1. FORENSIC ACCOUNTING - BA124 – Spring 2015 Today’s Topics n Why Fraud? n Who commits fraud n The fraud triangle n Pressures n Opportunity and control issues n Rationalization n Power and influence…collusion

2. FORENSIC ACCOUNTING - BA124 – Spring 2015 Who Commits Fraud? n In essence…you and I

3. FORENSIC ACCOUNTING - BA124 – Spring 2015 Why Commit Fraud? n The fraud triangle n Situational pressures n Available opportunities n Personal integrity (rationalization)

4. FORENSIC ACCOUNTING - BA124 – Spring 2015 Situational Pressures n Financial n Vice n Work related n Other pressures n The thrill or challenge n Extraordinary circumstances “Every man has his price, and he was getting close to mine.” Abraham Lincoln, on throwing a lobbyist out of his office

5. FORENSIC ACCOUNTING - BA124 – Spring 2015 Available Opportunities n COSO’s elements of control n Control environment n Appropriate systems n Procedures and activities n Note the information in Albrecht

6. FORENSIC ACCOUNTING - BA124 – Spring 2015 Control Environment n Management example n Management communication n Hiring practices n Organizational structure n Effective internal audit department or similar oversight

7. FORENSIC ACCOUNTING - BA124 – Spring 2015 Procedures & Activities n Segregation of duties n System of authorizations n Independent checks n Physical safeguards n Documents and records

8. FORENSIC ACCOUNTING - BA124 – Spring 2015 Factors That Promote Fraud n Outcomes that are difficult to evaluate n Failure to discipline n Complexity or lack of access to information n Apathy n Missing or non-existent audit trail

9. FORENSIC ACCOUNTING - BA124 – Spring 2015 Rationalization n Pathological lying n “Everyone does it.” n See the list on page 50

10. FORENSIC ACCOUNTING - BA124 – Spring 2015 Power and Influence n Different types…see pg. 53 n Influences co-conspirator n Knowledge may protect us and assist in investigation