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Fraud Prevention And Deterrence > Fraud > Flashcards

Fraud Flashcards

1
Q

What percentage of fraud cases resulted in some sort of internal punishment and what percentage were fired?

A

80% received punishment

66% were fired.

59% referred to LE

10% allowed or required to resign

9% were placed on suspension or probation.

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2
Q

Organizational crime vs occupational crime.

A

Origniazational crime the benefits go to the organization. Example: Price fixing

Occupational. The benefits go to the individual. Example: Accepting kickbacks

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3
Q

Rational choice theory

A

Suspect performs cost benefit analysis that evaluates possibility of getting caught.

Best way to reduce crime is reduce opportunities.

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4
Q

What are the three elements that influence crime in the routine activity theory.

A

The availability of suitable targets

The absence of capable guardians

The presence of motivated offenders

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5
Q

Theory of differential association.

A

Criminal behavior is learned

Learned from people you hang out with. IE GANGS

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6
Q

What is social control theory

A

Society keeps them in line. What would my mom think of me? Dad? If they found out.

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7
Q

Effects of white collar crime.

A

On going damages

Loss of competitive advantage

Loss of employee confidence in job security

Loss of employee productivity

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8
Q

What is the OECD definition? Corporate governance

A

Procedures and processes according to which an organization is directed and controlled

Distribution of rights and responsibilities

Lays down rules for decision making.

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9
Q

What is the Cadbury Report.

A

to encourage the efficient use of resources and require responsibility.

Solid Corporate governance practices are necessary when owners are not responsible for setting strategy or exciting business activities. IE. publicly

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10
Q

The treadway commission. What is the auditor’s responsibility in preventing fraud?

A

MandatoryINDEPENDANT audit committee

Written charter

Adequate resources and authority

Audit committee members should be informed, vigilant, and effective.

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11
Q

What are the four principles of corporate governance. RAFT

A

Accountability: hold management accountable.

Transparency: accurate, complete, timely financial statements and disclosure of all material matters

Fairness: all stakeholders treated equitably

Responsibility: act in the organization and society’s best interest.

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12
Q

What it is internal control? ROC

A

Designed to provide assurance regarding the achievement of objective.

Efficiency of OPERATIONS
Reliability of financial and non financial REPORTING
COMPLIANCE with applicable laws and regulations.

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13
Q

Identify the five interrelated components of internal control? CRIME

A 
Control environment 
Risk assessment 
Control activities 
Information and communication 
Monitoring
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14
Q

What does the controlled environment provide?

A

Makes up the ethical and moral culture of the organization.

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15
Q

What does risk assessment do? OICA

A 
Identify and assessment of risks relevant to achieving control goals. 
  Set clear objectives 
  ID risks 
  Consider potential for fraud 
   Assesses changes.
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16
Q

What does control activities mean?

A

Controls policies
INFO AND COMMUNICATION Exchanges information in a way that allows employees to carry out responsibilities.
MONITORING the effectiveness of the control system over time

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17
Q

What is a material misstatement. And materiality.

A

If omitting, misstating, or obscuring it could reasonably be expected to influence the decision of the primary financial statement users.

Materiality is often considered in quantified terms within the audit. Like a large amount for that company. Ie don’t review anything under $10k. (Quantitative)

But you find 30 transactions of $9,999. (Qualitative)

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18
Q

What is ISA 240

ISA 265

A

240: establish standards and provide guidance on the auditors responsibility to consider fraud in an audit of financial statements.
265: provide guidance regarding the auditors responsibility to communicate an organizations internal control deficiencies with management and those charges with governance.

19
Q

What is the auditors requirements if they find a deficiency in the internal controls?

A

Communicate significant deficiencies in writing to those charged with governance in a timely manner. Unless it would be inappropriate

20
Q

What is the international organization of supreme audit institution? And why are they different

A

Umbrella for external GOVERNMENT audit community.

They are broader
Consideration of the concept of abuse
Inability to withdrawal from the engagement
Additional communications about fraud related matters.

21
Q

What are inherent risks

What are residual risks

A

INHERENT: Risks that are present before the effect of internal controls. Including anti fraud controls

RESIDUAL: risks that remain after the effect of these controls.

22
Q

What is a fraud risk assessment.

A

An ongoing, continuous process aimed at proactively, identifying and addressing an organizations vulnerabilities to both internal and external fraud.

23
Q

What are elements of a good fraud risk assessment.

A

Collaborative effort.
Independence and objectivity
Functional knowledge of the business
Thinking like a fraudster

24
Q

Most effective techniques used to conduct fraud risk assessment

A

Interviews
Focus groups
Surveys
Anonymous feedback mechanisms

25
Q

What to do when you find residual fraud risks?

A

Avoid the risk: eliminate the assets

Transfer the risk: purchase a insurance policy

Mitigate risk: implement prevention and detection controls

Assume the risk:

26
Q

The audit process in the fraud risk assessment

A

Identify and map the existing preventative and detection controls

Perform tests to see if controls are operating effectively and efficiently

Identify risk management override controls

Develop reports with results of auditor validation and testing of fraud controls

27
Q

What are the five COSO ENTERPRISE fraud risk management components. GSPRI

A

Governance and culture: who does what

Strategy and objective setting: business objective

Performance: identify and assess risks

Review and revision:

Information, communication and reporting:

28
Q

What are the two principles of ISO 31,000?

A

Is customized and proportionate to operations and objectives

Is dynamic and responsive to change.

29
Q

How to manage third party fraud risks

A

Customer due diligence
Simplified: ID
standard:
Enhanced: high profile, large value transactions.
Sources of income and overall net
worth.

Expected pattern of purchasing
Expected method of payment

30
Q

Vender third party risks.

A

Ensure vendors have their own ethics and compliance program before engaging.

Include contract clauses requiring vendors to report and misconduct

31
Q

What are the 5 fraud risk management principles GAAIM

A

Fraud risk governance
Fraud risk assessment
Fraud control activities
Fraud investigation and corrective actions
Fraud risk management monitoring activities.

32
Q

What does punishment involve?

A

Applying a negative stimulus or WITHDRAWING A positive stimulus

33
Q

What are three things we can do to demonstrate proactive audit procedures.

A

Use of analytical review procedures

Fraud assessment questions

Surprise audits when possible.

34
Q

What is the most effective fraud prevention method.

A

Increasing Perception of detection.

35
Q

What should you have when developing a good ethics program

A

Define organization organization values.
Designated ethics official.
Ethics task force or committee

36
Q

What is an effective compliance program.

A

Management is responsible for establishing the program

Reasonably designed, implemented, and enforced to be effective in preventing and detecting criminal conduct.

37
Q

What does Preventive controls and detective controls do.

A

Preventive: stops something bad from happening before it occurs.

Detective controls: designed to ID something bad that has already happened.

38
Q

Who would be a good sponsor.

A

Senior in organization, ideally an independent board direct or audit committee member.

39
Q

Fraud risks are classified into these four areas: CAFE

A

Fraudulent financial reporting: inappropriately reported revenue, expenses,assets, or liabilities

Assist misappropriation: theft of tangible or intangible assets

Corruption: bribes, kickbacks, aiding and an eating vendor fraud

External fraud: fraud committed by customers, vendors, or other third parties.

40
Q

What are the 5 components of enterprise risk management

A 
Government and culture
Strategy and objective setting 
Performance
Review and revision 
Information/communication/ and reporting
41
Q

What does ISO 31000 do? Principals of effect risk management

A

Customized and proportionate to operations and objectives

Dynamic and responsive to change

42
Q

Board of directors role

A

Setting the tone and expectations management to enforce an anti fraud culture

Develop a strategy to assess and manage fraud risks that aligns with the organizations risk appetite and steric plan.

43
Q

Audit committee role.

A

Oversee financial and audit and accounting matters

Report to board of directors

Oversee how management is going to oversee the fraud risk management plan

44
Q

Assets misappropriation is the most common?

Financial state fraud is most commonly?

A

Assets: most common occupational fraud and is the least costly.

Financial statement fraud causes the greatest median loss.

Fraud Prevention And Deterrence (1 decks)

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