GROUP 7
Definition: intentional act, characterized by deceit, concealment, dishonesty,
misappropriation of assets or information, forgery, violation of trust perpetrated, secure
unjust or illegal gains.
Common Fraud Methods: ‘
● Financial Statement Fraud: alter its financial statement, company appears more
profitable, hide losses, altering company records, omitting transactions, creating
fictitious sales, misusing accounting rules, manipulate timing.
● Insider trading: buy, trade stocks or securities based on not yet available information
● Embezzlement: trusted individual, take advantage, steal assets.
● Expense reimbursement of fraud: reimbursement of fictitious or inflated expenses,
mischaracterized expenses, multiple reimbursement.
● Phishing: suspicious email, link, impersonating CEO, froster accounts, series of
complex banks, urgently request transfer.
Fraud triangle
- Opportunity: a combination of circumstances or conditions that enable fraud to occur
(weak IC, lack of oversight, access to sensitive information, lack of security)
- Pressure & Incentive: An actual or perceived need that provides a reason or motive
(Financial debt, desire for a better lifestyle, addiction)
-Rationalization: justify actions in line with their personal ethical standards. This
characteristic depends on an individual’s ethical perspective / a concocted,
convincing, and plausible justification ( entitlement, only temporary or borrowing,
denied that no one is being hurt by the action)
Fraud triangle is useful for: better understanding about the risk that cause fraud
- Educate employee about fraud
- Improve processes and controls
- Promote ethical behavior throughout the organization
How to fight:
- Education and training.
- Whistleblower programs
- Good internal controls
- Effective internal audit function
