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Unformatted text preview: erstating the value of inventory (Phar-Mor) Chapter 3 Forensic and Investigative Accounting 11 Fraud Schemes Based on
7. Omitted or improper disclosures.
8. Equity fraud.
9. Related-party transactions.
10. Alter ego.
11. Minimizing income or inflating expenses to
reduce tax liabilities.
6. Chapter 3 Forensic and Investigative Accounting 12 Internal vs. External Fraud
Misappropriation Expense accounts False insurance
of cash assets
Lapping False financial
statements Credit card fraud Check forgery Misappropriation
of False invoices Expense accounts Unnecessary
Chapter 3 Forensic and Investigative Accounting Product
13 Internal vs. External Fraud (contd.)
Check forgery External
commission Kickbacks Kickbacks Bid rigging/price
investments Ghost vendors False representation
employees Diversion of sales Source: KPMG, Fraud Awareness Survey, Dublin: KPMG, 1995, pp. 10-12.
Chapter 3 Forensic and Investigative Accounting 14 CONDITIONS CONDUCIVE TO
Chapter 3 Forensic and Investigative Accounting 15 Fraud Risk Triangle
(aka Fraud Pyramid) Chapter 3 Forensic and Investigative Accounting 16 Motivation
Poor Income Performance Impaired Ability to Acquire Capital
Impaired Compliance with Bond Covenants Greed – Bonuses tied to stock price or earnings
– Insider trading Cover up misappropriation of assets Rationalization
Sherron Watkins provides an excellent
comment about rationalization with respect to
Enron’s Jeff Skilling and Andy Fastow.
At what point did they turn crooked? “…there
is not a defining point where they became
corrupt. It was one small step after another, with
more and more rati...
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This document was uploaded on 01/21/2014.
- Spring '14