Red Flag and Theories of Fraud

7/26/2019 Red Flag and Theories of Fraud

1/11

Fraud: Red Flagand Theory of

FraudWEEK 2


2/11

Denition of Fraud

How does your comany dene fraud! Dening fraud hels to detect"lac#$s %aw Dictionary

&ll means 'y which one indi(idual can get an ad(antage o(er anothersuggestions or suression of the truth) *t includes all surrise+ tric#+ dissem'ling+ and any unfair way 'y which another is cheated)

*nstitute of *nternal &uditors

&ny illegal acts characteri,ed 'y deceit+ concealment+ or (iolation of These acts are not deendent uon the alication of threat of (iolenhysical force) Frauds are eretrated 'y arties and organi,ations tomoney+ roerty or ser(ices- to a(oid ayment or loss of ser(ices- or ersonal or 'usiness ad(antage)


3/11

The term fraud hacome to encompasmany forms ofmisconduct.

Denition of Fraud


4/11

/lassication of FraudOccupational Fraud and Abuse Classication System


5/11

/hanges in emloyee lifestyle+ ha'its and'eha(iour

Decline in emloyee morale andor attenda erating on a crisis 'asis 3ne4lained (ariances ne emloyees 5does it all6 and wants to c

e(erything

/hanges in emloyee lifestyle+ ha'its and'eha(iour

Decline in emloyee morale andor attenda erating on a crisis 'asis 3ne4lained (ariances ne emloyees 5does it all6 and wants to c

e(erything

RED F%&78 F FR&3DRED F%&78 F FR&3D


6/11

9issing+ altered+ or erfect documents *n(oice items do not aear consistent E4cessi(e rush or emergency transactions endors with generic names andor ;ost


7/11


8/11


9/11

Theories of Fraud1. Social learning theory

8ocial learning is that indi(iduals learn either ro=social norms or antisocial normde(iant+ delinAuent and criminal 'eha(iorB through #ey learning mechanisms an

2. Dierential association

Diferential association is the process whereby one is exposed to normative deavorable or unavorable to illegal or law-abiding behavior

3. Denitions

*ndi(iduals$ ersecti(es or attitudes @i)e) denitionsB of a'errant acti(ity are sharo4imal relationshis with (arious eer grous) Denitions ertain to 5one$s owor meanings that one attaches to gi(en 'eha(ior6) These denitions can 'e oside(iant 'eha(iorB+ negati(e @i)e) anti=de(iant 'eha(iorB or neutrali,ing @i)e) Custiarticiating in de(iant 'eha(iorB


10/11

0) Dierential reinforcement.Dierential reinforcement imlies 5the 'alance of anticiated or actrewards and unishments that follow or are conseAuences of 'eha(

5. Imitation.

*mitation is the 5engagement in 'eha(ior after the o'ser(ation of si

'eha(ior of others6

6. Self-control theory

8elf=control theory redicts that indi(iduals with low le(els of self=co

engage in a (ariety of criminal and analogous acts


11/11

>) outine acti!ity theoryR&T redicts that the ro'a'ility of crime increases with con(ergencelements: a moti(ated oender+ suita'le target and a'sence of caguardians

". Strain theory.

&t the indi(idual le(el+ traditional strain theory suggests that eole

crime when they are 'loc#ed from legitimately achie(ing cultural go

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Red Flag and Theories of Fraud