Financial Fraud, And Identification Of The Different Fraud Types

Fraud: Dishonest, confidentiality-breaking, financially sneaky employees, customers, and business partners exist. One wrong move and the fraudulent person can damage the company's reputation and image to the point of closure.

Professional auditing standards discuss the three key “conditions” that are typically present when a financial fraud occurs and identify a lengthy list of “fraud risk factors.”

(TCO 5) Fraud is an intentional misrepresentation of facts, made for the purpose of persuading another party to act in a way that causes injury or damage to that party. In our readings and discussions we have seen several examples of fraud in business. Using that experience (1) provide an example of a common fraudulent practice in business with an explanation of how the practice works and (2) name and describe each of the elements of the Fraud Triangle.

Internal fraud consists in “a type of fraud that is committed by an individual against an organization. [Furthermore], a perpetrator of fraud engages in activities that are designed to defraud, misappropriate property, or circumvent the regulations, law, or policies of a company”[8]. Not only has the incidence of internal fraud increased in frequency because of the availability of sensitive information such as client details or confidential business documents; moreover, this type of fraud is found in various types of organizations, ranging from corporations, public service institutions and financial institutions. Our analysis will concentrate on the most common and prolific types of internal fraud, namely identity theft, insider trading, loan fraud and wire fraud. Interestingly, PriceWaterhouseCooper conducted a survey that revealed that the “demographics of a typical fraudster are as follows: males (85% of cases), 31-50 years (72% of cases), reached high-school level (50%), Bachelor’s or post graduate degree (50%) and middle or senior management (52%)”[9].

Fraud and corruption is one of the biggest issues that the society is facing and is also one of the most challenging issues that have yet to be tackled worldwide. Organizations end up losing a lot of profits due to the scrupulous nature of its employee’s fraudulous

11-2: The three main groups of people who commit financial statement fraud are organized criminals, mid- and lower-level employees, and senior management (Wells, 2013, p. 274). Senior management such as the CEO and CFO typically commit fraud to meet the expectations of Wall Street, preserve status, and/or receive performance bonuses (Wells, 2013, p. 274). Middle management will falsify financial statements in order to receive performance bonuses (Wells, 2013, p. 274). While organized criminals will try to obtain loans or engage in a pump-and-dump scheme (Wells, 2013, p. 274).

According to the 2014 Report to the Nation on Occupational Fraud and Abuse, the average organization lost about 5% of revenues each year to occupational fraud with a median loss estimated at $145,000 based on the results of a study involving survey participants. Additionally, the median duration of a fraud scheme was 18 months from the beginning until the discovery. Furthermore, 49% of the tips which permitted the detection of fraud involved employees who stood as whistleblowers against their organizations. Indeed, the banking and financial services held the first place with 17.8%, followed by the government and the public administration sector which ranked second and also counted for 10.3% of fraud cases. Finally, the lack of internal controls

Have you ever received an e-mail seeking money or personal information? How about a phone call saying you’ve won a trip to the Bahamas and all you need to do is answer a few questions? Chances are you have but you’re not the only one. These are all attempts of fraud. Fraud is a very frequently committed crime in America, yet many are unaware when it is being committed. Fraud is a type of criminal activity, defined as an act of deception intended for personal gain and the loss of another party. There are numerous types of fraud but one commonly committed form is identity theft. As the name suggest this is when a thief steals your identity. These larcenist use a persons confidential information to impersonate and commit financial frauds. This

Asset misappropriation in corporate America is so normal, however this fraud plot isn't new the spate of its event in the most recent decade involves grave worry to administration, speculators and workers. Resource misappropriation plans include workers, ordinarily in conspiracy with a few individuals from administration who contribute in abrogating and covering the plan. Therefore, it goes on for just about 10 years before a watchful individual from administration identifies it. This report surveys a benefit misappropriation fraud executed by Miss Sujata "Sue" Sachdeva, its Chief Financial Officer in the vicinity of 1997 and 2009, assess the elements that added to the misappropriation and decide if any administration omissions or insufficiencies

Some industry-specific factors, such as having valuable near-cash assets, can increase the organization's vulnerability. Also they will need to rationalize the actions as justifiable. The individuals committing the fraud must first convince themselves that their behavior is acceptable or will be temporary. For example, Barry Minkow’s believed that the lies and deceit are for the betterment of his company and that with time everything will eventually return to normal.

Fraud is defined as a deliberate misrepresentation that causes a person or business to suffer damages, often in the form of monetary losses through deception or concealment. And Occupational Fraud as defined by the ACFE is the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets. Traditional fraud triangle theory by Donald Cressey explains that propensity of fraud occurring in an organization lies on three critical elements which are Pressure, Opportunity, and Rationalization.

Financial statement fraud is usually a means to an end rather than an end in itself. When people "cook the books" they may doing it to "buy more time" to quietly fix business problems that prevent their entities from achieving its expected earnings or complying with loan covenants (Fraud Magazine, 2014. It may also be done to obtain or renew financing that would not be granted or would be smaller if honest financial statements were provided. People intent on profiting from crime may commit financial statement fraud to obtain loans they can then siphon off for personal gain or to inflate the price of the company 's shares, allowing them to sell their holdings or exercise stock options at a profit (Fraud Magazine, 2014). However, in many past cases of financial statement fraud, the perpetrators have gained little or nothing personally in financial terms. Instead the focus appears to have been preserving their status as leaders of the entity - a status that might have been lost

Fraud is present in all aspect of life. It is very common in business environment. Business organizations try to do their best to ensure that fraudulent practices do not put them out of business. Case study is used to establish the value of internal anti-fraud control and to point out that a small business can implement it with common sense and solid auditor’s advice.

Fraud is not prejudice; culture, ethnicity, and religion, are not factors in determining who will commit fraud. Finding fraud can be difficult. We 're constantly reminded at every client consultation, audit, fraud and accounting conference we attend that fraud is inherently hidden. Deception, alteration, fabrication and the destruction of documents seems to be the norm for all fraudsters, yet qualified anti-fraud professionals can

Over the past two years, corporate America has endured a plethora of fraudulent acts committed by those of high status within their respective corporations, most of which involve internal fraud. Internal fraud has two main aspects, misappropriation of assets and fraudulent financial reporting, with the focus of this discussion lying within the former. Misappropriation of assets is defined as fraud for personal gain. It is the most common type of fraud found among employees and frequently includes theft of cash and inventory.