Chapter 6 - Chapter 6 Employee Fraud and the Audit of Cash...

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Unformatted text preview: Chapter 6 Employee Fraud and the Audit of Cash "Rather fail with honor than succeed by fraud."--Sophocles (496-406 BCE) Chapter 6 Objectives 1. Define and explain the differences among several kinds of employee frauds that could occur in an organization. 2. List and explain some conditions that can lead to frauds. 3. Describe ways and means to prevent employee frauds. 4. Describe the controls over the receipt and disbursement of cash. 5. Design and perform substantive audit procedures for the audit of cash. 6. Discuss actual cash fraud cases and describe how the schemes were uncovered. 7. Describe some extended procedures for detecting employee fraud schemes involving cash. 6-2 Fraud Opportunities Revisited 6-3 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 . 6-4 Definitions Related to Employee Fraud 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 . 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. 6-6 Fraud Triangle Pressure Opportunity Justification Motive or Pressure 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)...
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This note was uploaded on 02/05/2011 for the course ACCT 461 taught by Professor Staff during the Spring '08 term at George Mason.

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Chapter 6 - Chapter 6 Employee Fraud and the Audit of Cash...

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