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Chapter 1

Chapter 1. Introduction to Fraud Examination. Discipline of Fraud Examination. Resolving allegations of fraud Forensic accounting vs. fraud examination. Issue Auditing Fraud Examination. Timing. Auditing vs. Fraud Examination. Scope. Objective. Relationship. Methodology. Presumption.

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Chapter 1

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  1. Chapter 1 Introduction to Fraud Examination

  2. Discipline of Fraud Examination • Resolving allegations of fraud • Forensic accounting vs. fraud examination

  3. IssueAuditingFraud Examination Timing Auditing vs. Fraud Examination Scope Objective Relationship Methodology Presumption

  4. Predication Fraud examinations must be based on predication Fraud Examination Methodology

  5. Fraud Theory Approach • Analyze • Create • Test • Refine and amend

  6. Document Analysis Corroborative Witnesses T Target Co-Conspirators Neutral Third-Party Witnesses Tools Used in Fraud Examination Observation

  7. Defining Occupational Fraud and Abuse • Occupation • Personal enrichment • Deliberate misuse or misapplication

  8. Elements of Fraud • material • Knowledge • Reliance • Damages

  9. Occupational Fraud and Abuse Research • Edward Sutherland • Donald Cressey • Cressey’s Hypothesis • Albrecht • Hollinger & Clark

  10. Opportunity Fraud Triangle Pressure Rationalization

  11. 2006 Report to the Nation on Occupational Fraud & Abuse • Nationwide surveys • Measuring the costs of occupational fraud • 6 percent lost to fraud • $800 billion annually in the U.S. • Perpetrators of fraud

  12. Occupational Fraud and Abuse Corruption Asset Misappropriations Fraudulent Statements Conflicts of Interest Cash Financial Bribery Inventory & All Other Assets Nonfinancial Illegal Gratuities Economic Extortion

  13. Occupational Management Investment Scams Vendor Customer Victim: Employers Perp: Employee Victim: Stockholders, lenders Perp: Top management Victim: Investors Perp: Con men/women Victim: Organizations that buy goods/services Perp: Vendors Victim: Organizations that sell goods/services Perp: Purchaser Fraud Types & Victims

  14. Purpose: To right a wrong Penalty: Jail/fines Burden of Proof: Beyond a reasonable doubt Jury: must be 12 Organization: Grand jury  indictment Verdict: unanimous Claims: only 1 at a time To obtain a remedy Restitution/damage payments Preponderance of evidence Fewer than 12 Filing of claim by plaintiff Less than unanimous Many claims can be joined @ 1 time. Criminal vs Civil Responses to Fraud

  15. Criminal versus Civil Responses to Fraud

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