Week one lecture notes 2008

Week one lecture notes 2008 - Forensic Accounting &...

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Week One Lecture Notes FORENSIC ACCOUNTING: - the big picture idea - the use of accounting knowledge or skill for courtroom purposes; Forensic accounting can therefore involve not only fraud, but also bankruptcy, valuation, and disputes, divorce and other litigation. FRAUD EXAMINATION: - Involves obtaining documentary evidence, interviewing witnesses and potential suspects, writing investigative reports, testifying to findings, and assisting in general detection and prevention of fraud. Corporate Scandals Fraud Quiz So, What Is Fraud? o Black’s Law Dictionary- Intentional perversion of truth for the purpose of inducing another, in reliance upon perversion of truth, to part with some valuable thing belonging to him or to surrender a legal right Intentional deceit that someone else relied on . o What is Occupational Fraud and Abuse? o Use of occupation for personal enrichment through deliberate misuse or misapplication of employer’s resources/assets Defining Fraud o Four elements: 1. Material false statement 2. Knowledge that the statement was false [intentional deceit] 3. Reliance on the statement by the victim 4. Damages Research in Occupational Fraud and Abuse o Edwin H. Sutherland- First defined “white-collar crime” - Criminal acts of corporations, individuals in corporate capacity Theory of differential association- Crime is learned, not genetic o Donald R. Cressey- Studied embezzlers ( Why people become “trust violators”) Developed the Fraud Triangle The Fraud Triangle (Pressure, Perceived Opportunity and Rationalization Pressure ) Otherwise known as Incentives, Lack of Controls, and Attitudes 1
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o Steve Albrecht - Nine motivators of fraud (Types of Pressures/Motivation) 1. Living beyond means Overwhelming desire for personal gain 2. High personal debt Close association with customers 3. Pay not commensurate with job 4. Overwhelming desire for personal gain 5. Close association with customers 6. Wheeler-dealer [gambler type] 7. Strong challenge to beat the system Excessive gambling 8. 9. Family/Peer pressure …Fraud scale- situational pressures, opportunity to commit, personal integrity… - High situational pressures, high opportunity and low integrity = high fraud The Report to the Nation on Occupational Fraud and Abuse [on WebCT as a resource] o Largest fraud study ever- updated 2006 o Study of 1,134 fraud cases o Reported by CFEs o Total Estimated Fraud Losses: $652 billion o Costs How to measure? Orgs don’t know what they lose Opinions of CFEs 5% of gross revenues Twice the US defense budget $652 billion per year o Position in the Organization - Cases Employees are the highest likely [68%] o Position in the Organization – Median Loss Owners only commit 12% of the time but highest amount of money o Median Loss by Age Age 51-60 are the highest likely o Median Loss by Education Postgraduates are most likely
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Week one lecture notes 2008 - Forensic Accounting &...

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