...------------------------------------------------- ------------------------------------------------- Module 3 - CIT Case 1. Explain the three aspects of the fraud triangle and how these factors enabled fraud to occur at CIT. The three aspects of the fraud triangle were available in the CIT case. Niakan was the Director of Assets Management. He was in charge of two departments, the Remarketing Department and the End of Lease Department. These two departments made him responsible of all returning off-lease assets at the Jacksonville branch. Niakan' s position in the company provided him the opportunity to commit the fraud because he was in charge of receiving the leased assets and resell them. Niakan and his wife went through several rounds of expensive in vitro fertilization before they had their twins. These fertilization made Niakan struggled financially. Niakan rationalized himself to sell the company's assets and received the money for himself. He did not regret it that he committed the fraud. The opportunity of being in charge of receiving and reselling the same assets and the need of the money rationalized Niakan to commit the fraud. 2. What were the red flags that signaled fraud was occurring at CIT? What should auditors, fraud examiners and colleagues pay attention to that could be indicative of fraud? There were multiple red flags that signaled to the fraud that was occurring at CIT. Werle saw nonsense actions going on in the company. Werle found that there were two suspicious companies...
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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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...Assignment # 1 Case 6.1 The Greater Providence Deposit & Trust Embezzlement Accounting Information Systems – ACC 564 Professor Jim Ridilla October 23, 2011 Discuss how Greater Providence Deposit & Trust might improve its control procedures over the disbursement of loan funds to minimize the risk of this type of fraud. Segregation of duties is a fundamental element of internal control in any company. No single employee should be given too much responsibility over certain business transactions or processes. When one person in an organization has too much control or access over these responsibilities, problems can and often do arise. In the case of The Greater Providence Deposit & Trust, James Guisti was a manager and trusted employee. Mr. Guisti’s job required him to know the details and intricacies involved in the operation of processing consumer loans. Adequate segregation of duties were not put into place at the Bank, creating a scenario that allowed Mr. Giusti to use his knowledge to embezzle close to $2 million from his employer. Mr. Giusti was authorized to make consumer loans up to a certain dollar limit without loan committee approvals. He then used his position of authority over the customer service representative, Lucy Farioli, to have her co-sign loan checks that were, unbeknownst to her, bogus. Mr. Giusti should have been required to have a member of upper management, not Ms. Fraioli, co-sign the checks. Backup documentation along...
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...Today’s Risk of Fraud: Forensic Accountants Help Protect Identity Theft Megan Laughman Financial Accounting Theory Michael Miller 4/7/15 Abstract The purpose of this study is to explore the recent cyber breaches that have occurred within companies throughout the United States and to look at the different ways these cyber breaches could have been prevented. The research also examines the need for forensic accountants within the business field, as they are able to help protect a company’s credibility and reputation. The study looks at the different internal controls a forensic accountant can incorporate into a company to help prevent cyber breaches and fraud from taking place. The results of the research provide confirmation that forensic accountants are essential in every company in order to help prevent and detour cyber breaches and fraud. Table of Contents Introduction……………………………………………………………………………………4 Literature Review………………………………………………………………………………7 Data Analysis........................................................................................................................…...14 Results and Conclusion…………………………………………………………………………17 References………………………………………………………………………………………19 Today’s Risk of Fraud: Forensic Accountants Help Protect Identity Theft Introduction Technology today is more advanced than it ever has been and almost everyone this day and age owns a computer, tablet, or smart phone. Most Americans utilize their computers, tablets...
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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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...Financial Statement Fraud ACCT 710: Assignment 6-2 Shannon Baxley David Welch September 24, 2011 Table of Contents Abstract………………………………………………………………………………………3 Introduction…………………………………………………………………………………..3 Literature Reviews……………………………………………………………………………5 Conclusion…………………………………………………………………………………..16 References…………………………………………………………………………………...18 Abstract This paper describes financial statement fraud (FSF) and how it may occur within companies. The reason of this study was to research FSF detection and prevention. Research was also done to determine any influences that SAS (Statement on Auditing Standards) No. 82 and SAS No. 99 had on audit programs and the analysis from external auditors. Thirteen scholarly journals were reviewed in order to analyze SAS No. 82 and No. 99 and to show ways to detect and prevent fraud. Results found that managers and/or auditors can create fraud intentionally and unintentionally. There are ways to prevent fraud and educating managers and/or auditors is a good way to make sure fraud does not occur. Introduction Financial statement fraud (FSF) involves the premeditated issuing of phony information on a financial statement (financial statement fraud, 2011). FSF occurs when a company exaggerates assets or revenue, or when it devalues liabilities and expenses (financial statement fraud, 2011). The American Institute of Certified Public Accountants or AICPA defines fraudulent financial reporting as “intentional misstatements or omissions...
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...criteria * Purpose: To enhance the degree of confidence of intended users in the financial statements by the expression of an opinion by the auditor Overall Objectives of the Auditor: * To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion on whether the financial statements are prepared, in all material aspects, in accordance with an applicable financial reporting framework * To report on the financial statements and communicate in accordance with the auditor’s findings Audit Process Overview: * Step 1: Client Acceptance and Retention * Step 2: Risk Assessment (Through understanding client business environment and operations Assess risks of material misstatement Assess Audit Risk) * Step 3: Audit Procedures Planning * Step 4: Test of controls (IF reliance on controls) * Step 5: Perform substantive tests * Step 6: Audit Completion and Reporting Financial Statement Assertions: * Assertions are representations made by management, explicit or otherwise, that are embodied in F/S, as used by auditor to consider the different types of potential misstatements that may occur * Focus on assertions as: * Different risks result in different risks of misstatements affect different assertions (transactions and account balances can be misstated in different ways with different assertions being affected...
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...Corporate fraud can be very difficult to prevent and to catch. Corporate fraud schemes go beyond the scope of an employee’s stated position, and are marked by their complexity and economic impact on other employees and outside parties. By creating a system of checks and balances and physical security, a company may limit the amount of fraud that may be able to take place. This type of crime is considered a white collar crime. Three new ways that I believe will get rid of corporate fraud are: a. Evaluate programs and control When the auditor identifies risks of material misstatements due to fraud, the auditor must consider management’s programs and controls to address those risks. Auditors may want to include broader programs or certain controls designed to prevent, or detect fraud. The auditor would estimate whether these programs have been designed and placed in operation. b. Auditor’s response The auditors can develop a suitable response for every fraud risk recognized and includes more extensive guidance on how to do so. The auditors responses are usually influenced by the nature of the risks recognized, may have an overall effect on how the audit is conducted or might involve changing the nature. The response will usually involve performing certain procedures to address the risk of management override of controls. c. Expanded scope for assessing fraud risks The auditors should obtain a broader range of information to act as the foundation for an assessment that...
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...Case Study: HOW A CFO PLOWED HIMSELF UNDER By Recitta Askew ACCT217 July 26, 2014 Fraud Theory and Prevention is getting a lot of attention these days, however preventing fraud and understanding fraud continues to puzzle corporations and is the focus of many studies and reasons why many internal controls are in place today. As an example Dr. Donald Cressey a fraud expert developed what is known as the Fraud Triangle Theory which essentially states that three elements must be present in order for fraud to occur and those are, Motive, Opportunity and Rationalization. This theory demonstrates how a highly regarded bank CFO committed fraud because all three critical elements were present which enabled him to embezzle $150,000. So in order to prevent fraud we must first understand how an individual such as Mr. McKinley can go from being a law abiding citizen to a white collar criminal. Therefore fraud prevention begins with understanding the Fraud Triangle, the importance of good internal controls and the role of external auditors and how they are all connected. First according to the Fraud Triangle “Motive is the reason people commit fraud…It is the driving force”. (Biegelman & Bartow, 2006, p. 32). In McKinley’s case the motive and driving force appears to have been the emotion of humiliation, after all he was a respectable church going family man, CPA and highly respected bank CFO. Therefore the driving force of protecting his image coupled with the...
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...Auditors’ Ability to Assess Fraud Risk on Their Ability to Detect the Likelihood of Fraud Nahariah Jaffar* Faculty of Management, Multimedia University Arfah Salleh Graduate School of Management, Universiti Putra Malaysia Takiah Mohd Iskandar Faculty of Economics and Business Management, Universiti Kebangsaan Malaysia Hasnah Haron School of Management, Universiti Sains Malaysia ABSTRACT The Malaysian Approved Standards on Auditing, AI 240 on “Fraud and Error” (MIA, 1997) requires the auditor to assess the risk of fraud and error during the audit of financial statements. Based on the risk assessment, the auditor should design audit procedures to obtain reasonable assurance that misstatements arising from fraud and error that are material to the financial statements taken as a whole are detected. Inability of the external auditor to detect material misstatements, particularly intentional misstatements, may expose the external auditor to litigation. The present study aims to examine the effect of the external auditor’s ability to assess fraud risk on his/her ability to detect the likelihood of fraud. An experimental approach is adopted by sending case materials to audit partners and audit managers attached to auditing firms operating in Malaysia. The result shows that in a high fraud risk scenario, the external auditor’s ability to assess fraud risk has a positive effect on his/her ability to detect the likelihood of fraud, whereas in a low fraud risk scenario not. The...
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...having some material information linking the flowchart of the investigation to the actual fraudster. Step five: finally David narrowed down to James Flemming as the sophisticated target because he had gathered enough evidence to support his allegation towards him. b) * To gather adequate incriminating evidences that will glue down the fraudster at the end of the investigation procedures. * To obtain a clear flow of events that could possibly lead to the occurrence of fraud in the organization. * To ensure no any facts is hidden that could be deemed relevant and material in the investigation process since if it could be worked outwards the actual fraudster could easily camouflage some evidences. * To establish the root cause of the fraud, its base and the loopholes that might have favored the incidence. * To come up with robust defenses that might be used to counter against the fraudster’s evasion tactics. c) * The strength of the predication If the fraud predication draws a strong ground to build a resilient case from it, then its worth for an organization to carry out the investigation but if...
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...Program Expectations and Timeline ..............................................................................6 1.4 Guidance Manual and Training Program.......................................................................7 2. OVERVIEW OF INTERNAL CONTROLS OVER FINANCIAL REPORTING 2.1 2.2 2.3 2.4 2.5 Introduction ....................................................................................................................8 Definition of Internal Control ........................................................................................8 COBIT..........................................................................................................................11 Responsibility for Internal Control System .................................................................13 Conclusion ...................................................................................................................14 3. TOP-DOWN, RISK-BASED APPROACH 3.1 3.2 3.3 3.4 3.5 Introduction ..................................................................................................................15 Risk Identification........................................................................................................17 Controls Identification .................................................................................................18 Execution and Evaluation ............................................................................................21 Roadmap for...
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...percent of revenues to internal fraud. This may seem like a small percentage but it adds up. That five percent can be the difference between staying afloat or filing bankruptcy. When a company spends time and money to prevent fraud it is far less than running the risk of internal fraud. The most effective way to prevent fraud is to establish a proactive fraud prevention program. It is best if a company seeks the advice from a qualified fraud expert. A successful fraud prevention program requires three elements: education, investigation, and proactive preventative techniques. Most internal frauds are brought to attention from employees, customers, or vendor tips. Employees are the most likely source to provide tips of misconducts. So implementing a company-wide education program is a crucial part of a fraud prevention program (Coenen, 2011). Fraud education should focus on fraud awareness and should be presented to all employees. Investigating fraud is important to a comprehensive fraud prevention program. Although investigations are time consuming and costly the benefits are worth it. Investigations can have deterrent effects on potential thieves. Investigations send a company-wide message that management is aware and looking for fraud. Proactive fraud prevention techniques are the biggest asset in the company’s fraud prevention plan. Proactive fraud prevention techniques should include policies and procedures that aim to detect and prevent fraud. One example is establishing...
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...SEPTEMBER 30, 2014 ACC504 INTERNAL CONTROL DR. MICHAEL ABNER PREPARED BY NELLY OYANE Table of Contents Introduction I. Internal Control Requirements II. What the Company is Doing Correct III. What the Company is Doing Incorrect Conclusion References Introduction LBJ Company is presently conducting a decision to go public or not and with that they will also be familiar with their internal controls inside their systems, particularly with regard to Accounting and Human Resources and the way it will affect them and their workers and of course the way they operate. There have been some encouraging and bad issues arise regarding their internal controls. Nevertheless, LBJ Company needs to be recognized for what they are doing right, but must also need to address matters that are harmfully affecting them and their business and will remain to damagingly impact them if they choose to go public, which will negatively drive down the cost of their shares etc. This case study will examine these matters and make recommendations for what LBJ Company can do to strengthen their internal controls. I. Internal Controls Requirements Inform the President of any new internal control requirements if the company decides to go public. Internal controls are mechanisms, policies and procedures used to decrease and control operational risk. In order to prevent employees from committing...
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...Tony Moss, president of Greater Queensland Bank, received an anonymous note in his mail stating that a bank employee was making bogus loans. Moss asked the bank’s internal auditors to investigate the transactions detailed in the note. The investigation led to James Guy, manager of a North Queensland branch office and a trusted 14-year employee who had once worked as one of the bank’s internal auditors. Guy was charged with embezzling $1.83 million from the bank using 67 phony loans taken out over a three-year period. Court documents revealed that the bogus loans were 90-day notes requiring no collateral and ranging in amount from $10,000 to $63,500. Guy originated the loans; when each one matured, he would take out a new loan, or rewrite the old one, to pay the principal and interest due. Some loans had been rewritten five or six times. The 67 loans were taken out by Guy in five names, including his wife’s maiden name, his father’s name, and the names of two friends. These people denied receiving stolen funds or knowing anything about the embezzlement. The fifth name was James Vane, who police said did not exist. The Social Security number on Vane’s loan application was issued to a female, and the phone number belonged to a North Queensland auto dealer. Lucy Fraser, a customer service representative who consigned the cheques, said Guy was her supervisor and she thought nothing was wrong with the cheques, though she did not know any of the people. Marcia Price,...
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