Albrecht_5th_Chapter_5_Fall_2016 - Chapter 5 deals with...

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Chapter 5 deals with fraud detection. Although the act of fraud itself is seldom observed, symptoms and indicators of fraud are often observable. In this chapter, we discuss several fraud symptoms in an attempt to help you recognize when fraud is occurring.
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If these fraud symptoms are recognized & reported, many frauds can be detected at an early stage… before they grow into something much more damaging . Most real-life frauds could have been detected much sooner if the fraud symptoms had led someone to investigate.
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1. Understand how symptoms help in fraud detection. Learning Objectives
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2. Identify and understand accounting symptoms . Learning Objectives
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3. Describe internal controls that help deter and detect fraud. Learning Objectives
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4. Identify and understand analytical symptoms . Learning Objectives
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5. Explain how lifestyle changes and behavioral symptoms help detect fraud. Learning Objectives
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6. Recognize the importance of tips and complaints . Learning Objectives
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6 types of red flags (symptoms): Accounting anomalies Internal control weaknesses. Analytical anomalies Extravagant lifestyle Unusual behavior Tips and complaints
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Accounting Anomalies § Accounting anomalies result from unusual processes or procedures in the accounting system. § Common anomaly fraud symptoms involve: § Irregularities in source documents § Faulty journal entries § Inaccuracies in ledgers
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Irregularities in Source Documents
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Accounting Anomalies - Cont’d Irregularities in Source Documents § Missing documents § Stale items on bank reconciliations § Excessive voids or credits § Common names or addresses of payees or customers § Increased past-due accounts § Increased reconciling items
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Accounting Anomalies - Cont’d
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