Fraud Flashcards
(44 cards)
What percentage of fraud cases resulted in some sort of internal punishment and what percentage were fired?
80% received punishment
66% were fired.
59% referred to LE
10% allowed or required to resign
9% were placed on suspension or probation.
Organizational crime vs occupational crime.
Origniazational crime the benefits go to the organization. Example: Price fixing
Occupational. The benefits go to the individual. Example: Accepting kickbacks
Rational choice theory
Suspect performs cost benefit analysis that evaluates possibility of getting caught.
Best way to reduce crime is reduce opportunities.
What are the three elements that influence crime in the routine activity theory.
The availability of suitable targets
The absence of capable guardians
The presence of motivated offenders
Theory of differential association.
Criminal behavior is learned
Learned from people you hang out with. IE GANGS
What is social control theory
Society keeps them in line. What would my mom think of me? Dad? If they found out.
Effects of white collar crime.
On going damages
Loss of competitive advantage
Loss of employee confidence in job security
Loss of employee productivity
What is the OECD definition? Corporate governance
Procedures and processes according to which an organization is directed and controlled
Distribution of rights and responsibilities
Lays down rules for decision making.
What is the Cadbury Report.
to encourage the efficient use of resources and require responsibility.
Solid Corporate governance practices are necessary when owners are not responsible for setting strategy or exciting business activities. IE. publicly
The treadway commission. What is the auditor’s responsibility in preventing fraud?
MandatoryINDEPENDANT audit committee
Written charter
Adequate resources and authority
Audit committee members should be informed, vigilant, and effective.
What are the four principles of corporate governance. RAFT
Accountability: hold management accountable.
Transparency: accurate, complete, timely financial statements and disclosure of all material matters
Fairness: all stakeholders treated equitably
Responsibility: act in the organization and society’s best interest.
What it is internal control? ROC
Designed to provide assurance regarding the achievement of objective.
Efficiency of OPERATIONS
Reliability of financial and non financial REPORTING
COMPLIANCE with applicable laws and regulations.
Identify the five interrelated components of internal control? CRIME
Control environment Risk assessment Control activities Information and communication Monitoring
What does the controlled environment provide?
Makes up the ethical and moral culture of the organization.
What does risk assessment do? OICA
Identify and assessment of risks relevant to achieving control goals. Set clear objectives ID risks Consider potential for fraud Assesses changes.
What does control activities mean?
Controls policies
INFO AND COMMUNICATION Exchanges information in a way that allows employees to carry out responsibilities.
MONITORING the effectiveness of the control system over time
What is a material misstatement. And materiality.
If omitting, misstating, or obscuring it could reasonably be expected to influence the decision of the primary financial statement users.
Materiality is often considered in quantified terms within the audit. Like a large amount for that company. Ie don’t review anything under $10k. (Quantitative)
But you find 30 transactions of $9,999. (Qualitative)
What is ISA 240
ISA 265
240: establish standards and provide guidance on the auditors responsibility to consider fraud in an audit of financial statements.
265: provide guidance regarding the auditors responsibility to communicate an organizations internal control deficiencies with management and those charges with governance.
What is the auditors requirements if they find a deficiency in the internal controls?
Communicate significant deficiencies in writing to those charged with governance in a timely manner. Unless it would be inappropriate
What is the international organization of supreme audit institution? And why are they different
Umbrella for external GOVERNMENT audit community.
They are broader
Consideration of the concept of abuse
Inability to withdrawal from the engagement
Additional communications about fraud related matters.
What are inherent risks
What are residual risks
INHERENT: Risks that are present before the effect of internal controls. Including anti fraud controls
RESIDUAL: risks that remain after the effect of these controls.
What is a fraud risk assessment.
An ongoing, continuous process aimed at proactively, identifying and addressing an organizations vulnerabilities to both internal and external fraud.
What are elements of a good fraud risk assessment.
Collaborative effort.
Independence and objectivity
Functional knowledge of the business
Thinking like a fraudster
Most effective techniques used to conduct fraud risk assessment
Interviews
Focus groups
Surveys
Anonymous feedback mechanisms
