Fraud and Forensic Accounting overview

Meeting 2 1
Types of Fraud

ACFE: fraudulent financial reporting
(pelaporan keuangan yang curang),
misappropriation of assets (penggelapan
atau penyalahgunaan asset) dan korupsi .


Albrecht, Albrecht, dan Albrecht (2006, 10-
11) mengklasifikasikan fraud berdasarkan
pelakunya: employee embezzlement,
management fraud, investment scam, vendor
fraud, customer fraud, dan miscellanous
fraud.
Type of Fraud Victim Perpetrator Explanation
1. Employee
embezzlement or
occupational fraud
Employers Employees Employees directly or
indirectly steal from
employers
2. Management
fraud
Shareholders, lenders,
& others who rely on
Financial Statements
Top
management
Top management provides
misrepresentations, usually
financial information
3. Investment
scams
Investors Individuals Individuals trick investors into
putting money into fraudulent
investments
4. Vendor fraud Organizations that buy
goods & services
Organizations
or individuals
that buy
goods and
services
Organizations overcharge for
goods & services or non-
shipment of goods even
though payment is made
5. Customer fraud Organizations that sell
goods and services
Customers Customers deceive sellers
into giving customers
something they should not
have
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Employee
embezzleme
nt
Management
fraud
Investment
scams
Vendor fraud
Customer
fraud
ACFE
Association of Certified Fraud
Examiners
Employees taking employers assets
Overcharge for goods, or ship
inferior goods
Selling worthless investments to
unsuspecting investors
Manipulation of financial statements
by management
Getting something for nothing, not
paying for goods & services
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Fraud
Perpetrators
Other Property Offenders Uni Students
Yes
Most pressures involve
financial need
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Perceived
Opportunity
Meeting 2 9
Rationalisation
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Meeting 2 11
Perceived Opportunity
Can fraud be prevented by removing one of the
three elements of fraud from the fraud triangle.
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Perceived Opportunity
Inversely, the higher the personal integrity
the less likely to commit fraud.
It will take much more of the three fraud
elements to move them to commit fraud.
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Incentive
Expensive lifestyle to maintain (39%)
Dissatisfaction with the company (14%)
Career disappointment (14%)
Opportunity
Insufficient controls (41%)
External collaboration (36%)
Management over-ride (25%)
Internal collaboration (22%)
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Self-rationalisation
Lacking awareness of wrong-doing (52%)
Low temptation threshold (50%)
Self-denial of consequences to company (26%)

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Motivations
Year of Employment
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1, 2, 3, 4, 5, 6, ., 35
30% 70%
What is the age of the
person most likely to
commit fraud?
35 - 44
Per PwC Global Economic Crime Survey 2006
(Australia)
Male (87%)
Aged 41 50 (53%)
Educated to high school or less (60%)
Meeting 2 20
Male aged 38 years acting alone
Non-management employee
Employed for a period of 5 years and held
current position for three years at the time
of detection
Motivated by greed, misappropriating funds
to an average value of $219,707
Detected by agencys internal controls 12
months after the commencement of the
fraud
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Per BDOs Not-for-profit Survey 2006
Female (54%)
Aged in 40s
Paid non-accounting employee
Only 15% committed by volunteers
89% of reported frauds were under $50,000

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73% of employees who committed fraud acted
alone.
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Management & above

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Financial services Non-financial services
Sector
Lending fraud 43% False invoicing 31%
Theft of cash 35% Theft of inventory 21%
Non-management
Financial Services Non-financial Services
False invoicing 22% Theft of cash 29%
Theft of tangible
assets 20%
Theft of inventory 20%
Theft of cash 18% Unauthorised
manipulation of
computer data 17%
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1. The Theft Assets Are Taken
2. Concealment Hide It from Others
3. Conversion Spend or Convert to Cash and
then Spend
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Ability to get around internal controls
Inability to judge performance
Failure to discipline prior frauds
Lack of access to information
Ignorance, apathy, incapacity
Lack of an audit trail
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KPMG Fraud Survey 2006
PwC Global Economic Survey 2006
Not-for-profit Survey BDO
Albrecht, et.al Fraud Examination Thomson,
2 Ed, 2006
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Your presentation should take approximately 10-15 minutes.
And then, 10-15 minutes for answering questions. For Article
presentations, give a summary of the article(s), their
objectives and major findings/recommendations. In addition,
evaluate strengths/weaknesses and identify any further
issues that could have been considered. For Case
presentations, provide background information on the case,
definitions of terms, major factors relevant to the case and
answers to the case questions. Provide a copy of your
PowerPoint slides to class members (30 copies).

Topic for group 1: Plutonium Case

Meeting 2 29