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17 Cards in this Set
- Front
- Back
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What is the difference between forensic accounting and fraud examination?
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Forensic accounting is anytime two parties are arguing over something financial & it has the potential to end up in court. Fraud Examination is a subset of Forensic Accounting.
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What is the difference between auditing & fraud examination?
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Auditing is similar to grading assignments, whereas fraud examination involves 2 papers being the same and it is obvious there is some sort of fraud.
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How would you explain the concept of “tone at the top”? What, if anything, can managers really do to ensure their employees behave ethically?
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Tone at the top means that management must reinforce to its employees through its actions that dishonest, questionable, or unethical behavior will not be tolerated. Management, the board of directors, & others at the top of an organization set a positive "tone at the top." They can provide effective fraud teaching and training throughout the organization as well as have a well defined corporate code of conduct.
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A CFE is part…list the four (4) parts.
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1. Part Accountant
2. Part Cop 3. Part Lawyer 4. Part Criminologist |
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What are the four (4) phases of fraud examination?
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- Prevention – The most important thing in fraud examination. There are typically no winners in frauds
- Detection – How did we find out about the fraud? A common way to find out about a fraud is a TIP. Initial uncovering of incident. - Investigation – who did it, how much they got away with, what they did, how well we can build a case - Resolution – Once we’ve done investigation, what are we going to do about it? |
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What are the seven (7) key elements of the legal definition of fraud?
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-A representation,
-About a material point, -Which is false, -And intentionally (or recklessly) so [scienter], -Which is believed, -And acted/relied upon by the victim, -To the victim’s damage. |
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Five (5) elements of the control environment.
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-Management’s role and example
-Management communication -Appropriate Hiring -Clear organizational Structure -An effective internal audit department |
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Five (5) control procedures.
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- Segregation of duties, or dual custody
- System of authorizations - Independent checks - Physical safeguards - Documents and records |
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Three (3) elements of the Fraud Triangle + what additional one makes the Fraud Diamond?
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1. Opportunity
2. Perceived pressure 3. Rationalization - Additional one that makes the fraud diamond : capability |
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Fraud motives = MICE
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- M = Money
- I = Ideology - C = Coercion - E = Ego |
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Five (5) elements to eliminate fraud opportunities (see Figure 4.3, page 120, right-hand side)
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- Having good internal controls
- Discouraging collusion between employees and others and informing vendors of company policies - Monitoring employees and implementing a hotline - Creating an expectation of punishment - Proactive fraud auditing |
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The Obvious Fraud the first day of class. What was the intended lesson from that case?
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Don't rush into confrontation & accusing people of serious allegations such as fraud until you have the evidence gathered to back it up.
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Steckline Communications – what are the two federal statutes commonly used in fraud prosecutions?
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Mail & wire fraud
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Kay Lemmon – how did she conceal her theft? What control that is relatively inexpensive would have detected her fraud?
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She increased inventory (money in company account -> her account). One control that would have detected her fraud would be to have someone else look at monthly bank statements. {on book scheme}
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Student Health Services – on-book or off-book? What is the difference? Calculate an estimated loss using the cash-to-checks ratio.
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Off book scheme, skimming - $ never got in account
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Grocery store cashier – there was a control for prevention and one for detection. What were they and why did they both fail?
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Prevention - Manager was supposed to authorize all voided sales {Manager trusted cashier & gave him code to void sales}
Detection - Computer system tracked voided sales by cashier {No one was printing the report} |
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Be able to match the six symptoms of fraud with examples from chapter 5.
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1. Tips/Complaints
- Armored Car (tip from competitor) 2. Internal Control Weaknesses - Lorraine, $525,000 CC, $13,000 in account 3. Accounting Anomalies - Paying personal expenses using company funds (charge a service - hard to prove whether you got it or didn't get it; ex: advertising expense) 4. Analytical Anomalies - Movie tickets - tickets weren't in numerical order after he went on break. 5. Unusual Behaviors - Johnson Marine - bullying/ management by intimidation - left town with no forwarding address 6. Extravagant Lifestyles - Lorraine; Kay & husband - no kids |
