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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
Who Commits Fraud?
In essence…you and I
FORENSIC ACCOUNTING - BA124 – Spring 2015
Why Commit Fraud?
The fraud triangle
Situational pressures
Available opportunities
Personal integrity (rationalization)
FORENSIC ACCOUNTING - BA124 – Spring 2015
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
Available Opportunities
COSO’s elements of control
Control environment
Appropriate systems
Procedures and activities
Note the information in Albrecht
FORENSIC ACCOUNTING - BA124 – Spring 2015
Control Environment
Management example
Management communication
Hiring practices
Organizational structure
Effective internal audit department or
similar oversight
FORENSIC ACCOUNTING - BA124 – Spring 2015
Procedures & Activities
Segregation of duties
System of authorizations
Independent checks
Physical safeguards
Documents and records
FORENSIC ACCOUNTING - BA124 – Spring 2015
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
Rationalization
Pathological lying
“Everyone does it.”
See the list on page 50
FORENSIC ACCOUNTING - BA124 – Spring 2015
Power and Influence
Different types…see pg. 53
Influences co-conspirator
Knowledge may protect us and assist
in investigation
FORENSIC ACCOUNTING - BA124 – Spring 2015