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