Fraud Basics
These are 2 of the main outcomes from the Sarbanes-Oxley Act of 2002.
What are
- assessment of internal controls
- preservation of evidence
- whistleblower protection
- increased penalties for securities fraud
A forensic accounting investigation is grounded in this.
What is evidence?
These are the three sides of the fraud triangle?
What are...
M.I.C.E. stand for this.
What is...
This is one of the four amendments to the US Constitution associated with due process.
What are:
- The Fourth Amendment (Search & Seizures)
- The Fifth Amendment (Self Incrimination)
- The Sixth Amendment (Right to Attorney)
- The Fourteenth Amendment (Due process and Equal Protection)
Extravagant lifestyles, unexplained accounting anomalies, tips or complaints are all examples of these.
What are red flags?
Professional skepticism is...
What is an attitude that includes a questioning mind and a critical assessment of the evidence?
These 3 compose the triangle of fraudulent act or elements of fraud?
What are...
Commonly male, middle aged, 5+ years of service, never charged with a crime, well educated, acting alone.
What is a search warrant?
Warrant holder - not recipient (as in a subpoena) determines which documents are relevant.
These are the 4 essential elements of fraud.
What are...
- A material false statement
- Knowledge that the statement was false when it was spoken
- Reliance on the false statement by the victim
- Damages resulting from the victim’s reliance on the false statement
This is the primary goal of an auditor.
What is to issue an opinion on the financial statements.
The fraud diamond adds this element to the fraud triangle.
What is capability?
These fraudsters seek to deliberately defraud an organization with little remorse.
What is a predatory fraudster?
These are the considerations of documentary evidence.
What are:
1) Not forged.
2) Original documents are preferable.
3) Not hearsay or objectionable.
4) Authenticated.
5) Reliable.
These are classifications of organizational frauds.
From the fraud tree: What are...
- Corruption
- Asset Misappropriation
- Fraudulent Financial Statements
These are the primary functions of a forensic accountant.
What are:
The best way to prevent fraud is to improve this side of the fraud triangle.
What is opportunity?
Even if an organization has excellent internal controls in place, these 2 actions can result to fraud.
What are collusion and management override?
This is the process where each side may explore the merits of the others side's arguments by obtaining documentary and testimonial evidence.
That is discovery?
Skimming is an example of this type organizational fraud classification.
What is asset misappropriation.
An employee surfing the internet and searching for college friends on the internet is an example of this.
What is abuse?
This fraud element differentiates an error from a fraud.
What is Conversion?
A mistake becomes a fraud when the benefits of the error/theft are converted to the perpetrator for personal benefits.
The best way to deter employee theft, is to increase this.
What is the perception of detection?
Evidence is intended to support this.
What is facts at issue?