A Deeper Look at Fraud Examination and the Fraud Triangle Janice Shields Florida Atlantic University Author Note Janice P. Shields, Department of Accounting, Florida Atlantic University Abstract
This paper explores five published articles that This paper explores fraud examination and the fraud triangle and how they are correlated with the investigation process
The purpose of the paper is to explain the different motives behind the fraud triangle and how a forensic accountant can use it. This paper also explains what the fraud examination process may consist of and what the requires are in order to become a Forensic Accountant in the State of Florida
Keywords: fraud examination, fraud triangle, opportunity, pressure, rationalization,
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The Title 18 of the U.S Code covers the different types of financial crimes laws such as money laundering, embezzlement, extortion and other economic crimes. A fraud examiner must determine what laws were violated in the process of crime once the evidence of fraud is present. Once the fraud examiner has made the determination that fraud has occurred, he or she will have the option to reach out to other channels such as law enforcement to move forward the investigation ."One advantage of turning the case over to law enforcement is that authorities often have considerably stronger investigative powers such as obtaining subpeanas for employees personal banking , credit, and phone records(Hopwood S. William, Leiner J. Jay, Young R. George, (2012) )"
In order to ensure that a Forensic Accountant is qualified to conduct such an investigation there are several requirements that must be obtained. A Forensic Accountant in the state of Florida must have Baccalaureate degree . You must have at least one hundred fifty hours of college credits. You must also apply to your CPA License, which requires you take a CPA exam and pass it. You must also have one year of experience under a CPA. In conjunction with obtaining CPA license , you must also complete Master's program required for semester 'hours .(http://www.accountingedu.org/florida.html
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B. (2016, Aug 23). The 'fraud triangle'. Business Mirror Retrieved from http://ezproxy.fau.edu/login?url=http://search.proquest.com/docview/1813909835?accountid=10902 Hopwood S. William, Leiner J. Jay, Young R. George, (2012) Forensic Accounting and Fraud Examination Eaton, T. V., & Korach, S. (2016). A criminological profile of white-collar crime. Journal of Applied Business Research, 32(1), 129. Retrieved from http://ezproxy.fau.edu/login?url=http://search.proquest.com/docview/1778070961?accountid=10902
Alalehto, T. (2015) White Collar Criminals: the State of Knowledge. The Open Criminology Journal, 8: 28-35 http://dx.doi.org/10.2174/1874917801508010028
* Steven Dellaportas , Author Vitae
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School of Accounting, Economics and Finance, Deakin University, 221 Burwood Hwy, Burwood, Victoria 3125, Australia
Khairul Mizan Zakaria, Anuar Nawawi, Ahmad Saiful Azlin Puteh Salin, (2016) "Internal controls and fraud – empirical evidence from oil and gas company", Journal of Financial Crime, Vol. 23 Issue: 4, pp.1154-1168, doi: 10.1108/JFC-04-2016-0021 Permanent link to this document: http://dx.doi.org/10.1108/JFC-04-2016-002
Weld, L. G., Bergevin, P. M., & Magrath, L. (2004). Anatomy of a financial fraud. The CPA
Financial statement fraud makes up a marginal (less than 10%) percentage of occupational fraud cases, but the median loss is significantly higher at $975,000. A fraud scheme occurring over a significant amount of time will likely result in much higher median losses. For example, a fraud scheme lasting more than five years could result in median losses of $850,000. Larger companies are more likely able to implement strong anti-fraud controls due to size and finances, therefore, smaller companies become more susceptible to fraud schemes due to lack of proper preventive controls. Preventive controls include: implementing internal controls, continually updating the company’s Code of Conduct, rotating jobs/duties, and
Taking a look at Donald Cressey’s hypotheses which is now known as the fraud triangle depicts the certain criteria for the mind frame of the fraudster. The fraud triangle is a theory that consists of perceived pressures, perceived opportunity, and rationalization. It gives us the different pressures placed on individuals that would make them consider “cooking the books.” It also demonstrates where the possible opportunity lies so that we may take precautions to eliminate the opportunity. Last, it demonstrates how a fraudster rationalizes with themselves to make committing the fraud okay. Donald Cressey believes all three elements must be present for fraud to occur. Upper management is usually the focus of financial statement fraud because financial statements are done at the management level. So in this case financial statement fraud was committed by the CEO Gregory Podlucky
Hanson, J. R. (n.d.). Fraud or confusion? RDH Magazine, 19(4). Retrieved 3 15, 2014, from http://www.rdhmag.com/articles/print/volume-19/issue-4/feature/fraud-or-confusion.html
Madura, Jeff. What Every Investor Needs to Know About Accounting Fraud. New York: McGraw-Hill, 2004. 1-156
Shover, N, & Hochstetler, A. (2006). Choosing white-collar crime. New York, NY: Cambridge University Press.
Perri, J.D., CFE, CPA, F. (2011, January/February). White-collar crime punishment too much or not enough?. FRAUDMAGAZINE, Retrieved from http://www.all-about-forensic-science.com/support-files/white-collar-crime-punishment.pdf
Corporate crimes was not necessarily seen as a public issue until the nineties when it was no longer just an issue in North America but a global concern, and this type of crime became a high concern during this time for this offence (Sheptycki, 2003). The implications and findings of corporate crime are often well hidden in the past and often take forensic accountants, accountants that use investigation skills in order to find certain aspects of corporate crime, for the investigations (Nurse, 2002). One of the major aspects of corporate crime is that of workplace safety training and market fraud unlike regular crimes or law offences this type of white collar corporate crimes have that its legally handled by educational and administrative measures (Comack, 2014). Unsurprisingly the age of those who participated in these white-collar crimes are typically between the ages of forty and have a variety in the way of sentencing (Bergeon & McKelvine,
In today’s day and age, there is a lot of news that is related to corporate accounting fraud as companies intentionally manipulate their financial statements to show a better picture of their financial health. The objective of financial reporting is to provide financial information about a company to its various stakeholders such as investors and creditors so that these stakeholders can make decisions accordingly. Companies can show a better image of their financial well being by providing misleading information. This can be done by omitting material information from the books or deceitful appropriation of assets such as inventory theft, payroll fraud, check forgery or embezzlement. Fraudulent financial reporting will have an effect on the This includes but is not limited to; check forgery, inventory theft, cash or check theft, payroll fraud or service theft.
Giroux, G. (Winter 2008). What went wrong? Accounting fraud and lessons from the recent scandals. Social Research, 75, 4. p.1205 (34). Retrieved June 16, 2011, from Academic OneFile via Gale:
According to Sutherland, detailed documentation proved that white collar criminals have “rap sheets” which resemble in terms of length and frequency to those of professional but conventional offenders. In other words, white collar criminals committed just as many criminal acts and just as often as those who committed conventional crimes such as bank robberies or con men. This concept is what Walters and Geyer’s research was founded and focused
The installation of conventional integrated databases in governments and corporations can come in handy, with the assistance of forensic regulators. The approach will create a working environment where detailed information is captured and recorded at every management level. When regulators perceive any fraudulent act by an individual or corporation, it should be succeeded with investigation/inquiry by an assigned law enforcement authority. Regarding investigation and enforcement, requisite funds and resources should be provided to enable a law enforcement/regulatory framework that incorporates various units to deal with different specialties. For example, special task forces could deal with distinct domains such as pyramid schemes, bribery or forgery.
Separation of duties is a security measure in order to prevent fraudulent reporting. Certain duties within the financial aspects of an organization are separated in order to prevent conflicting tasks to be conducted by the same user (Lu, Zhang, & Sun, 2009). The internal control practice of separation of duties failed to prevent fraudulent reporting because even though the CEO suspected the fraud he did not do anything about it. In the case study, the CEO and CFO both knew the controller was reporting revenues fraudulently. The CFO knew that meeting the required revenue numbers were important to the CEO; however, he did not prohibit the controller from making up the numbers in order to meet the bonus for himself and the stockholders (Edmonds, Tsay, & Olds, 2011).
ABSTRACT: The quantity of accounting fraud cases keeps on rising. Fraud is a consistent thing that will reliably be around, and in a bigger number of routes than just a single. An extensive apportionment of organizations out there fighting fraud, either from within the organization, or from outside the organization. Knowing how to manage this is essential for an organization to be productive over an extended period of time. The investigation regarding the matter of accounting fraud will utilize sources from the web and the DeVry School Library.
Champion, D 2011, ‘White-collar crimes and organizational offending: An integral approach’, International Journal of Business, Humanities, and Technology, vol. 1 no. 3, pp. 34-35.