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Related Flashcards
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Cards In This Set
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Fraud
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•consists of knowingly making material misrepresentations of fact with the intent of inducing someone to believe the falsehood and act upon it and thus, suffer a loss or damage.
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Employee fraud
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Is the use of fraudulent means to take money or other property from an employer.
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•(1) the fraudulent act, (2) the conversion of the money or property to the fraudster's use and (3) the cover-up.
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Three phases of employee fraud
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Embezzlement
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•is a type of fraud involving employees' or nonemployees' wrongfully taking money or property entrusted to their care, custody, and control, often accompanied by false accounting entries and other forms of lying and cover-up.
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Errors
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•are unintentional misstatements or omissions of amounts or disclosures in financial statements.
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Direct-effect illegal acts
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Are violations or government regulations by the company, or its management or employees that produce direct and material effects on dollar amounts in the financial statements
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Fraud red flags
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•Experience sleeplessness
•Drinking too much
•Take Drugs
•Become irritable easily
•Can’t relax
•Get defensive
•Can’t look people in the eye
•Sweat excessively
•Go to confession
•Find excuses and scapegoats for mistakes
•Work standing up
•Work alone
•Work late frequently
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•Has education beyond high school
•Is likely to be married
•Is member of a mosque, temple, or church
•Ranges in age from teens to over 60
•Is socially conforming
•Has an employment tenure from 1 to 20 years
•Has no arrest record
•Usually acts alone
Unfortunately, they look like most everybody else
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Characteristics of fraudsters
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Motivation, opportunity, rationalization
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There are three conditions that are likely to be present when a fraud occurs. They are: (Fraud triangle)
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Motive
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•some kind of pressure a person experiences and believes to be unshareablewith friends and confidants
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Economic motive
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Actual or perceived need for money
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Psychotic motive
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“Habitual criminal”who steals for the sake of stealing
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Egocentric motive
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Committing fraud for personal prestige
-friends drive nice cars so they wat to too -can relate more to financial statement fraud: look like a better manager |
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Ideological motive
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Cause is morally superior, justified in making others victims
-"it hink the company is evil and im gonna make them go bankrupt" |
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Opportunity
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•an open door for solving the unshareableproblem by violating a trust.
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