Chapter 16

Question 1

Fraud relates to (3):

Answer 1

Theft
False accounting
Bribery and corruption

Question 2

Prerequisites of fraud

Answer 2

Dishonesty
Employee opportunity
Motive

Question 3

Common types of fraud

Answer 3

Theft
False accounting
Collusion

Question 4

Organisation characteristics likely to be involved in fraud

Answer 4

High staff turnover rates in key controlling functions. Long service staff in stores/purchasing departments

Chronic understaffing in key control areas

Frequent changes of legal advisers/auditors

Inadequate segregation of duties

Low staff morale/lack of career progression

Excessive hours worked by key staff

Lack of effective procedures in HR, credit control, inventory, purchasing or accounts departments

Consistent failure to correct major weaknesses in internal control

Inadequate internal reporting or management accounting

Loss of records or inadequate documentation about transactions

Overly secret dealings with certain clients or suppliers

Excessive pressure to meet budgets, targets or forecast earnings

Personnel not required to take their holiday entitlement

Lack of common sense controls such as changing passwords frequently

Question 5

Money laundering offences

Answer 5

Laundering - assisting with the process of transferring or investing cash obtained through criminal activity into legal ‘clean’ money. UK up to 14 years in jail.

Failing to report - this is also criminal offence not to report any suspicions of criminal activity up to 5 years in jail.

Tipping off - this is when someone tips off the money launderer that the authorities have been called as this could get in the way of an investigation. 2 years in jail.