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    Fraud Short Notes

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    haptartech

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    Fraud Short Notes

    Uploaded by

    haptartech
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    3 views2 pages

    Fraud Short Notes

    Uploaded by

    haptartech

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Fraud; Uncommon, well- considered, imperceptibly concealed, time

    evolving and often carefully organized crime which appears in many


    forms
    Fraud is deception that includes the following elements:
    1. A representation
    2. About a material point,
    3. Which is false,
    4. And intentionally or recklessly so,
    5. Which is believed
    6. And acted upon by the victim
    7. To the victim’s damage
    Types of Frauds:
    -Those that are committed against organizations
    -Those that are committed on behalf of organizations.
    -Investment scams and other consumer frauds
    -Miscellaneous frauds
    -Occupational Fraud
    1.is clandestine
    2.violates the employee’s fiduciary duties to the organization
    3.is committed for the purpose of direct or indirect financial benefit
    to the employee
    4.costs the employing organization assets, revenues, or reserves
    Direct fraud occurs when an employee steals company cash, inventory,
    tools, supplies, or other assets. Indirect employee fraud occurs when
    employees take bribes or kickbacks from vendors or others outside the
    company to allow for lower sales prices, higher purchase prices, non-
    delivery of goods, or the delivery of inferior goods.
    Some of the most common consumer fraud schemes:
    1.Ponzi scheme
    2.Telemarketing fraud
    3.Nigerian letter or money scams
    4.Identity theft
    5.Advance fee scams
    6.Redemption/strawman/bond fraud
    7.Letter of credit fraud
    Vendor fraud comes in two common forms:
    1) Fraud perpetrated by vendors acting alone
    2) Fraud perpetrated through collusion between buyers and vendors.
    When customer fraud takes place, either customers do not pay for
    goods purchased or they get something for nothing.
    Majjor categories of occupational fraud
    (1) asset misappropriations
    (2) corruption, in which fraudsters wrongfully use their influence in a
    business transaction in order to procure some benefit for themselves
    (3) Fraudulent statements
    Why people commit fraud
    The Fraud Triangle:
    -the pressure of the individual
    -the opportunity to commit fraud
    -the ability rationalize the crime
    -the ability rationalize the crime
    The element of Pressure
    -Financial Pressure
    -Vice Pressure
    -Work related pressure
    Factors that increase opportunities for people to commit
    fraud(element of opportunity)
    -Lack of controls that prevent fraud
    -Inability to judge quality of performance
    -Failure to discipline fraud perpetrators
    -Lack of access to info
    -Ignorance
    -Lack of audit trail
    Controls that prevent fraud
    -The control environment: honest and ethical conduct etc.
    -Management communication: training
    -Appropriate hiring
    -Clear Organizational Structure
    -Effective Internal Audit Department
    Elements of fraud:
    -The theft act
    -Concealment
    -Conversion
    A good accounting system should ensure that recorded transactions
    are:
    -Valid
    -Properly authorized
    -Complete
    -Properly classified
    -Reported in the proper period
    -Properly Valued
    -Summarized correctly
    Control Procedures(Activities)
    -Segregation of duties, or dual custody
    -System of authorizations
    -Independent Checks
    -Physical Safeguards
    -Documents and Records
    Factors that Allow Frauds to occur
    -Inability to judge the quality of performance
    -Failure to discipline fraudsters
    -Lack of info
    -Ignorance, Apathy and Incapacity
    -Lack of an Audit Trail
    Red flags: fingerprints of fraud

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