* Occupational fraud - use of one’s occupation for personnel enrichment through deliberate misuse or misapplication of the employing org’s resources or assets. Categories: Asset misappropriation (steal asset), f.s fraud (manipulate f.s), Corruption scheme (misuse connections).
* Employee embezzlement-can be: direct (e.g: asset misappropriation, making dummy company and making employer pay for goods not actually delivered) (from perpetrator to employer); or indirect (corruption, taking bribes from outside) (3rd party involved) * Management fraud- aka financial statement fraud; involves top management’s deceptive manipulation of f.s.; more inclusive * Investment scam-consumer fraud: Ponzi scheme, telemarketing, identity theft, money scam, advance fee scam, letter of credit fraud, etc. * Vendor fraud-overcharge, send inferior goods, charge for goods not shipped; * Customer fraud-not pay, shoplift;
* Prosecution: show that perpetrator acted with intent. Criminal-deals with offenses of a public nature/ against society as a whole. Prosecuted under a violated statute. Jail-time or pay fines. Burden of proof: beyond reasonable doubt. Purpose is to right a wrong. Jury must have 12 people. Initiation is determined by grand jury . Verdict is unanimous. Criminal if it involved: bribery, giving/receiving of anything of value by a subcontractor to a prime contractor in US govt contracts, mail fraud, bank fraud, racketeering activity, unauthorized access to a protected computer (computer fraud), an insider who has material information buys/sells company’s securities (securities fraud), bribery of foreign officials, tax evasion. Civil-deals with rights of individuals. Purpose is to compensate for harm done/ seek restitution for damages. Burden of proof: preponderance of evidence. Jury may consist of less than 12. Initiation is through filing a claim. Verdict: parties may stipulate to a less than unanimous verdict.
* Fraud triangle: pressure: financial (greed, living beyond one’s means, high debt, poor credit, financial losses, unexpected financial needs), work (frustration/not satisfied, get-even w/ employer), vice (drug abuse, marital problem, gambling), other (beat the system, spouse want better life); opportunity: lack of control, inability to judge quality of performance, failure to discipline perpetrators, lack of access of information, ignorance/apathy/incapacity, lack of audit trail; rationalization * Internal Control Framework: Control environment-atmosphere organization establish for employees, management has most important role (tone at the top). Elements: proper modeling- actions, being good example; proper labeling-communication, let them know what is appropriate through orientation, training, code of conduct; appropriate hiring-background check, interview; & clear org. structure- org. charts, clear responsibility. Risk assessment-risk of an error occurring. Control activities- procedures/policies to ensure mgmt activities are going smoothly & comply w/ standards & goals are achieved. Control procedures: segregation of duties, system of authorization, independent check (required vacation, rotation of duties, audits, bank reconciliation), physical safeguards, documents & records (accurate, pre-numbered, cancelled). Information & Communication (AIS)- audit trail that allows fraud to be discovered & make...