fraud

Examples of fraud in the following topics:

• Managing to Prevent Fraud

  • Employees are more likely to commit fraud when under situational or financial pressure, and when the opportunity to commit fraud is present .
  • Management helps to prevent fraud by reducing the incentives of fraud.
  • One incentive, the opportunity to commit fraud, can be reduced when accounting functions are separated.
  • For fraud to occur in this situation, two employees must collude to perpetrate the crime.
  • Explain how a company can prevent fraud by establishing internal controls

• Cash Controls

  • If designed well, internal controls can prevent theft and fraud.
  • To minimize errors and fraud, the correct information must flow to the right people in a timely manner.

• Current Issues in Reporting and Disclosure

  • These included more transparency in financial reporting and stronger internal controls to prevent and identify fraud and auditor independence.
  • This act also implemented harsher penalties for fraud, such as enhanced prison sentences and fines for committing fraud.

• Inputs to Accounting

  • Journal entries are an easier means for perpetrating financial statement fraud than adjusting the subledgers.
  • False journal entries figured prominently in the frauds at WorldCom, Cendant, and Xerox.

• Standard-Setting Groups: SEC, AICPA, and FASB

  • The enforcement authority given by Congress allows the SEC to bring civil enforcement actions against individuals or companies alleged to have committed accounting fraud, provided false information, or engaged in insider trading or other violations of the securities law.