Internal Control Systems

Front 1

Chapter Six - Employee Fraud and the Audit of Cash

Back 1

Louwers, Ramsay, Sinason, and Strawser (2007)
Auditing & assurance services: A look beneath the surface (2nd ed.).
New York: McGraw-Hill/Irwin

Front 2

Why can't an organization's internal control thwart all fraud schemes?

Back 2

p. 201

Front 3

Why is attention to employee fraud important?

Back 3

p. 201

Front 4

Define fraud

Back 4

p. 201

Front 5

Define management fraud

Back 5

p. 202

Front 6

Define errors

Back 6

p. 202

Front 7

Define direct-effect illegal acts

Back 7

p. 202

Front 8

Define employee fraud (often referred to as misappropriation of assets or defalcation)

Back 8

p. 202

Front 9

Define embezzlement

Back 9

p. 202

Front 10

Define larceny

Back 10

p. 202

Front 11

Employee frauds generally consist of...

Back 11

p. 202

Front 12

How do alert auditors uncover many frauds

Back 12

p. 202

Front 13

Employee Fraud Red Flags
(Changes in habits and lifestyles)
How do they act?

Back 13

p. 202

Front 14

Why are personality red flags difficlut to recognize?

Back 14

p. 203

Front 15

Why are managers in the best position to notice changes in employee habits and lifestyles?

Back 15

p. 203

Front 16

What are some telltale hints of cover-up for auditors?
(Exceptions and oddities)

Back 16

p. 203

Front 17

Employees committing fraud look like

Back 17

p. 204

Front 18

Danagers of managers trusting "long-time trusted employees"

Back 18

p. 204

Front 19

When can fraud occur?

Back 19

p. 205

Front 20

Probability of fraud as a function of three factors (fraud triangle)

Back 20

p. 205

Front 21

Define motive

Back 21

p. 205

Front 22

Classifications of motivation (pressures to contemplate theft)

Back 22

p. 205

Front 23

Common economic needs for motivation

Back 23

p. 205

Front 24

Examples of control weaknesses that provide opportunity

Back 24

p. 206

Front 25

Define unimpeachable integrity

Back 25

p. 206

Front 26

Occasional lapses of integrity

Back 26

p. 206

Front 27

Examples of rationalization

Back 27

p. 207

Front 28

Why are most day-to-day business activities pose difficulty with preventing fraud?

Back 28

p. 207

Front 29

Challenge for fraud prevention

Back 29

p. 207

Front 30

fraud diamond

Back 30

p. 208

Front 31

Capability

Back 31

p. 208

Front 32

Why are effective long-run prevention measures complex and difficult?

Back 32

p. 208

Front 33

Job of ethics officers

Back 33

p. 208

Front 34

Ethic "hot lines"

Back 34

p. 208

Front 35

One control - "trustworthy employees"

Back 35

p. 208

Front 36

Important consideration that prevents many people from performing fraud

Back 36

p. 209

Front 37

Red flags for identifying control violation or the attempt to conceal control violation

Back 37

p. 209

Front 38

Important feature of internal control is the separation of these duties and responsibilities

Back 38

p. 209

Front 39

Person acting alone or in a conspiracy can perform

Back 39

p. 209

Front 40

Fraud awareness auditing

Back 40

p. 209

Front 41

Codes of conduct

Back 41

p. 210

Front 42

Define lockbox

Back 42

p. 211

Front 43

Good control for initial custody of cash

Back 43

p. 211