Chapter 1 - The Nature of Fraud Flashcards
Characteristics of Fraud
- Intentional
- to trick or deceive someone out of assets
- theft
- criminal
Fraud is NOT
- taking by physical force
- mistakes or errors
- victimless
- insignificant
- acceptable or justifiable
3 types of fraud according to ACFE
- asset misappropriation
- Corruption
- Financial Statement Fraud
Examples of asset misappropriation
embezzlement, skimming, inventory fraud
embezzlement, skimming and inventory fraud are examples of what category of fraud?
asset misappropriation
examples of corruption fraud
bribery, conflict of interest
bribery and conflicts of interest at types of what kind of fraud
corruption fraud
fraudulent statements are perpetrated by …
management and employees
ACFE types of fraud by percentage
- asset misappropriation 83%
- corruption 35%
- fraudulent statements <10%
grand total is greater than 100 because frauds often involve more than 1
7 elements of fraud…
- a representation
- about a material point
- which is false
- and intentionally or recklessly so
- which is believed
- and acted upon by the victim
- to the victim’s damage
Who’s the victim?
Employee embezzlement
the company or organization
Who’s the victim?
Vendor fraud
the company or organization
Who’s the victim?
Customer fraud
the company or organization
Who’s the victim?
management fraud
the shareholders or debt-holders of the organization
Who’s the victim?
investment scams or consumer frauds
the unwary individuals
explain customer fraud
customers don’t pay, pay too little or get too much from the organization
when someone doesn’t pay, pay too little or get too much from an organization is an example of ______ fraud
customer fraud
another name for management fraud is…
financial statement fraud
another name for financial statement fraud is…
management fraud
the 2 ways vendor fraud can be committed
- by a vendor acting alone
2. vendor and buyer colluding
types of investment scams
- Ponzi Scheme
- telemarketing fraud
- Nigerian letter or money
- identity theft
- advance fee scam
- redemption/strawman/bond fraud
- letter of credit fraud
- internet fraud
explain Ponzi scheme
early investors are paid high returns but with later investors money
explain telemarketing fraud
callers pressure victims to provide financial info immediately or miss out on a deal
explain Nigerian letter or money scam
a victim receives an email that they will be handsomely rewarded for helping to transfer money from one country to another
explain advance fee scam
victim pays up front for a good, loan, gift, investment or service that’s never provided
explain redemption/strawman/bond fraud
perpetrators claim the US government controls bank accounts that can be accessed by submitting paperwork. they sell the individuals expensive training kits that supposedly teach them how to access the funds
explain letter of credit fraud
perpetrators create bogus bank guarantee letters and sell them as investments
in criminal prosecution, when convicted, you must be proven_____
guilty beyond a reasonable doubt
in civil prosecution, you must be proven______
only slightly more guilty than not guilty (by the preponderance of evidence)
principal federal fraud statutes that can be prosecuted…
- bribing of public officials or witnesses
- anti kickback act of 1986
- bank fraud
- racketeer influenced and corrupt organizations (RICO statute)
- computer fraud
- securities fraud
- Foreign Corrupt Policies Act (FCPA)
- Tax evasion
top 3 critical skills to fight fraud…
- analytical skills
- communication skills
- technical skills
