Lecture 1 Flashcards
(6 cards)
1
Q
What is fraud?
A
- the wrongful or criminal deception intended to result in financial or personal gain
2
Q
Fraud triangle and the breakdown
A
- developed by Cressey and designed to explain the reasoning behind a worker’s decision to commit fraud
- Pressure is the motivation behind the crime and can be either personal financial pressures such as debt or workplace debt
- Opportunity is how the individual will defraud the organisation - abuse of their position
- Rationalisation is the cognitive stage that requires the fraudster to justify their crime in a way that is justifiable by their internal moral s
3
Q
Red Flags and examples
A
- they are not proof of fraud but are often a useful indicator
- lack of holidays
- lifestyle changes
- behavioural changes
- complaints about management
4
Q
Financial Statement Fraud (Management Fraud)
A
- almost always involves the company management and are a result of pressure to meet internal or external pressures
- pursued by manipulating, falsifying, or altering financial records
- causes serious problems in the market and economy as the financial data that is publically available is not correct
- often leads to large losses for investors and a lack of trust in the market
5
Q
Symptoms of Fraud
A
- Analytical symptoms - unusual events or transaction such as sales being too high
- Accounting or documentary - discrpenancies in the accounting systems, or missing documents
- Lifestyle symptoms - perpatrators rarely save what they steal so their lifestyle improves
- Control - breakdowns in accounting symptoms, lack of segregation of duties
- Behavioural symptoms - often offenders are first time so they will feel guilty and distressed
- Tips and complaints - from employees, customers, and others (whistleblowers)
6
Q
Red Flags and examples
A
- they are not proof of fraud but are often a useful indicator
- lack of holidays
- lifestyle changes
- behavioural changes
- complaints about management
