FRAUD EXAMINATION ALBRECHT, ALBRECHT, & ALBRECHT Recognizing the Symptoms of Fraud CHAPTER 5

Learning Objectives 1.Understand how symptoms help in the detection of fraud. 2.Recognize and understand accounting symptoms of fraud. 3.Identify internal controls that help detect fraud. 4.Identify and understand analytical symptoms of fraud.

Learning Objectives 5.Realize how lifestyle changes help detect fraud. 6.See how behavioral symptoms help detect fraud. 7.Recognize the importance of tips and complaints as fraud symptoms.

Discuss the Symptoms of Fraud.

List 6 Symptoms of Fraud.

List 6 Symptoms of Fraud (cont’d)

List Irregularities to Look for in Source Documents?

Accounting Anomalies

Identify Symptoms of Journal Entry Fraud.

Discuss the Inaccuracies of Ledgers  Define a Ledger  How do you prove the accuracy of a ledger?  What symptoms relate to control accounts?

List & Explain Internal Control Weaknesses.

List Common Examples of Analytical Anomalies. Explain.

Discuss Questionable Financial Statement Relationships. Explain.

Accounting Anomalies

Comment on Extravagant Lifestyles.

What is the Chain that Leads to Unusual Behavior?

List Some Unusual Behaviors.

Review the Fraud Triangle.

Tips & Complaints Term Match Theft Concealment Conversion Steps Taken by Perpetrator to Hide the Fraud Converting Stolen Assets to Cash & Spending the Cash Actually Taking Cash, Inventory, Information or Other Assets

Discuss Why More Frauds Are Discovered through Tips & Complaints?

Why Do Employees Hesitate to Report Fraud Symptoms?

Discuss the Use of Hotlines.

Match Terms Accounting Anomalies Internal Control Weakness Elements of Fraud Analytical Anomalies Weaknesses in control environment, accounting system or control activities Inaccuracies in journal entries, ledger, etc. Relationships, procedures or events don’t make sense Theft, Concealment, Conversion