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Fraud > Definitions > Flashcards

Definitions Flashcards

1
Q

Occupational Fraud and Abuse

A

the use of one’s occupation for personal

enrichment through the deliberate misuse or misapplication of the employing organisation’s resources or assets

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2
Q

Financial statement fraud

A

the deliberate misrepresentation of the financial condition of an enterprise accomplished through the intentional misstatement or omission of amounts or disclosures in the financial statements to deceive financial statement users.

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3
Q

Channel stuffing (trade loading)

A

sale of an unusually large quantity of a product to distributors, who are encouraged to overbuy through the use of deep discounts or extended payment terms

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4
Q

The current ratio

A

current assets to current liabilities

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5
Q

The quick ratio, often referred to as the acid test ratio

A

Cash+Securities+Receivables to current liabilities

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6
Q

Receivable turnover

A

net sales on account

divided by average net receivables

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7
Q

COLLECTION RATIO

A

It divides 365 days by the receivable turnover ratio

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8
Q

INVENTORY TURNOVER

A

Cost of Goods Sold to Average Inventory

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9
Q

AVERAGE NUMBER OF DAYS INVENTORY IS IN STOCK

A

It divides 365 days by Inventory Turnover

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10
Q

The debt to equity ratio

A

dividing total liabilities by total equity

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11
Q

Profit margin ratio

A

net income divided by net sales

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12
Q

ASSET TURNOVER

A

Net sales divided by average operating assets

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13
Q

Cash Larceny

A

theft of money that has already appeared on a victim organisation’s books

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14
Q

Skimming

A

removal of cash from a victim entity prior to its entry in an accounting system

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15
Q

Lapping

A

crediting of one account through the bstraction of money from another account

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16
Q

Cheque tampering schemes

A

the perpetrator takes physical control of a cheque and makes it payable to himself through one of several methods.

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17
Q

“Maker” of the cheque

A

person who signs a cheque

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18
Q

A forged maker scheme

A

a cheque tampering scheme in which an employee misappropriates a cheque and fraudulently affixes the signature of an authorised maker thereon.

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19
Q

Forged endorsements

A

cheque tampering schemes in which an employee intercepts a company cheque intended to pay a third party and converts the cheque by endorsing it in the third party’s name

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20
Q

Pass-through schemes

A

Instead of buying merchandise directly from a vendor, the employee sets up a shell company and purchases the merchandise through that fictitious entity. He then resells the merchandise to his employer from the shell company at an inflated price.

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21
Q

Pay-and-Return Schemes

A

an employee intentionally mishandles
payments that are owed to legitimate vendors, then call the vendor and request that cheque be returned. The clerk then intercepts the returned cheque.

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22
Q

Ghost Employees

A

someone on the payroll who does not actually work for the victim company

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23
Q

Larceny

A

Felonious stealing, taking and carrying, leading, riding, or driving away another’s personal property, with intent to convert it or to deprive owner thereof. The unlawful taking and carrying away of property of another with intent to appropriate it to use inconsistent with latter’s rights.

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24
Q

Inventory shrinkage

A

Unaccounted-for reduction in the company’s inventory that results from theft

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25
Q

Bribery

A

offering, giving, receiving, or soliciting any thing of value to influence an official act

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26
Q

Kickbacks

A

giving or receiving anything of value to influence a business decision without the employer’s knowledge and consent

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27
Q

Overbilling schemes

A

Vendor submits inflated invoices to the victim organisation. The false invoices either overstate the cost of actual goods and services, or reflect fictitious sales.

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28
Q

Slush fund

A

a noncompany account from which bribes can be made

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29
Q

NEED RECOGNITION SCHEMES

A

a conspiracy between the buyer and contractor where an employee of the buyer receives something of value and in return recognises a “need” for a particular product or service

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30
Q

SPECIFICATIONS SCHEMES

A

the vendor pays off an employee of the
buyer who is involved in preparing specifications for the contract. In return, the employee tailors the specifications to accommodate that vendor’s capabilities so that the contractor is
effectively assured of winning the contract.

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31
Q

Bid pooling

A

a process by which several bidders conspire to split contracts up and ensure that each gets a certain amount of work

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32
Q

Economic extortion

A

an employee demands that a vendor pay him in order to make a decision in that vendor’s
favour

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33
Q

Illegal gratuities

A

The party who benefited from the decision then gives a gift to the person who made the decision

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34
Q

Fiduciary duty (duty of loyalty)

A

The agent must act solely in the best interest of the principal and cannot seek to advance personal interest to the detriment of the principal.

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35
Q

Turnaround Sales or the flip.

A

an employee knows his employer is seeking to purchase a certain asset and takes advantage of the situation by purchasing the asset himself The fraudster then turns around and resells the item to his employer at an inflated price

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36
Q

Appearance of Conflict of Interest

A

Examples include ownership in a
blind trust, in which the employee has no authority to make investment decisions, or an external auditor owning a minority interest in a company that is audited by the auditor’s firm.

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37
Q

Confidentiality

A

ensuring that information is accessible only to those authorised to have access, and that they can only use it for specified purposes

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38
Q

Integrity

A

safeguarding the accuracy and completeness of information and processing
methods

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39
Q

Availability

A

ensuring that authorised users have access to information and associated assets when required

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40
Q

Espionage

A

intelligence activity directed towards the acquisition of
information through clandestine means and proscribed by the laws of the country against
which it is committed

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41
Q

Smurfing.

A

The process of breaking transactions up into smaller amounts to evade the reporting
requirements

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42
Q

Layering

A

financial transactions designed in complex patterns in order to disguise the source of the money

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43
Q

Money laundering

A

process which aims to disguise the existence, nature, source, control,
beneficial ownership, location, and disposition of property derived from criminal activity

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44
Q

Balance Sheet Laundering

A

Depositing Cash and Writing Cheques in Excess of Reported Revenues and
Expenses

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45
Q

EVIDENCE

A

an assertion of fact, opinion, belief, or knowledge whether material or
not and whether admissible or not.

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46
Q

Evidence rules

A

principles developed and refined over hundreds of years, that are designed to ensure that only relevant and probative evidence is admitted in court proceedings, and that irrelevant, unreliable and prejudicial evidence is excluded, so that cases can be fairly and expeditiously decided

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47
Q

Testimony

A

refers to the oral statements made by witnesses under oath

48
Q

A lay (or fact) witness

A

a non-expert witness who must testify from personal knowledge about a matter at issue (testimony)

49
Q

Expert witness

A

a person who, by reason of education, training, skill, or experience, is qualified to render an opinion or otherwise testify in areas relevant to resolution of a legal dispute (testimony)

50
Q

Real evidence

A

describes physical objects that played a part in the issues being litigated.

51
Q

Demonstrative evidence

A

a tangible item that illustrates some material proposition (e.g., a map, a chart, a summary). It differs from real evidence in that demonstrative evidence was not part of the underlying event; it was created specifically for the trial.

52
Q

Direct evidence

A

includes testimony that tends to prove or disprove a fact in issue directly, such as eyewitness testimony or a confession

53
Q

Circumstantial evidence

A

evidence that tends to prove or disprove facts in issue indirectly, by inference.

54
Q

Relevant evidence

A

evidence that tends to prove or disprove a fact in issue

55
Q

Character evidence (propensity evidence)

A

testimony or exhibits that purport to
establish a “trait of character” or propensity to behave in a particular way, such as
carefulness, honesty, violence, or cowardice

56
Q

Exhibits

A

tangible objects presented as evidence

57
Q

The “Best Evidence” Rule

A

This prohibits a party from testifying about the contents of a document without producing the document itself.

58
Q

Chain of Custody

A

refers to (1) who has had possession of an object, and (2) what they have done with it.

59
Q

Hearsay

A

“a statement, other than one made … at the trial or hearing, offered in evidence to
prove the truth of the matter asserted.”

60
Q

Testifying expert

A

give opinion testimony when specialized knowledge is needed to help the jury understand evidence or determine a fact in issue

61
Q

Consulting experts

A

hired to provide technical assistance to

the attorney in preparing the case

62
Q

conflict of interest

A

exists when an expert’s ability to objectively evaluate and present an issue for a client will be impaired by any current, prior, or future relationship with parties to the litigation

63
Q

Relevant testimony (expert witness)

A

assist the jury in understanding the evidence or determining a fact at issue. To be relevant, the proposed testimony must have a tendency to make the existence of any fact more probable than it would be without the evidence. Testimony is not relevant if the jury can make its own determination without expert testimony.

64
Q

Reliable testimony (expert witness)

A

product of reasoning or methodology that has a reliable basis in the knowledge and experience of the relevant discipline and is based on adequate data

65
Q

Depositions of Expert Witnesses

A

sworn testimony given by a party or witness upon questioning by counsel for one of the parties before trial and outside of court

66
Q

Narrative questions

A

broad, opened ended questions that allow experts to present their opinions in their own words with minimal prompting from the lawyer

67
Q

Hypotheticals

A

fictional situations, analogous to the act in question, which clarify and highlight particular aspects of the dispute

68
Q

Myopic Vision

A

entails getting the expert to admit to a great amount of time being spent in the
investigation of a matter, then selecting an area to highlight about which the expert is unsure or has not done much work. This area might not be central to the issues in the case, but it must be relevant to the conclusions reached. Then, the opposing counsel will make a large issue of it and prove that the expert’s vision is myopic in that the work was limited in extent or scope and, as such, substandard. At the same time, the matter of fees could be drawn in to show that large sums were expended to have this “obviously incomplete” work done.

69
Q

Substantive law

A

Defines the type of conduct permissible and the penalties for violation

70
Q

Procedural law

A

Defines the rules by which individual cases are decided

71
Q

Public law

A

Involves such areas as: administrative law, criminal law, constitutional law, taxation law

72
Q

Private law

A

Encompasses those areas where the legal system is used to resolve primarily disputes between private parties

73
Q

Civil law system

A

Individual cases are decided in accordance with an accepted set of principles. These principles are set out in the civil code

74
Q

Common law system

A

The common law approach involves analyzing similar cases which were previously decided and applying the basic principles set forth in those cases to the problem at hand

75
Q

Stare decisis doctrine

A

Lower courts are bound to follow the decisions or precedents of higher courts

76
Q

Trial court

A

Conducts the trial and issue a judgement

77
Q

Appellate court

A

Reviews the rulings and procedures followed by the lower court and issue a decision

78
Q

Fraud

A

All multifarious means which human ingenuity can devise, and which are resorted to by one individual to get an advantage over another by false suggestions or suppression of truth. It includes all surprise, trick, cunning or dissembling, and any unfair way by which another is cheated

79
Q

Misrepresentation of material facts

A

Deliberate making of false statements to induce the intended victim to part with money or property, normally include:
• a material false statement
• knowledge of its falsity
• reliance on the false statement by the victim
• damage suffered

80
Q

Concealment of material facts

A
  • That the defendant had knowledge
  • of a material fact
  • that the defendant had a duty to disclose
  • and failed to do so
  • with the intent to mislead or deceive the other party
81
Q

Bribery

A

Form of corruption that may be defined as the offering, giving, receiving, or soliciting anything of value to influence an act or decision

82
Q

Official bribery

A 
Illegal payments to public officials, elements:
• giving or receiving 
• a thing of value 
• to influence
• an official act
83
Q

Commercial bribery

A
  • giving or receiving
  • a thing of value
  • to influence
  • a business decision
  • without the knowledge or consent of the principal
84
Q

Proof of corrupt influence

A

Involves demonstration that the person receiving the bribe favorited the bribe-payer in some improper or unusual way

85
Q

Illegal gratuity

A 
Similar to the offense of official bribery, and the elements of illegal gratuity are:
• giving or receiving
• a thing of value
• for or because of
• an official act
86
Q

Extortion

A

Obtaining of property from another with the other party’s “consent” having been induced by wrongful use of actual or threatened force or fear

87
Q

Conflict of interest

A

Occurs when an employee has an undisclosed personal or economic interest in transaction; elements of a typical civil claim for conflict of interest include:
• an agent taking an interest in a transaction
•that is actually or potentially adverse to the principal
•without full and timely disclosure to and approval by the principal

88
Q

Embezzlement

A

The wrongful appropriation of money or property by a person to whom it has been lawfully entrusted, elements are:
• the defendant took or converted
• without the knowledge or consent of the owner
• money or property of another
• that was properly entrusted to the defendant

89
Q

Theft

A

Wrongful taking of money or property of another with the intent to convert or to deprive the owner of its possession and use

90
Q

Duty of loyalty

A

Requires that the employee/agent act solely in the best interest of the employer/principal, free of any self-dealing, conflict of interest , or other abuse of the principal for personal advantage

91
Q

Duty of care

A

People in a fiduciary relationship, must conduct business affairs prudently with the skill and attention normally exercised by people in similar positions

92
Q

Inter-American convention against corruption goal

A

To make every effort to prevent, detect, punish, and eradicate corruption in the performance of public functions and acts of corruption specifically related to such performance

93
Q

The organization for economic co-operation and development (OECD)

A

Intergovernmental institution, which groups member countries in a forum to examine, advance, and cultivate economic and social policies

94
Q

United Nations Convention Against Corruption

A

The UNCAC covers five main areas: (1) prevention, (2) criminalization and law enforcement measures, (3) international cooperation, (4) asset recovery, and (5) technical assistance and information exchange. In general, it requires signatories to take effective measures to prevent
and criminalize corruption in the private sector.

95
Q

Bustout

A

planned bankruptcy

96
Q

Stock

A

an equity that represents a right of ownership in a corporation

97
Q

Bond

A

a debt instrument, for example treasury bills, corporate bonds, municipal bonds,
and “junk bonds

98
Q

junk bonds

A

high-risk, below investment grade, commercial bonds

99
Q

Certificates of Deposit

A

acknowledgement by a bank of the receipt of money with a promise to repay it with interest

100
Q

Future

A

contract agreeing to buy or sell a specified quantity of something (such as foreign
currency or commodities) at some future time at a price agreed upon now

101
Q

Options

A

to buy (known as a “call”) or sell (known as a “put”) an asset (such as stocks, bonds, commodities, or real estate) on or before a future date at a price agreed upon now.

102
Q

strike price

A

price at which the option may be exercised

103
Q

option premium

A

The price paid for the option

104
Q

plain-vanilla options

A

Standardised exchange-traded options contracts

105
Q

call option

A

right but not the obligation to purchase the underlying security at the strike (exercise) price by the option’s expiration date

106
Q

put option

A

right but not the obligation to sell the underlying security at the strike
(exercise) price by the option’s expiration date

107
Q

A call option is in the money

A

when the price of the underlying exceeds its strike price

108
Q

a put option is in the money

A

when the price of the underlying is less than its strike price

109
Q

Over-the-Counter (OTC) options

A

agreements made between private parties

110
Q

Churning

A

excessive trading of a customer account for the purpose of generating
commissions

111
Q

Parking

A

practice of selling a security to one party with the understanding that the seller
will repurchase the security later at an agreed-upon price.

112
Q

Bucket shops

A

fraudulent enterprises that masquerade as licensed brokerage operations

113
Q

Front running

A

use for profit of the privileged knowledge of a customer’s order to buy or sell a large
amount of a commodity, options, or security that, because of its size, is likely to move the
market

114
Q

Block Order

A

When several different accounts are combined on the same order

115
Q

Search Warrant

A

an order issued by a justice under statutory powers, authorising a named person to enter a specified place to search for and seize specified property which will afford evidence of the actual or intended commission of a crime

Fraud (10 decks)

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