Midterm Flashcards
Types of Fraud
-Employee Embezzlement
- Vendor fraud
-customer fraud
- management fraud (financial statement fraud)
- investment scams and other consumer frauds
the fraud triangle
- perceived pressure
- perceived opportunity
- rationalization
types of pressure that motivate somebody to commit fraud
- financial
- vice
-work related - other
types of opportunities for fraud
lack of controls
inability to judge performance quality
failure to discipline fraudsters
lack of access to information
ignorance
lack of an audit trail
types of rationalization
the organization owes me
I am only borrowing
nobody will get hurt
I deserve more
its for a good purpose
What is the single most important step an organization can take to prevent and detect fraud?
having an effective control structure
Five components of a company’s internal control
(CRIME)
Control environment
Risk Assessment
Information and Communication
Monitoring
(existing) control activities
Types of Power
Reward power
A’S ABILITY TO PROVIDE BENEFITS TO B
Coercive power
A’s ability to punish B if B does not comply with A
Expert power
A’s Possession of special knowledge or expertise
Legitimate Power
A’s legitimate right to prescribe behavior for B
Referent Power
The extent to which B identifies with A
Organizations fight fraud by
- fraud prevention
- early fraud detection
-fraud investigation - follow up legal action candor resolution
Fraud prevention involves 2 fundamental activities:
- create and maintain a culture of honestly and high ethics
- assess the risks for fraud, develop concrete responses to mitigate the risks, and eliminate the opportunities for fraud
The evidence square includes:
- testimonial evidence
- documentary evidence
- physical evidence
- personal observation
Testimonial evidence includes:
evidence gathered from interviews, interrogations, and honesty tests
Documentary evidence includes:
evidence gathered from paper, computers, and other written or printed sources
Physical evidence includes:
fingerprints, tiremarks, weapons, stolen objects, tangible evidence
personal observations includes:
evidence collected by investigators themselves
