Chapter 11 Slides

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Unformatted text preview: 11 - 1 Click to edit Master subtitle style Acct 4510/5510 11 - 1 Fraud Auditing Chapter 11 11 Acct 4510/5510 11 - 2 Acct 4510/5510 What Constitutes Fraud? 22 Typically under common law, three elements are required to prove fraud: 1. A material false statement made with an intent to deceive. (There are no “accidental” fraud situations.) 2. A victim’s reliance on the statement 3. Damages Acct 4510/5510 11 - 3 Acct 4510/5510 Occupational Fraud 33 Fraudulent Financial Statements Corruptio n Misappropriatio n Asset Acct 4510/5510 Discussed in our text in Chapter 11 11 - 4 Acct 4510/5510 Fraud resulting from fraudulent financial reporting versus misappropriation of assets Acct 4510/5510 44 Fraudulent financial reporting harms users by providing them incorrect financial statement information for their decision making. Our chapter definition is “an intentional misstatement or omission of amounts or disclosures with the intent to deceive users.” Asset misappropriation is when the assets are stolen from the organization and are no longer available to their rightful owners. 11 - 5 Acct 4510/5510 Acct 4510/5510 55 Three Elements are Common to Every Fraud – Let Us Look At The Elements P e r c e i v e d P r e s s 11 - 6 Acct 4510/5510 Acct 4510/5510 66 Examples of Risk Factors Related to Incentives and Pressures Fraudulent Financial Reporting Financial stability or profitability is threatened by economic, industry, or entity operating conditions. Excessive pressure for management to meet debt repayment or covenant requirements. Personal net worth values are threatened by the entity’s financial performance. Misappropriation of Assets Personal financial obligations create pressure upon those with access to cash Bad employer/employee relationships 11 - 7 Acct 4510/5510 Acct 4510/5510 77 Three Elements are Common to Every Fraud – Let Us Look At The Elements P e r c e i v e d P r e s s P er ce iv ed O p p or tu ni ty 11 - 8 Acct 4510/5510 Acct 4510/5510 88 Three Parts of Perceived Opportunity 1. Opportunity to commit fraud 2. Opportunity to conceal fraud 3. Opportunity to avoid punishment 11 - 9 Acct 4510/5510 Acct 4510/5510 99 Examples of Risk Factors Related to Opportunities Fraudulent Financial Reporting There are significant accounting estimates that are difficult to verify....
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This note was uploaded on 04/11/2010 for the course ACCT 4510 taught by Professor Lord during the Spring '10 term at Bowling Green.

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Chapter 11 Slides - 11 1 Click to edit Master subtitle...

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