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Unformatted text preview: onalizations. There was a slow
erosion of values over time.”
Source: Pamela Colloff, “The Whistle-Blower,” Texas Monthly,
April 2003, p. 141.
Chapter 3 Forensic and Investigative Accounting 18 Rationalization
Behavioral psychologists call rationalization
“reframing.” Someone who is about to cheat will adjust the
definition of cheating to exclude his or her actions.
definition “People who would never take $5 from petty cash
have no problem paying for a drink for a stranger
and putting it on a company tab.”
and Source: S.L. Mintz, “The Gauge of Innocence,”
CFO, April 2009, p. 56.
Chapter 3 Forensic and Investigative Accounting 19 Opportunity
Fraud Risk Factors AICPA’s Fraud Risk Factors
– SAS 82 and SAS 99 identify factors that
auditors should look for that indicate greater
risk of financial reporting fraud
– See Table 3.4 on p. 3-22 Chapter 3 Forensic and Investigative Accounting 20 Opportunity
Weak Internal Control COSO Components of Internal Control
– Control environment
Control activities or control procedures
Information and communication systems
– Monitoring Chapter 3 Forensic and Investigative Accounting 21 Types of Controls
Preventive Controls Segregation of duties
Using document control numbers
Computer backup Chapter 3 Forensic and Investigative Accounting 22 Types of Controls
Reconciliations Reviews Event notifications Surprise cash count Counting inventory Chapter 3 Forensic and Investigative Accounting 23 Types of Controls
Training Process redesign Additional technology Quality circle teams Budget variance reports Chapter 3 Forensic and Investigative Accounting 24 Psychology of Fraud Fraud can be explained by three factors:
• Supply of motivated offenders.
• Availability of suitable targets.
• Absence of capable guardians (e.g., internal controls). The three B’s -- babes, booze,...
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