Fraud (Part 1 Unit 7)

Question 1

What are some of the Indicators of Fraud?

Answer 1

1. SOD issue (no segregation of duties)
2. High trust in key employees
3. Poor management philosophy
4. Financial problems
5. Ethics issue
6. Lack of background checks on new hires
7. Absence of controls or loose controls or controls not applied consistently
8. Unrealistic goals i.e. sales or production targets
9. Absence or lack of employee rotations such as in cash handling
10. Vague (unclear) JDs and lines of responsibility or accountability
11. Refusal of employee to take vacations / promotion
12. High profits as compared to industry / competitors
13. High employee turnover among senior positions
14. Unjustifiable use of sole-supplier in procurement
15. Unproportionate increase in sales and cost of sales

Question 2

What are the 3 items of Fraud triangle?

Answer 2

1. Pressure / Motivation
2. Opportunity
3. Rationalisation

Question 3

What are some of the items under “Opportunity”

Answer 3

1. Weak internal controls
2. Absence of monitoring / oversight / review
3. High level of trust
4. Assets / items susceptible to fraud
5. Does not take vacation
6. Crisis

Question 4

Areas to assess fraud risk?

Answer 4

1. Framework - COSO Fraud Framework
2. No Framework - Understand the different fraud schemes