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Curbing Fraud Through Risk Assessments Essay

3589 words - 15 pages

Curbing Fraud Through Risk Assessments

The purpose of this paper is to discuss the psychology behind why people commit fraud and how a risk assessment can be used to mitigate fraud and risk towards a given organization. The risk assessments portion of the paper will discuss areas such as a process for an effective fraud risk assessment which includes defining a risk scope, risk treatments (acceptance, avoidance, transfer, mitigate, or a combination approach), and most importantly risk monitoring and review through controls. The paper then discusses in detail the importance of proper risk modeling then finished with an analysis on an actual fraudulent activity around the abuses ...view middle of the document...

Cressey’s means if an employee has fallen on hard times and is ashamed or embarrassed to let their situation is known, then they will try and resolve their problem on their own which may lead to desperate acts which then leads to the person selling themselves on the idea that they are stealing for the greater good and don’t feel what they are doing is wrong and still see themselves as an honest and loyal employee. This hypothesis has been well known in the forensics community as the “fraud triangle”

Figure 1.0 Fraud triangle (Healthcare Management Systems, 2011)
The fraud triangle’s three legs represent the three key elements that allow a seemingly candid employee to scam a company. The first leg of the triangle in the upper left side is the “perceived non-shareable problem”. The common perceptions seen by fraudsters in this category are their problem is “a onetime deal” or “I never thought of something like this before” (Wells, 2011). These types of problems often times results from problems resulting from personal failure, physical isolation, and employer employee relations that makes it fell like a person is unable to come forward and admit that they have a serious personal issue without losing credibility with his or hers peers (Wells, 2011). The culmination of these events or situations causes people to “lose sight of the big ethical picture”. One of the most common misperceptions of when people face an ethical decisions is they clearly understand the choice that they are making. When people have to face a stressful situation with a financial problem, the fight or flight response mechanism in the brain turns on to search for a resolution to the problem in the quickest way possible. In the case of financial issues, the problem can cause a person to have tunnel vision and only see stealing as a viable and quick resolution to their problem (Joffe-Walt and Spiegel, 2012). This leads to the base of the triangle, employee opportunity. There are two parts to employee opportunity, general information and technical skill. General information is the simple knowledge that an employee knows they are in a position with their employer to abuse the power of their position or status with their job (Wells, 2011). Technical skill involves to the actual abilities of the employee to be able to take money or other goods to compensate for their personal financial issues without leaving a large trail of evidence behind them (Wells, 2011). Once the opportunity is realized and the logistics of the fraud are planned, then the most important part of the triangle creates the perfect storm for fraud, and that is the rationalization of the fraud itself. In most crimes, the rationalization of fraud occurs after the crime has taken place; however, in fraud the rationalization takes place and is seeded BEFORE the fraudulent activity has been committed (Wells, 2011). Rationalization comes in many different forms; fraudster’s use anything from denial to using other...

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