...Fraud is a serious problem for most businesses today and often technology compounds the problem. In addition, the role of the independent auditor in the detection of fraud is often questioned. (http://www.swlearning.com/accounting/hall/ais_4e/study_notes/ch03.pdf) Fraud is dishonest activity causing actual or potential financial loss to any person or entity including theft of money or other property by employees or persons and where deception is used at the time, immediately before or immediately following the activity. (http://about.curtin.edu.au/definitions-impact.cfm) * Types of Fraud (http://www.auditsol.com.au/media/Fraudw.pdf) 1. Employee fraud Is internal or employee frauds are when fraud is committed against the company or organization a person is working for. Internal frauds can include: * payment fraud Payment fraud is any fraud that involves falsely creating or diverting payments. Payment fraud can include: * creating bogus customer records and bank accounts so that false payments can be generated * intercepting and altering payee details and amounts on cheques and Payable Orders, then attempting to cash them * creating false payment and financial information to support fraudulent claims for benefits * processing false claims by accomplices for benefits, grants or repayments self authorizing payments to oneself. * procurement fraud Procurement fraud is any fraud relating to a company purchasing goods,...
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...Fraud Schemes and Fraud Investigation Acc 571 Instructor: Dr. Ole Ruankaew Diane Phillips November 22, 2015 Fraud Schemes and Fraud Investigations The problem that organization faces today, are employee fraud. Many organizations feel that long term success of any company comes from the quality of their employees and workers loyalty. While during my research, I discovery that Association of Certified Fraud Examiners, Inc. has shown that organization have lost five percent of their annual revenue each year because of employee fraud. Every organization needs to have a plan in places for fraud detention. In preventing fraud in the work place, a good strategy for any organization is to implement internal control. These are plans; programs and procedures put in place to safe guard the company assets, and ensure the integrity of its accounting records. As prevention fraud is much easier than recovering losses after a fraud has been committed. This study will focus on the case of Stanford Financial Group Company fraud in which Robert Allen Stanford, chairman of Stanford International Bank (SIB), was involved in a Ponzi scheme. Stanford was convicted of orchestrating a 20-year investment fraud scheme in which he misappropriated $7 billion form SIB to finance his personal businesses. The Stanford Financial Group claimed to have pulled in retail, wealthy and commercial investors from 136 countries on six continents. Lopez and Kuhrt was aware of what Stanford ...
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...FRAUD: FRAUDULENT ACTIVITIES A REVIEW OF THE CRIMES Introduction Investigations into fraudulent activities have brought much attention to Federal Government spending. The impact of fraud and the corruption caused by internal parties or external entities targeting government funds can be substantiated. For example, the Association of Certified Fraud Examiners (ACFE) in a 2012 Report to the Nations on Occupational Fraud and Abuse projected a global fraud loss of more than $3.5 trillion per year. Fraud and corruption is a common problem that is all over the world. The U.S. Nuclear Regulatory Commission (NRC, 2006) wrote in its “Fraud Awareness” handbook that fraud is an enormous problem that can waste valuable funding and other resources. Fraud is a potential problem that threatens the Federal Government mission of protecting the health and welfare of the American peoples. According to the Legal Information Institute (LII) at Cornell University Law School fraud precise legal definition varies in the area over which legal authority extends or the given power or authority that has exclusive jurisdiction to decide legal matters. LII defines fraud as “deliberately deceiving someone else with the intent of causing damage.” On December 2nd 2012 Special Agent Jason Muldrew of the Air Force Office of Special Investigations at Kunsan Air Base, Republic of Korea printed news story said, “Fraud is defined as the crime of obtaining money or other benefits by deliberate deception...
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...subterfuge or illegal circumvention. Furthermore white collar crimes concentrated much more consideration in organization and businessmen. The terms "white-collar crime" and its offshoot, are "organized crime”. Most of the criminals are occurring in companies and the causes are the way money handling (Murray.K, 2010). Forensic accountant will investigating financial crimes and insurance fraud of white collar crook on behalf of companies and public law enforcement agencies. In addition, most of the high profile corporation, will misconduct in money laundering. The fraud will identify by forensic accountants and wherever they go money will takes them. Less attention is focused towards perpetrators compare to actual crime committed by the white collar crook. Antitrust violation, bank fraud, bribery/kickbacks, computer/internet fraud, consumer fraud, counterfeiting, credit card fraud, economics espionage and trade secret theft, embezzlement /larceny, extortion/blackmail, financial fraud, forgery, healthcare fraud, identify theft, public corruption, racketeering, and telemarketing fraud are the white collar crook violations (Brody.G, Kiehl.A, 2010). The characteristic white collar crook criminal does not pledge many of the economics fraud as we listed earlier. It is this phenomenon that criminologists, sociologists, law enforcement, fraud examiners and forensic accountants must take into consideration as they investigate white collar crimes (Brody.G, Kiehl.A, 2010). With the current...
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...Anatomy of computer accounting frauds A. Seetharaman, M. Senthilvelmurugan and Rajan Periyanayagam Faculty of Management, Multimedia University, Malaysia Keywords Fraud, Corruption, Financial reporting, Whistleblowing, Internal control, Corporate governance Abstract This paper introduces fraud as asset misappropriations (85 per cent of cases), corruption and fraudulent statements. Symptoms include accounting anomalies, lack of internal control environment, lifestyle and behaviour. The most effective tools for fraud detection are internal audit review, specific investigation by management, and whistle-blowing. The paper details the fraud investigation process and the role of auditors as fraud examiners. The correlation of fraud perpetrators’ personality with the size of losses is examined. Personality is analysed into age, gender, position, educational background and collusion. A strong system of internal control is most effective in fraud prevention. Fraud prevention procedures, targeted goals and improvements to system weaknesses feature in the paper. Fraud impacts on accounting transactions in accounts receivable, receipts and disbursements, accounts payable, inventories and fixed assets, and financial reporting. The monetary impact resulting from fraud is analysed by the type of victim and the amount of loss. Internal control and good employment practices prevent fraud and mitigate loss. Computer accounting frauds 1055 Introduction Accounting fraud involves an intentional action...
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...In addition to the benefits associated with monetary or financial rewards with by faking an illness online, the prospect of insurance or disability fraud could also explain why some individuals are more likely to exaggerate or fake symptoms of chronic illness and permanent disability than others. For instance, some of the more conservative estimates regarding disability benefit fraud suggest that “approximately $60 billion in annual Medicare payments are fraudulent. In short contrast, current efforts to prevent, detect, and prosecute healthcare fraud have produced only modest returns, recovering only $4.1 billion in 2011” (Gray et al., 2013, p. 749). Offenders looking to commit medical fraud, for example, might decide to feign symptoms of illness...
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...The owner should provide effective firewalls and other safeguards to their computer. 3. Do software developers shoulder some of the blame when they distribute operating systems and applications that include security flaws that make computers vulnerable? I don’t think so. Becacuse for me, nobody is perfect. Anyone is entitled for any lapses he or she may execute but that does not mean there will be no room for correction. If further development is needed, then it should be done in order to eliminate these bot herders who kept on seeking cybercrimes. 5.16 What are two tactics criminals use to commit credit fraud? What are two countermeasures financial institutions and retailers use to prevent credit fraud? 5.19 The meaning of the term hacker has changed overtime. Describe three phases it has gone through and what it meant it each phase. Explain the terms white-hat-hackers, black-hat-hacker and cracker. 5.21 Describe the purpose of Cybercrime Treaty (5.5.3). What is the dual criminality provision? Do you consider this provision to be...
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...damage that may possibly decrease the utmost amount in which an auditor’s liability could be. (2) It will require a plaintiff to pay reasonable defendant attorney fees and expenditures in relation to litigations founded by the court-system that are irresponsible and unnecessary. Due to this it might cause it to be doubtful that an auditor would get sued for his or her deep pocket if this is found to be an irresponsible and unnecessary suit. (3) It presents a stay of discovery throughout the phase that there is a pending motion to dismiss, in so doing a cost reduction typically coerces parties of innocence to resolve irresponsible suits of class action. (4) It puts a limitation on damages that are punitive through the elimination of fraud securities basically for creating actions with racketeer influences and the Act of Corrupt Organization that provide for treble damage. Limitations on a punitive damage will absolutely cause a reduction in an auditors cost of damages. (5) It puts a suing limitation on 3rd party rights through the limitation of the amount of instances that plaintiffs have the ability of being a lead plaintiff to less than five class actions within each period of three years and through the imposes of firmer standards of pleading met by the plaintiff. This, in turn, places limitations on the amount of people which can sue the auditor and places a reduction on the probability of professional plaintiff suits. (4-17) a.) Explain how the Sarbanes-Oxley Act...
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...crime related legislation: 1. Unauthorised use 2. Computer related fraud 3. Computer forgery 4. Damage to computers 5. Unauthorised interception 6. Unauthorised reproduction of a protected computer program 7. Data misappropriation 8. Unauthorised access devices 9. Impersonation 10. Objectionable material and child pornography Compare the legislation available in your jurisdiction to each of the above items. The legislation can be shown in table form if convenient. Discuss the strengths and weaknesses of the legislation in your jurisdiction against the ACPR ‘ Minimum Provision.’ The Queensland Police Service has a dedicated computer investigation Section that investigates all computer related offences. To facilitate this, the following State legislation are used: Criminal Code Act 1899 Classification of Computer Games and Images Act 1995 Evidence Act 1977 Criminal Proceeds Confiscations Act 2002 Table demonstrating Queensland Law and relevant Act and Section |Incident description |Covered by State Legislation |Relevant Act and Section | |Unauthorised Use |Yes |Criminal Code Act 1899 (Qld) – Section | | | |408D – ‘Computer hacking and misuse | |Computer related fraud |Yes |Criminal...
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...D61/63378/2010 DAC: 606 ADVANCED ACCOUNTING SEMINAR A TERM PAPER PRESENTED FOR THE PARTIAL FULFILMENT OF THE MASTER OF BUSINESS ADMINISTRATION UNIVERSITY OF NAIROBI JANUARY – APRIL 2012 Contents SUMMARY OF TERMS 3 ABSTRACT 4 STATEMENT OF THE PROBLEM 5 LITERATURE REVIEW 6 a. Introduction 6 b. The Need for an Audit 7 c. Risk of fraud 8 d. The Auditor-Investor ''Expectation Gap'' 9 e. Auditing Profession and Challenges 9 f. Public opinion 10 g. Family or Personal Relationship 10 h. Integrity 11 i. Inherent limitations of an audit. 11 j. Responsibility of Auditors to Third Parties – Case Law 12 k. International, Assurance Auditing, Standards Board (IAASB) 14 CORPORATE FRAUD CASES 16 CASE STUDY: 21 CONCLUSIONS………………………………………………………………………………24 REFERENCES……………………………………………………………………………..….25 SUMMARY OF TERMS ISA: International standards of Audit KPC: Kenya Pipeline Company IAASB: International Assurance Audit Board IFAC: International Federation of Accounting USD: United States Dollar KCB: Kenya Commercial Bank BCCI: Bank of Credit International SEC: Securities and Exchange Commission ABSTRACT The way in which auditors perform their duties and the auditing profession in general raises questions and puts the auditors on the spotlight from clients who rely on their reports. Questions on whether the public trust the way auditors perform their secondary duty of detecting errors and frauds, the reliability, completeness and accuracy of their auditing...
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...Reference 16 a) As the auditor, describe the concerns you have that may suggest fraud is occurring in the company. The Fraud Triangle ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley The fraud triangle originated from Donald Cressey's hypothesis (Donald R. Cressey, 1973). The fraud triangle is a model for explaining the factors that cause someone to commit occupational fraud (acfe, n.d.). Type of fraud: Management fraud Fraudulent financial reporting Misappropriation of assets. (Arens/Elder/Beasley, 2012) ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley At the types of fraud, usually the Management fraud are including fraudulent financial reporting and the misappropriation of assets. Why the company will occurs the fraud, because the employees and managers have incentive, opportunities and attitude. The fraud specific fraud risk area are including revenue and accounts receivable fraud risk, inventory, purchases and other area Management fraud Management fraud, as the name suggests, is perpetrated by the top management of a company who has the intention of misleading investors (Dutta, 2013). Usually management fraud by accounting manipulation and misstates the...
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...Rite- Aid Accounting Fraud: How It Could Have Been Detected Abstract Martin Grass assumed leadership of Rite-Aid from his father in the mid-1990s. In the next 5 years Rite-Aid experienced rapid growth. The company was reporting higher earnings per share each year and a rise in stock prices only to discover it was all because of accounting fraud perpetrated by its senior executives. The SEC filed multiple charges listing the fraud perpetrated by senior management. There were warning signs to investors and creditors that things may not be as good as they seem. Accounting process and techniques could have detected the fraud and prevented Rite-Aid from having the largest financial restatement in history. In 1995 Martin Grass took over as chief executive officer (“CEO”) and chairman of the board of Rite-Aid Pharmacy, which is the third largest pharmacy in the nation. Under Grass, Rite-Aid started to acquire other pharmacy companies such as Perry Drug Stores, Harco Pharmacy and Thrifty Payless. Rite-Aid also purchased PCS Health Systems Inc., which was a pharmaceutical benefits management company. Rite-Aid had a generous compensation program for senior executives that included an annual bonus plan, stock option plan and long term incentive plan (“LTIP”). These programs were based on the company’s earnings per share (“EPS”) and stock price. If the EPS or stock price wasn’t met, then the executives didn’t receive the compensation. It was the company’s compensation program and...
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...FRAUD BASICS WHAT IS FRAUD? Fraud, sometimes referred to as the fraudulent act, is an intentional deception, whether by omission or commission, that causes its victim to suffer an economic loss and/or the perpetrator to realize a gain. A simple working definition of fraud is theft by deception. Legal Elements of Fraud Under common law, fraud includes four essential elements: 1. A material false statement 2. Knowledge that the statement was false when it was spoken 3. Reliance on the false statement by the victim 4. Damages resulting from the victim’s reliance on the false statement In the broadest sense, fraud can encompass any crime for gain that uses deception as its principal technique. This deception is implemented through fraud schemes: specific methodologies used to commit and conceal the fraudulent act. There are three ways to relieve a victim of money illegally: force, trickery, or larceny. Those offenses that employ trickery are frauds. The legal definition of fraud is the same whether the offense is criminal or civil; the difference is that criminal cases must meet a higher burden of proof. For example, let’s assume an employee who worked in the warehouse of a computer manufacturer stole valuable computer chips when no one was looking and resold them to a competitor. This conduct is certainly illegal, but what law has the employee broken? Has he committed fraud? The answer, of course, is that it depends. Let us briefly review the legal ramifications...
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...Data Mining for Fraud Detection: Toward an Improvement on Internal Control Systems? Mieke Jans, Nadine Lybaert, Koen Vanhoof Abstract Fraud is a million dollar business and it’s increasing every year. The numbers are shocking, all the more because over one third of all frauds are detected by ’chance’ means. The second best detection method is internal control. As a result, it would be advisable to search for improvement of internal control systems. Taking into consideration the promising success stories of companies selling data mining software, along with the positive results of research in this area, we evaluate the use of data mining techniques for the purpose of fraud detection. Are we talking about real success stories, or salesmanship? For answering this, first a theoretical background is given about fraud, internal control, data mining and supervised versus unsupervised learning. Starting from this background, it is interesting to investigate the use of data mining techniques for detection of asset misappropriation, starting from unsupervised data. In this study, procurement fraud stands as an example of asset misappropriation. Data are provided by an international service-sector company. After mapping out the purchasing process, ’hot spots’ are identified, resulting in a series of known frauds and unknown frauds as object of the study. 1 Introduction Fraud is a million dollar business and it is increasing every year. ”45% of companies worldwide have fallen victim...
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...Consideration of Fraud within Small Business Organizations Introduction In recent studies made by Klynveld, Peat, Marwick and Goerdeler, LLC (KPMG), Fraud and Misconduct survey 2010 shows “The value of frauds committed by employees has double during the past two years with the average case now costing victims $3 million. The survey found that 61% of cases, there was no recovery of cash stolen, and that the average time to detect major fraud has increased from 342 days to 399 days. It also confirms the traditional profile of the average fraudster: a 38-year old male, who has been with a business for several years and holds a management position”. This paper analyzes and examines the three elements of the fraud triangle, including it’s characteristics, symptoms, and fraud prevention programs according to the case scenario. The fraud triangle theory was first accredited to Donald R. Cressey, integrating the three elements that must be present for occupational fraud. *Perceived Pressure *Perceived Opportunity *Rationalization According to the Association of Certified Fraud Examiners (ACFE), “Fraud encompasses a range of irregularities and illegal acts characterized by intentional deception or misrepresentation, which an individual knows to be false or does nor believe to be true. Further, fraud is perpetrated by a person knowing that it could result in some unauthorized benefit to him or her, to the organization, or to another person, and can be...
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