05_ALDO TRI PUTRA SOSIAWANTORO_ELFIA.pptx

05_ALDO TRI PUTRA SOSIAWANTORO_ELFIA.pptx - Fraud Auditing...

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Aldo Tri Putra Sosiawantoro – 2001570932 Elfia - 2001557792 Fraud Auditing Chapter 5 Recognizing the Symptoms of Fraud
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1. Understand how symptoms help in the detection of fraud. 2. Identify and understand accounting symptoms of fraud. 3. Describe internal controls that help deter and detect fraud. 4. Identify and understand analytical symptoms of fraud. 5. Explain how lifestyle changes help detect fraud. 6. Discuss how behavioral symptoms help detect fraud. 7. Recognize the importance of tips and complaints as fraud symptoms. Learning Objectives
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Fraud is a crime that is seldom observed. John J. Hall (1996) “Fraud symptoms- the specific, observable signs that fraud might be present-may he of the actual fraud or of the cover-up attempt.” (p.85) Symptoms Help in The Detection of Fraud
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Can be separated into six groups: 1. Accounting anomalies 2. Internal control weaknesses 3. Analytical anomalies 4. Extravagant lifestyle 5. Unusual behavior 6. Tips and complaints Symptoms of Fraud
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Auditors did not ask questions such as the following: 1. Are the payments reasonable? 2. Do the endorsements make sense? 3. Why are the checks going to and the bills coming from the same two addresses? Symptoms of Fraud
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Common anomaly frauds involve: Irregularities in source documents Faulty journal entries Inaccuracies in ledgers Example : the 22 phony doctors checks were sent to the same two common addresses Why? managers trusted the perpetrator completely auditors merely matched claim forms with canceled checks 1. Accounting Anomalies
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A. Irregularities in source documents Normal Fraud 1. Accounting Anomalies
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A. Irregularities in source documents Include the following: 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 Alterations on documents Duplicate payments Second endorsements on checks Document sequences that do not make sense Questionable handwriting on documents Photocopied documents 1. Accounting Anomalies
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B. Faulty journal entries Fraud is hidden by using accounting language Legal Expense ..................... 5,000 Cash ................... ……………5,000 English: “An attorney was paid $5,000 in cash” Accounting: “Debit Legal Expense; credit Cash” Was the attorney really paid $5,000?
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