MOS 3367a - Introduction to Fraud Examination
Course Outline: Section 001/Fall 2015
1. Course Information:
Class Location and Time:
Social Science Room 3024
Wednesdays 2:30 pm to 5:30 pm
Skimming: the theft of cash from a victim prior to its entry in an accounting system.
leave no direct audit trail
Can occur @ any point where funds enter a business almost anyone who deals with process of
receiving cash may be in a posit
Cash Larceny: the intentional taking away of an employers cash (incl. both currency and checks)
without the consent, and against the will, of the employer.
Is a CASH RECEIPT SCHEME (one of two cash schemes, the other being fraudulent disbursements)
WEEK 5: Chapters 8 & 9
Week 2: Chapter 2 & 3
CHAPTER 2: SKIMMING
Skimming: the theft of cash from a victim entity prior to its entry in an accounting
No direct audit trail
Its principal advantage is its difficulty of detection
A form of FRAUDULENT DISBURSEMENT.
Based on a fraudulent claim for payment that causes the victim company to unknowingly make the
Typically based on fraudulent time cards or payroll registers; show that the victim organization owe
One of the most common forms of fraudulent disbursement.
Most cheque tampering frauds fall into one of 5 categories:
Forged Maker Schemes
Forged Endorsement Schemes
Altered Payee Schemes
Concealed Cheque Schemes
Authorized Maker Schemes
Occurs when a
The more rules within the organization, the more likely employees are to run afoul of them.
9/10 employees admitted to committing abusive conduct at some level
Tom R. Tyler: individuals obey only laws they believe in.
MEASURING THE LEVEL OF OCCUPATIONAL
Five general types of questions:
Routine interview situations where object is to get info from neutral or corroborative witnesses:
I) INTRODUCTORY QUESTI
Financial Statement Fraud: the deliberate misstatements or omissions of amounts or disclosures of
financial statements to deceive financial statement users, particularly investors and creditors.
May involve the following schemes:
Fraud Risk: the vulnerability that an organization has to those capable of overcoming all three of the
fraud triangle elements
can come from sources both internal and external to the organization
Inherent Risk: risks that are present before management ac
WHEN IS AN INVESTIGATION NECESSARY?
Determine source of losses caused by an occupational fraud
Help prevent future instances
May be a legal requirement/regulatory requirement
Failure to investigate reliable allegations of misconduct ca
External Fraud: unauthorized activity, theft, or fraud carried out by a third part outside the institution
that is the subject of the fraudulent behaviour.
Fraud committed against an organization by someone who is not employed by the
Who commits fraud?
Mid- and lower-level employees
Why do people commit financial statement fraud?
To conceal true business performance.
To preserve personal status/control
To maintain personal income/wealth
4 categories of corruption schemes:
Conflicts of interest
Bribery: the offering, giving, receiving, or soliciting anything of value to influence an official act.
Official Act: traditional bribery statues
Frequency & Cost:
Not as common as cash schemes
Lower median cost
Types of Non-Cash Assets Stolen:
Physical assets were most commonly misappropriated non-cash asset
o Least likely, but more costly.
NON-CASH MISAPPROPRIATION SCHEMES
A form of fraudulent disbursement that occurs when employees make false claims for reimbursement of
fictitious or inflated business expenses.
Can be extremely difficult to detect.
Generally detected by indirect means (trend analysis, comparisons of expen
These schemes differ from other register frauds (larceny & skimming) in that the removal of money is
recorded on the register tape.
False transaction recorded as though it were a legitimate disbursement to justify the removal
Reported less freq
5 major categories of fraudulent disbursement in the fraud tree:
Expense reimbursement schemes
Register disbursement schemes
Perpetrator uses false documentation to cause his employer