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Today’s Topics

Today’s Topics. Why Fraud? Who commits fraud The fraud triangle Pressures Opportunity and control issues Rationalization Power and influence…collusion. Who Commits Fraud?. In essence…you and I. Why Commit Fraud?. The fraud triangle Situational pressures Available opportunities

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Today’s Topics

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  1. Today’s Topics • Why Fraud? • Who commits fraud • The fraud triangle • Pressures • Opportunity and control issues • Rationalization • Power and influence…collusion FORENSIC ACCOUNTING - BA124 – Spring 2015

  2. Who Commits Fraud? • In essence…you and I FORENSIC ACCOUNTING - BA124 – Spring 2015

  3. Why Commit Fraud? • The fraud triangle • Situational pressures • Available opportunities • Personal integrity (rationalization) FORENSIC ACCOUNTING - BA124 – Spring 2015

  4. Situational Pressures • Financial • Vice • Work related • Other pressures • The thrill or challenge • Extraordinary circumstances “Every man has his price, and he was getting close to mine.” Abraham Lincoln, on throwing a lobbyist out of his office FORENSIC ACCOUNTING - BA124 – Spring 2015

  5. Available Opportunities • COSO’s elements of control • Control environment • Appropriate systems • Procedures and activities • Note the information in Albrecht FORENSIC ACCOUNTING - BA124 – Spring 2015

  6. Control Environment • Management example • Management communication • Hiring practices • Organizational structure • Effective internal audit department or similar oversight FORENSIC ACCOUNTING - BA124 – Spring 2015

  7. Procedures & Activities • Segregation of duties • System of authorizations • Independent checks • Physical safeguards • Documents and records FORENSIC ACCOUNTING - BA124 – Spring 2015

  8. Factors That Promote Fraud • Outcomes that are difficult to evaluate • Failure to discipline • Complexity or lack of access to information • Apathy • Missing or non-existent audit trail FORENSIC ACCOUNTING - BA124 – Spring 2015

  9. Rationalization • Pathological lying • “Everyone does it.” • See the list on page 50 FORENSIC ACCOUNTING - BA124 – Spring 2015

  10. Power and Influence • Different types…see pg. 53 • Influences co-conspirator • Knowledge may protect us and assist in investigation FORENSIC ACCOUNTING - BA124 – Spring 2015

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