Louwers3eChap006 - Fraud Opportunities Revisited 6-1...

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Unformatted text preview: Fraud Opportunities Revisited 6-1 Definitions Related to Employee Fraud White collar crime is fraud perpetrated by people who work in offices and steal with a pencil or a computer terminal. The contrast is violent street crime. Employee fraud is the use of fraudulent means to take money or other property from an employer . It consists of three phases: (1) the fraudulent act , (2) the conversion of the money or property to the fraudster's use and (3) the cover-up . Embezzlement is a type of fraud involving employees' or nonemployees' wrongfully taking money or property entrusted to their care , custody, and control, often accompanied by false accounting entries and other forms of lying and cover-up. Larceny is simple theft of an employers property that is not entrusted to an employee's care, custody or control. Defalcation is another name for employee fraud and embezzlement . 6-2 Exhibit 6-1 Fraud Elements Motivation Opportunity Rationalization High Risk Source: W.Hillison, D. Sinason, and C. Pacini, The Role of the Internal Auditor in Implementing SAS 82, Corporate Controller, July/August 1998, page 20. 6-3 Motive A motive is some kind of pressure a person experiences and believes unshareable with friends and confidants Actual or perceived need for money ( Economic motive) Habitual criminal who steals for the sake of stealing ( Psychotic motive) Committing fraud for personal prestige ( Egocentric motive) Cause is morally superior, justified in making others victims ( Ideological motive) 6-4 Opportunity An opportunity is an open door for solving the unshareable problem by violating a trust. Weak internal controls Circumvention of internal controls The greater the position, the greater the trust and exposure to unprotected assets....
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This note was uploaded on 04/08/2010 for the course AEM 4530 taught by Professor Lewis during the Spring '10 term at Cornell University (Engineering School).

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Louwers3eChap006 - Fraud Opportunities Revisited 6-1...

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