ACCT 4120: Chapter 1 Flashcards
It is impossible to know what percentage of fraud _____ are caught.
perpetrators
Government agencies—Agencies such as the FBI, FDIC, IRS, and various other agencies publish fraud statistics from time to time, but these organizations only publish those statistics that are directly related to their _____.
jurisdictions
_____ often conduct studies about particular types of fraud within certain industries.
Researchers
_____ often provide fidelity bonding or other types of coverage against employee and other fraud.
Insurance companies
Sometimes we learn about fraud from those who have been _____.
victims
The _____ is the world’s largest anti-fraud organization with approximately 80,000 members. It regularly conducts one of the most comprehensive fraud studies in the United States.
ACFE
Association of Certified Fraud Examiners
Because physical possession of stolen property is no longer required and because it is just as easy to program a computer to embezzle $1 million as it is $1,000, the size and number of frauds have _____ tremendously.
increased
For every $1 of fraud, the _____ of the firm is reduced by $1.
net income
Because fraud reduces _____, it takes significantly more _____ to recover the effect of the fraud.
net income
revenue
If the automobile manufacturer’s _____ (net income as a percentage of revenues) at the time was 10 percent, the company would have to generate up to $4.36 billion in additional revenue (or 10 times the amount of the fraud) to restore net income to what it would have been without the fraud.
profit margin
Fraud is deception that includes the following elements:
A representation
About a material point
Which is false
And intentionally or recklessly so
Which is believed
And acted upon by the victim
To the victim’s damage
_____ is a generic term, and embraces all the multifarious means which human ingenuity can devise, which are resorted to by one individual, to get an advantage over another by false representations. No definite and invariable rule can be laid down as a general proposition in defining fraud, as it includes surprise, trickery, cunning and unfair ways by which another is cheated. The only boundaries defining it are those which limit human knavery.
Fraud
Fraud is different from unintentional errors. If, for example, someone mistakenly enters incorrect numbers on a _____, is this fraud? No, it is not fraud because it was not done with intent or for the purpose of gaining advantage over another through false pretense. But, if in the same situation, someone purposely enters incorrect numbers on a _____ to trick investors, then it is fraud!
financial statement
The ACFE includes three major categories of occupational fraud:
asset misappropriations
corruption
fraudulent financial statements
Involves the theft or misuse of an organization’s assets.
asset misappropriations
Fraudsters wrongfully use their influence in a business transaction in order to procure some benefit for themselves or another person, contrary to their duty to their employer or the rights of another.
corruption
Generally involve falsification of an organization’s financial statements.
fraudulent financial statements
List the perpetrator and victim for the fraud type.
Employee Embezzlement
Perpetrator
Employees of an organization
Victim
The employer
List the perpetrator and victim for the fraud type.
Vendor Fraud
Perpetrator
Vendors of an organization
Victim
The organization to which vendors sell goods or services
List the perpetrator and victim for the fraud type.
Customer Fraud
Perpetrator
Customers of an organization
Victim
The organization which sells to the customers
List the perpetrator and victim for the fraud type.
Management Fraud
(financial statement fraud)
Perpetrator
Management of a company
Victim
Shareholders and/or debtholders and regulators (taxing authorities, etc.)
