AI Generated Flash Cards
(44 cards)
What is fraud?
Fraud is the ‘wrongful or criminal deception intended to result in financial or personal gain’
This definition captures the essence of fraudulent behavior, emphasizing the intent behind the act.
What are the three components of the Fraud Triangle?
The three components are:
* Opportunity
* Pressure
* Rationalisation
These components explain the reasoning behind a worker’s decision to commit workplace fraud.
Define ‘Pressure’ in the context of the Fraud Triangle.
Pressure is the motivation behind the crime, which can be personal financial pressures or workplace-related pressures
This motivation can stem from issues like debt or financial obligations.
What does ‘Opportunity’ refer to in the Fraud Triangle?
Opportunity refers to how an individual will defraud the organization by abusing their position
It is the means through which the fraudster can execute the crime.
Explain ‘Rationalisation’ in the context of fraud.
Rationalisation is the cognitive stage where the fraudster justifies the crime in a way acceptable to their internal morals
This justification is crucial for the fraudster to proceed with their actions.
What are red flags in relation to fraud?
Red flags are indicators of potential fraud, such as:
* Lack of holidays
* Sudden changes in behaviour
* Complaints about management
* Evasive behaviour
* Lifestyle changes
While red flags are not proof of fraud, they can signal the possibility of fraudulent activity.
What is financial statement fraud also known as?
Financial statement fraud is also known as management fraud
This type of fraud typically involves company management and results from pressures to meet expectations.
What are some common symptoms of fraud?
Common symptoms of fraud include:
* Analytical symptoms (unusual events or transactions)
* Accounting/documentary symptoms (discrepancies, missing documents)
* Lifestyle symptoms (improved lifestyle without savings)
* Control symptoms (breakdowns in accounting systems)
* Behavioural/verbal symptoms (changes in behaviour)
* Tips and complaints from others
Understanding these symptoms can help in identifying potential fraud.
What is the purpose of internal controls in fraud prevention?
The purpose of internal controls is to separate functions and duties to prevent and detect fraud
Effective internal control programs should be monitored and revised regularly.
List the 8 steps for fraud prevention.
The 8 steps for fraud prevention are:
* Know your employees
* Do background checks
* Set up a reporting system
* Establish internal controls
* Don’t accept bad answers to good questions
* Implement compulsory holidays/job rotations
* Open your own mail
* Acknowledge your instincts
Each step is critical in creating a robust framework for preventing fraud.
What are the major characteristics of financial statement fraud?
Major characteristics include:
* Altering or manipulating financial statements
* Intentionally omitting material information
* Knowingly misusing accounting principles
* Inadequate disclosure of financials
These actions distort the true financial position of a company.
What is horizontal analysis?
Horizontal analysis involves comparing financial statements for several accounting periods to identify unusual movements
This method helps in spotting trends and anomalies over time.
What is vertical analysis?
Vertical analysis uses a base figure (usually income) to compare figures year on year
This analysis can highlight unusual changes that warrant investigation.
What are Electronic Confirmation Procedures (ECP)?
ECP are standard auditing procedures to obtain confirmation of bank balances by sending requests directly to the bank
This method enhances control and reliability in the audit process.
What does the Turnbull Report 1999 address?
The Turnbull Report addresses best practices on internal controls for UK listed companies, stating objectives such as:
* Efficient conduct of business
* Safeguarding assets
* Preventing and detecting fraud
* Completeness and scrutiny of financial records
* Timely preparation of financial statements
These objectives are crucial for maintaining corporate governance.
What is corporate governance?
Corporate governance is the system of rules, practices, and processes by which companies are directed and controlled
It ensures that companies operate in the interest of shareholders and the public.
Differentiate between auditors and forensic accountants.
Auditors:
* Determine fair assessment of financial statements
* Ongoing role
Forensic Accountants:
* Uncover and document fraud
* Specific engagement for fraud cases
While all auditors are accountants, not all forensic accountants are auditors.
What are the Nolan Principles?
The Nolan Principles include:
* Selflessness
* Integrity
* Objectivity
* Accountability
* Openness
* Honesty
* Leadership
These principles outline the ethical standards expected in the public sector.
What is the importance of collecting electronic evidence?
Collecting electronic evidence must follow the correct chain of custody to ensure it is admissible in court
Proper documentation and control are crucial to maintaining the integrity of digital evidence.
Define cybercrime.
Cybercrime is any criminal activity that involves a computer, networked device, or network
This includes a wide range of activities, primarily aimed at generating profit.
What are the pros of Generative Artificial Intelligence in accounting?
Pros include:
* Efficiency
* Accuracy
* Innovation
* Cost Effectiveness
These advantages can significantly enhance the accounting profession.
What are the cons of Generative Artificial Intelligence in accounting?
Cons include:
* Ethical concerns
* Technology over-reliance
* Employment landscape changes
* Security risks
These drawbacks highlight the challenges associated with AI adoption.
What should a fraud policy include?
A fraud policy should:
* Set the business’s stance on fraud
* Deter and detect fraud
* Investigate suspected fraud
* Report fraud to authorities
* Assist police in investigations
* Recover wrongfully obtained assets
* Encourage reporting of fraud suspicions
A well-defined fraud policy is essential for managing fraud risks.
What constitutes personal injury in civil law?
Personal injury legally covers injury to the body, physical, psychological, and emotional resulting from an event
Victims may be entitled to compensation for these injuries.
