Chapter 3: Fighting Fraud (an Overview) Flashcards
Fraud Fighting activities (4)
- Fraud Prevention
- Early Fraud Detection
- Fraud Investigation
- Follow-up legal action and/or resolution
Effection fraud prevention’s 2 fundamental activities
- Taking steps to create and maintain a culture of honesty and high ethics
- assessing the risks for fraud and developing concrete responses to mitigate the risks and eliminate the opportunities for fraud
Five elements for Maintaining a Culture of Honesty and High Ethics
- Tone at the Top
- Hiring right
- Communicating the right expectations throughout the organization and requiring written confirmation of acceptance of those expectations
- Creating a positive work environment
- Developing and maintaining an effective policy for when fraud does occur
Five elements for Maintaining a Culture of Honesty and High Ethics
- Tone at the Top
- Hiring right
- Communicating the right expectations throughout the organization and requiring written confirmation of acceptance of those expectations
- Creating a positive work environment
- Developing and maintaining an effective policy for handling fraud when it does occur.
ethical maturity model (emm)
a model that explains why people make unethical decisions
Like Maslow’s hierarchy of needs.
First Base: Personal Ethical Understanding
Second Base: Application of Ethics to Business Situations
Third Base: Ethical Courage
Home Plate: Ethical Leadership
People generally fall into three groups depending on their levels of honesty
- Those who will almost always be honest
- Those who are situationally honest
- Those who will always be dishonest.
How to communicate expectations of honesty and integrity
- Identifying and codifying appropriate values and ethics
- Fraud awareness training
- Communicating consistent expectations about punishment of violators.
How has business culture changed to encourage more fraud?
Treating employees more like assets that can be bought and sold, and less perceived ownership and commitment to a company.
How to proactively eliminate most fraud opportunities
- Identifying sources and measuring risks
- Implementing Preventive and Detective Controls
- Monitoring
- Having internal and external auditors to provide independent checks
3 ways to detect fraud
- by chance
- by providing ways for people to report suspicions of fraud
- by proactively examining transaction records and documents to determine if there are anomalies that could represent fraud
Predication
the circumstances, taken as a whole, that would lead a reasonable, prudent professional to believe a fraud haws occurred, is occurring, or will occur.
4 types of evidence that can be accumulated
- Testimonial evidence
- Documentary evidence
- Physical evidence
- Personal observation
Fraud Element Triangle Elements
- Theft Act
- Concealment
- Conversion
Procedures of Fraud Examination (7)
- They must only “establish the truth of the matter in question”
- the individuals charged with the investigation must be experienced and objective
- Any hypothesis about whether or not someone committed fraud should be closely guarded
- Investigators must ensure that only those who have a need to know are kept apprised
- Good investigators ensure that all information collected during an inquiry is independently corroborated and determined to be factually correct
- Investigators exercise care to avoid questionable investigative techniques.
- Investigators must report all facts fairly and objectively
3 actions an org and other victims can take after discovering the fraud
- Pursue no legal action
- Pursue civil remedies
- Pursue criminal action against the perpetrators
