FORENSIC ACCOUNTING - BA124 – Spring 2015

Today’s Topics

Why Fraud? Who commits fraud The fraud triangle Pressures Opportunity and control issues Rationalization Power and influence…collusion

FORENSIC ACCOUNTING - BA124 – Spring 2015

Who Commits Fraud?

In essence…you and I

FORENSIC ACCOUNTING - BA124 – Spring 2015

Why Commit Fraud?

The fraud triangle

Situational pressures

Available opportunities

Personal integrity (rationalization)

FORENSIC ACCOUNTING - BA124 – Spring 2015

Situational Pressures

Financial Vice Work related Other pressures

The thrill or challenge Extraordinary circumstances

“Every man has his price, and he was getting close to mine.”Abraham Lincoln, on throwing a lobbyist out of his

office

FORENSIC ACCOUNTING - BA124 – Spring 2015

Available Opportunities

COSO’s elements of control Control environment Appropriate systems Procedures and activities

Note the information in Albrecht

FORENSIC ACCOUNTING - BA124 – Spring 2015

Control Environment

Management example Management communication Hiring practices Organizational structure Effective internal audit department

or similar oversight

FORENSIC ACCOUNTING - BA124 – Spring 2015

Procedures & Activities

Segregation of duties System of authorizations Independent checks Physical safeguards Documents and records

FORENSIC ACCOUNTING - BA124 – Spring 2015

Factors That Promote Fraud

Outcomes that are difficult to evaluate

Failure to discipline Complexity or lack of access to

information Apathy Missing or non-existent audit trail

FORENSIC ACCOUNTING - BA124 – Spring 2015

Rationalization

Pathological lying “Everyone does it.” See the list on page 50

FORENSIC ACCOUNTING - BA124 – Spring 2015

Power and Influence

Different types…see pg. 53 Influences co-conspirator Knowledge may protect us and

assist in investigation