1. Albrecht, Albrecht, Albrecht, Zimbelman © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Fraud Examination Chapter 14 Fraud Against Organizations

2. Albrecht, Albrecht, Albrecht, Zimbelman © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. To The Student  This chapter, the first in Part 6 where we discuss various types of frauds, focuses on frauds against organizations, sometimes called occupational fraud. These types of fraud are by far the most common, and nearly every organization experiences occupational fraud.  In this chapter, we cover embezzlement and theft, commonly referred to as asset misappropriation, and corruption, where employees use their influence in business transactions to obtain unauthorized benefits contrary to their duties to their employers.

3. Albrecht, Albrecht, Albrecht, Zimbelman © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Learning Objectives  Understand the extent to which employees and others commit occupational fraud.  Describe the nature and various types of asset misappropriations.  Discuss the nature and various types of corruption.

4. Albrecht, Albrecht, Albrecht, Zimbelman © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Occupational Fraud  Occupational fraud and abuse impose enormous costs on an organization.  Occupational fraud schemes can be very difficult to detect.  Occupational frauds are more likely to be detected by a tip than other means such as internal audits, external audits, or internal controls.  The size of the loss caused by occupational fraud is strongly related to the position of the perpetrator.

5. Albrecht, Albrecht, Albrecht, Zimbelman © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Fraud Statistics 2010 ACFE Report to the Nation on Occupational Fraud & Abuse covers three types of fraud against organizations: (1)Asset Misappropriation- any scheme that involves the theft or misuse of an organization’s assets (2)Corruption- any scheme in which a person uses his or her influence in a business transaction to obtain an unauthorized benefit contrary to that person’s duty to his or her employer (3)Fraudulent statements – fabrication of an organization’s financial statements to make the company appear more or less profitable

6. Albrecht, Albrecht, Albrecht, Zimbelman © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Asset Misappropriations Opportunities to steal assets: 1.Steal receipts of cash and other assets that come into an organization. 2.Steal cash, inventory, and other assets that are on hand. 3.Commit disbursement fraud by having the organization pay for something it shouldn’t or pay too much for something.

7. Albrecht, Albrecht, Albrecht, Zimbelman © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Asset Misappropriations

8. Albrecht, Albrecht, Albrecht, Zimbelman © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Asset Misappropriations

9. Albrecht, Albrecht, Albrecht, Zimbelman © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Corruption  Corruption can be broken down into the following four scheme types:  bribery schemes  conflict of interest schemes  economic extortion schemes  Illegal gratuity schemes

10. Albrecht, Albrecht, Albrecht, Zimbelman © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Types of Corruption

11. Albrecht, Albrecht, Albrecht, Zimbelman © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Fraudulent Statements Definition Fabrication of an organization’s financial statements to make the company appear more or less profitable. Financial statement frauds were covered in Chapters 11-13.