Scribd Logo
Upload

Welcome to Scribd!

  • 243 views

    Chapter 4: Fraud: Jovit G. Cain, CPA

    Uploaded by

    Jao Flores
    The document discusses the nature of fraud, including defining fraud as an illegal act involving deceit, concealment, or breach of trust. It examines the fraud equation of reason, ability, and access that allows fraud to occur, and explores different types, causes, and indicators of fraud as well as the roles of management, internal audit, and controls in preventing and detecting fraud.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd

    Chapter 4: Fraud: Jovit G. Cain, CPA

    Uploaded by

    Jao Flores
    243 views23 pages
    The document discusses the nature of fraud, including defining fraud as an illegal act involving deceit, concealment, or breach of trust. It examines the fraud equation of reason, ability, and access that allows fraud to occur, and explores different types, causes, and indicators of fraud as well as the roles of management, internal audit, and controls in preventing and detecting fraud.

    Original Title

    IA_Ch 4

    Copyright

    © © All Rights Reserved

    Available Formats

    PPT, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses the nature of fraud, including defining fraud as an illegal act involving deceit, concealment, or breach of trust. It examines the fraud equation of reason, ability, and access that allows fraud to occur, and explores different types, causes, and indicators of fraud as well as the roles of management, internal audit, and controls in preventing and detecting fraud.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    243 views23 pages

    Chapter 4: Fraud: Jovit G. Cain, CPA

    Uploaded by

    Jao Flores
    The document discusses the nature of fraud, including defining fraud as an illegal act involving deceit, concealment, or breach of trust. It examines the fraud equation of reason, ability, and access that allows fraud to occur, and explores different types, causes, and indicators of fraud as well as the roles of management, internal audit, and controls in preventing and detecting fraud.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    You are on page 1of 23

    Chapter 4: Fraud

    Jovit G. Cain, CPA


    Fraud
    “Any illegal act characterized by deceit,
    concealment or violation of trust. These acts are
    not dependent upon the threat of violence or
    physical force. Frauds are perpetrated by parties
    and organizations to obtain money, property, or
    services; to avoid payment or loss of services; or
    to secure personal or business advantage.
    FRAUD EQUATION

    =
    + +

    Reason : ( Driving force and/or intention)


    Ability : (Presence of technical and other skills)
    Access : (Chance to conceal the fraudulent act)
    Four Components of Fraud

    1. Concealment
    2. Opportunity
    3. Attraction
    4. Motive
    CATEGORIES OF FRAUD
    - Known and recorded publicly
    - Known and recorded internally
    - Undiscovered
    Causes of Fraud: Why Fraud happen?

    - Absence of proper control


    - Collusion within the department
    - Failure to observe control procedures
    - Collusion with persons outside department
    - Lack of separation of duties
    ROLES TOWARDS FRAUD
    PREVENTION AND DETECTION
    MANAGEMENT
    -Set the tone from the top by having a policy that
    fraud will not be tolerated and fraudsters will be
    prosecuted.
    -Have a fraud mitigation strategy to detect and
    deter would be fraudsters.
    -Have a fraud response plan setting out exactly
    what steps to take if a fraud is reported or
    detected.
    ROLES TOWARDS FRAUD
    PREVENTION AND DETECTION
    INTERNAL AUDIT DEPARTMENT
    -Reviewing fraud prevention and detection
    processes put in place by management.
    -Assisting management to improve those
    processes.
    -Leading investigations where necessary.
    -Liaison with the police.
    -Dealing with whistle-blowers
    ROLES TOWARDS FRAUD
    PREVENTION AND DETECTION
    INTERNAL AUDIT DEPARTMENT
    -Reviewing fraud prevention and detection
    processes put in place by management.
    -Assisting management to improve those
    processes.
    -Leading investigations where necessary.
    -Liaison with the police.
    Types of Fraud
    A. Theft
    B. Bribery and Corruption
    C. Forgery
    D. Conspiracy
    A. THEFT
    - Obtaining property by deception and false
    accounting
    B. BRIBERY AND CORRUPTION
    - Any money, gift or consideration paid or
    consideration paid or received as an
    inducement or reward for favour or request
    from an authority.
    C. FORGERY
    - False instrument with the intention that he or
    another shall use it to induce someone to
    accept it as genuine and by reason of so
    accepting it, to do, or not to do some act to his
    own or some other’s prejudice.
    D. CONSPIRACY
    - Involves unlawful agreement by two or more
    persons to carry out an unlawful common
    purpose or lawful common purpose by
    unlawful means.
    Indicators of Fraud
    - Unexplained; Incomparable Data
    - Tipp-Ex (Erasing Fluid)
    - Unreconciled records
    - Rewritten and/or amended documents
    - Photocopies substituted for originals
    - Lavished lifestyle
    - Missing documents
    - Complaints from clients or suppliers
    MEANS TO DETECT FRAUD
    / Tip from employees
    / Internal control
    / Anonymous tip
    / By accident
    / External Audit
    / Tip from vendor
    / Internal Audit
    / Tip from customer
    / Notification from law enforcement
    INVESTIGATION FRAUD:
    What to do?
    - Call the police
    - Do nothing
    - Issue a formal instruction to staff
    - Check the system of internal control
    - Instruct disciplinary proceedings
    - Suspend the suspect
    - Interview the officer in question
    - Commence a joint management/ Internal audit
    investigation
    - Commence an audit investigation
    - Commence a management inquiry
    FRAUD INVESTIGATION
    AUDIT REPORT FORMAT
    1. Executive Summary
    2. Introduction
    3. Investigation
    4. Detailed findings
    5. Conclusion and recommendation
    6. Appendices
    FRAUD KEY CONTROLS
    - Good recruitment procedure
    - Supervision
    - System of management account
    - Up-to-date accounts
    - Clear line of authority
    - Controlled profit margins
    - Good staff discipline procedure
    - Management trail
    - Good controls over cash income
    - Store/equipment control
    FRAUD KEY CONTROLS (2)
    - Fraud hotline
    - Well-trained and alert management
    - Independent checks over work
    - Regular staff meetings
    - Employee code of conduct
    - Good management information system
    - Publicized policy on fraud
    - Good documentation
    - Financial procedure
    - Good communication
    FRAUD KEY CONTROLS (3)
    - Segregation of duties
    - Anti-corruption measures
    - Good-all-round systems of control
    Choice Board
    Task C:
    Task B:
    Explain, using a
    Task A: Draw a T-chart and graphic organizer, the
    then list down the theory behind the idea
    Using the acronym F- characteristics of a of ensuring proper
    R-A-U-D, describe your 21st century learner on alignment between and
    personal views about the left; while your among the lesson
    the nature and extent teaching approaches objectives, to the
    of “fraud” in internal on the right teaching-learning
    auditing. activity, to the
    assessment task
    Activity

    Task :

    Using the acronym R-I-S-K,


    describe your personal views
    about the nature and extent of
    “risk and risk management” in
    internal auditing.

    You might also like