CONSIDERATION OF FRAUD
Typical Techniques Used to Commit Fraud
Fraud Designed to benefit the Organization
· Falsified sales
· Improper payments, such as bribes, kickbacks
· Intentional overstatement of asset value and income, understatement of liabilities or expenses
· Improper related party transactions
· Intentional failure to disclose significant information
· Engaging in prohibited business activities, such as those against the law or in violation of contract terms
· Tax fraud
Fraud Perpetrated to the Detriment of the Organization
· Acceptance of bribes or kickbacks
· Diversion to an employee or outsider of a transaction that should have benefited the organization
· Embezzlement
· Intentional concealment or misrepresentation of events or data
Red Flags
Organizational Red Flags
· Weak internal controls
· Unethical leadership
· Lack of fraud policy
· Control by a single person over key functions
· Management requires unreasonable productivity
· Disagreements between employees and employer
· Impending company closing
· Fiscal problems
· Type of business
· Inadequate screening of job applicants
· Accounting books difficult to decipher
· Unusual transactions
· Extremely low or high employee turnover in key positions
Individual Red Flags
· Significant behavioral changes
· Adversarial attitude toward auditors
· Reluctance to be away from the office
· Desire to maintain complete controller over an operation
· Personal problems or debt
· Changes in lifestyle or spending habits
· Unusual allegiance to a certain vendor
· Job dissatisfaction