Bmgt423 Fraud Examination Exam Notes Essay

3286 words - 14 pages

-Who's in charge of internal control --> management (SOX)
-Management has to sign off to show internal control is working
-Everything over $10,000 needs a signature (stamps)

ACFE (association of certified fraud examiners --> results from misconduct of employees, managers, and executives) definition of occupational fraud - "use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employing org's resources or assets."

Fraud - A generic term that embraces all the multifarious means that human ingenuity can devise, which are resorted to by one individual, to get an advantage over another by false representation. No definite and ...view middle of the document...

investment sold to unsuspected investors
b. mutual fund scams where mutual fund is always priced 4pm ET and fund manager will let their favorite customer buy after 4pm ET if it's to their advantage (market timing)
c. during your life time 1 in 3 people will fall under the scam
4. Vendor fraud
a. Overcharging, shipment of inferior goods, no shipping but charged
b. Variety 1 - Buyer in the org. (collusion b/t buyers & vendors)
c. Variety 2 - sometimes done alone (vendors alone)
5. Customer fraud
a. switch tags on products
b. getting something for nothing (shoplifting)
c. deceive org. in giving something they shouldn't
6. Miscellaneous - anything else that doesn't fall in other categories

Two types of prosecution of fraud:
1. Criminal (federal or state level)
a. deals w/ offense of a public nature or against society
b. violates statute
c. fines/jail (statutes will specify)
2. Civil
a. individuals
b. civil suit
c. to get restitution
d. no jail time
e. preponderance of evidence
f. judge/jury-6
g. easier to get guilty plea

1. anti-kickback act (govnt contractors)
2. mail fraud
3. bank fraud
4. RICO --> prosecuting fraud of interstate commerce (racketeer influence corruption org) --> an offense for any person associated w/ an "enterprise" engaged in interstate commerce to conduct the affairs of the enterprise through a "pattern or racketeering activity.
5. Bribery of public officials and witnesses
6. FCPA --> foreign corruption practices act --> 1st act officially required public traded companies to have internal control
7. Securities fraud (insider info.)
a. beyond reasonable doubt
b. 12-men jury
8. Computer fraud
9. Tax evasion

FBI always look for accounting background and fraud experience people

Within org. - internal auditor, security officer, lawyer

Preventing ID theft:
1. mail stuff through US postal mailbox
2. shred all credit card application
3. credit report
4. limit personal info giving out



1. Who commits fraud?
a. people have financial difficulties
b. s.o living beyond their means
c. s.o who's been w/ a company for a while etc.

2. Characteristics:
a. less likely to be caught, convicted than other criminal
b. older people
c. educated, religious, less likely to have criminal record, not abusing alcohol/drugs
d. someone who's likely to be hired

3. Fraud Triangle
a. Perceived pressure (oxygen)
i. financial pressure and greed (living beyond means, unexpected needs, personal financial loss, high debt/bills, poor credit)
ii. vices
iii. work related
iv. other
b. Opportunity (fire)
i. try to eliminate fuel and/or heat
ii. remove one element to prevent fraud
iii. opportunity is the easiest to remove through the use of good internal controls (inplace, supervise, and monitor)
iv. weak internal controls --> people rationalize to commit fraud
c. Rationalization (heat)


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