Chap 8 Risk Of Fraud And Illegal Acts Flashcards Preview

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Flashcards in Chap 8 Risk Of Fraud And Illegal Acts Deck (27):
1

Common fraud perpetrator red flags:

-Living beyond their means

-Experiencing financial difficulties

-Excessive organizational pressure

2

Fraud

Any illegal act characterizing any deceit, concealment, or violation of trust. Frauds are perpetrated by parties or organizations to obtain money, property, or services; to avoid payment or loss of services; or to secure personal or business advantages

3

Misappropriation of assets:

-Pilferage

-Embezzlement

-Defalcation

4

Fraudulent financial reporting

Ask that involve falsification of and organize Asian's financial statements (for example, overstating revenues, understating liabilities and expenses)

5

Occupational fraud

Fraud in the workplace:

-Falsification of financial statements

-Asset misappropriation

-Corruption

6

Root causes of fraud: or Fraud triangle includes:

-Perceived opportunity

-Perceived need (pressure)

-Rationalization

7

Governance

The combination of processes and structures implemented by the board to inform, direct, manage, and monitor the activities of the organization toward the achievement of its objectives

8

Risk assessment

The identification and analysis (typically in terms of impact and likelihood) of relevant risks to the achievement of an organization's objectives, forming a basis for determining how the risks should be managed

9

Risk response

An action, or set of actions, taken by management to achieve a desired risk management strategy. Risk responses can be categorized as risk avoidance, reduction, sharing or acceptance

10

Fraud detection

According to the ACFE's Report to the nation, occupational fraud are much more likely to be detected by a tip then by audits, controls, or other means

11

Tone at the top

The entity-wide attitude of integrity and control consciousness , as exhibited by the most senior executives of an organization. See also control environment

12

Control environment

The attitude and actions of the board and management regarding the significance of control with in the organization

13

Fraud awareness

Activities that help employees understand the purpose, requirements, and responsibilities of a fraud risk management program

14

Reasonable assurance

A level of assurance that is supported by generally accepted auditing procedures and judgments

15

Regulatory and legal misconduct

Includes conflicts of interest, insider trading, theft of computer trade secrets, anti-competitive practices, environmental violations, and trade and customs regulations in areas of import/export

16

Impact

The severity of outcomes caused by risk events. Can be measured in financial, reputation, legal, or other types of outcomes

17

Likelihood

The probability that a risk event will occur

18

Risk tolerance

The acceptable level of risk size and variation relative to the achievement of objectives, which must align with the organization's risk appetite

19

Preventative control

An activity that is designed to deter unintended events from occurring

20

Collusion

Ask involving two or more persons, working together, whereby establish controls or procedures may be circumvented for the gain of those individuals

21

Detective control

An activity that is designed to discover undesirable events that have already occurred. A detective control must occur on a timely basis (before the on desirable event has a negative impact on the organization) to be considered effective

22

Legal privileges

Working with legal counsel to protect the results of investigations, supporting working papers, and communications with counsel

23

Fraud perpetrators

Generally fit one of two profiles: greater good oriented or scheming, self centered types

24

Due professional care

Applying the care and skill expected of a reasonably prudent and competent internal auditor. Does not imply instability

25

Professional skepticism

The state of mind in which internal auditors take nothing for granted; they continuously question what they hear and see and critically assess audit evidence

26

Certified Fraud Examiners

Individuals certified as specialist and conducting forensic accounting investigations and advising on fraud risk and other fraud matters

27

Corruption

Acts in which individuals 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 (for example, kickbacks, self-dealing, or conflicts of interest)