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Types of Fraud


Audit Committee of the Board. Outside directors. Written charter. Authority and resources ... to plan and perform the audit to obtain reasonable assurance about ... – PowerPoint PPT presentation

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Title: Types of Fraud

Types of Fraud
  • Some Common Frauds and responsibility for fraud
    detection and deterrence

Some General Types of Fraud
  • Frauds against individuals
  • Frauds against organizations
  • Frauds perpetrated by organizations
  • Organized Crime

Frauds Against Individuals
  • Home repair scams
  • Fictitious medical treatments
  • Misrepresented investments
  • Erroneous or false invoices
  • Altering checks
  • Credit card information theft
  • Computers are used as a tool in fraud

Frauds Against Organizations
  • Misappropriation of assets
  • Theft for personal benefit
  • To harm the organization
  • Stealing or corrupting data
  • For personal profit or harm to organization
  • To gain competitive advantage
  • Erroneous or false invoices

Frauds Perpetrated by Organizations
  • Financial statement fraud
  • Misrepresenting financial situation
  • Fraudulent business practices
  • False advertising
  • Bait and switch schemes
  • Pyramid or Ponzi schemes

Organized Crime
  • Mafia, gang, or business organization
  • Motives
  • Profit
  • Power

Who is Responsible?
  • Board of Directors
  • Management
  • Independent Auditor
  • Internal Auditor
  • Fraud Examiner

Board of Directors
  • Oversight responsibility
  • Audit Committee of the Board
  • Outside directors
  • Written charter
  • Authority and resources
  • Participate, informed, vigilant and effective
  • Liability

  • Sets the tone within the organization
  • Written code of conduct
  • Enforcement of the Code of Conduct
  • Provide an example for employees
  • Responsible for personnel
  • Hiring, training, and proper assignment of duties
  • Day-to-day responsibility
  • Monitoring controls

Independent Auditor
  • Statement on Auditing Standards 82 is the
    primary source of guidance
  • effective for audits of financial statements for
    periods ending on or after December 15, 1997.
  • The auditor has a responsibility to plan and
    perform the audit to obtain reasonable assurance
    about whether the financial statements are free
    of material misstatement whether caused by error
    or fraud.

Internal Auditor
  • IIA Statement on Internal Auditing Standards No.
    3 expanded the internal auditors role.
  • Deterrence
  • Evaluate mgmt actions
  • Detection
  • Sufficient knowledge to identify indications of
  • Investigation
  • May involve internal auditors
  • Reporting
  • Findings, conclusions, recommendations actions.

Certified Fraud Examiner
  • Helps resolve allegations of fraud
  • Obtains evidence
  • Takes statements
  • Writes reports of fraud examinations
  • Testifies to findings
  • Assists in the detection and prevention of fraud.
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