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Fraud_Chapter_Outlines_StudyGuide

Fraud_Chapter_Outlines_StudyGuide - Chapter 1 The Nature of...

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Chapter 1: The Nature of Fraud SERIOUSNESS OF THE FRAUD PROBLEM 1. Statistics on how much fraud is occurring come from four basic sources: a. Government Agencies b. Researchers c. Insurance Companies d. Victims of Fraud 2. The Association of Certified Fraud Examiners (ACFE) – conducted the most comprehensive fraud studies ever undertaken in 1996, and then updated the studying 2002 3. Fraud affects how much we pay for goods and services. Thus, each of us pays not only a portion of the fraud bill, but also a portion of the costs associated with the investigation of fraud 4. The FBI has labeled fraud the fastest growing crime 5. With increasing use of technology, computers, and the internet, the number of frauds have grown 6. As companies give in to Wall Street’s pressure to “meet the numbers” some large financial statement frauds are committed 7. Because fraud reduces net income, it takes significantly more revenue to recover the effect of the fraud on net income (must consider the company’s profit margin) – see examples on page 5 8. GDP – Gross Domestic Product – total dollar amount of all final goods and services produced in an economy (represents aggregate income) 9. In addition to actually impacting the amount of GDP, the amount of fraud in an economy also has an impact on how willing investors are to invest in the economy WHAT IS FRAUD? 1. Robbery is generally more violent (physically forcing someone to give what you want) whereas the losses from fraud (tricking someone to give up his assets)m far exceed those from robbery 2. Definition of Fraud Fraud is a generic term, and embraces all the multifarious means which human ingenuity can devise, which are resorted to by one individual, to get an advantage over another by false representations. No definite and invariable rule can be laid down as a general proposition in defining fraud, as it includes surprise, trickery, cunning and unfair ways by which another is cheated. The only boundaries defining it are those which limit human knavery. 3. Fraud is deception that includes the following elements: a. A representation b. About a material point c. Which is false d. And intentionally or recklessly so e. Which is believed f. And acted upon by the victim g. To the victim’s damage 4. One of the most famous frauds of all time: Charles Ponzi's investment scam.
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