuse |
Describes a variety of petty crimes and other counterproductive behavior that have become common and even silently condoned in the workplace |
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Examples of Occupational Abuse |
-Use of equipment belonging to the organization -Surf the Web while at work -Attend to personal business during working hours -Taking long lunches or breaks without approval |
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Condensed Fraud Tree |
1. Corruption -Conflicts of interest -Bribery -Illegal gratuities 2. Asset Misappropriations -Cash -Inventory & all other assets 3. Fraudulent Statements -Financial -Non-financial |
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2016 Report to the Nations on Occupational Fraud & Abuse |
-Survey distributed to 41,788 CFEs around the world -Summarize largest fraud case since Jan. 2014 -2,410 cases of occupational fraud summarized in the report -51% of cases outside the U.S. |
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Results |
-Estimated Organization Cost: 5% of Revenues -Length of time undetected- 18 months -Median loss: $150,000 -Asset Misappropriation- 83.5% frequency -Financial Statement Fraud Median Loss- 1,000,000 -U.S. 48.8% of cases -Private companies were victimized more -Organizations <100 people had more cases of fraud -39.1% of the cases were detected by a tip -The older you are, the greater the median loss for the company, however not as frequent -Most frequent fraudsters- 36-40 |
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Classical Philosophy |
-Evaluate one's character -What makes a good or bad person? -Aristotle -Focus is behavior |
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Modern Philosophy |
-Evaluate one's actions -Is this a right or wrong action? -Kant -Focus is process |
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Fraud Triangle- Occupational Fraud (Donald Cressey- studied embezzlers) |
-Opportunity -Pressure -Rationalization |
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Pressure |
-Non-shareable problem -Violated of ascribed obligations -Problems resulting from personal failure -Business reversals -Physical isolation -Status gaining -Employer- employee relations |
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Rationalization |
-Borrowing with intent to repay -Felt cheated by employer -Employer deserves it -Incapable of surviving any other way (low self esteem) |
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Hollinger-Clark |
-Employees steal primarily as a result of workplace conditions -Job dissatisfaction -Feel entitled because of perceived exploitation -True costs of employee theft are vastly understated -Those that engage in occupational abuse are more likely to engage in employee theft |
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Deterring Occupational Fraud |
-Must address causes of employee dissatisfaction -Company policies can be effective, but must be balanced so as not to create distrust and paranoia -Strong perception of detection minimizes employee theft versus strong sanctions on offenses -Informal social controls are a strong deterrent |
