A Brief Note On Occupational Fraud And Financial Fraud

What motivates someone to commit financial statement fraud? In public companies, there is a fiduciary obligation of management to the shareholders to provide true and correct information through financial statements. Concurrently, management is responsible for the performance of the public company it manages. If a shareholder is not satisfied with the performance of a company, the shareholder can try to sell the shares in the open market. Thus, in order to keep the capital provided by the investors†¦ I am reaching out to you today to discuss the possibility of fraud within the Apollo Shoes financial statements. After reading through some company documents in preparation of this Audit I have noticed multiple red flags that although in themselves do not constitute fraud outright, they do demand that we investigate this issues further to ensure fraud is not taking place. Through my initial research I believe the possibility of fraud at Apollo Shoes to be very high, and as such we must take precautionary†¦ How Financial Fraud can be detected Fraud is a pricey crime in the business corporation regardless of their industry sector or size. ASA 240.11 (ISA 240.11) illustrated fraud is an intentional act of misrepresentation by management, employees, or third parties, implicating the use of deception in order to access an illegal or unjust benefit (Gay & Simnett 2015, p. 258). Auditors usually concern two main types of material misstatements that are caused by fraud in the financial report (Gay & Simnett†¦ The effect of occupational fraud and abuse on the company Occupational fraud and abuse is defined as â€Å"The use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets† (2012 Report To Nations On Occupation Fraud And Abuse, 2012). Occupational fraud entails deceiving employing organization to obtain resources or assets for personal gain and abuse involves misapplication of the resources provided by the employer†¦ Financial Statement Fraud Company financial statements provides information that is utilized by investors to evaluate the conduct of managers and to compose economic arrangements (Chinniah, 2015, p. 1). The consumers of the financial statement may consider the financial information received as dependable and appropriate for its function (p. 1). Chinniah indicates accounting standards and regulations have been put in place to try to certify the financial information provided is consistent with†¦ Financial Statement Fraud The auditor will focus on the red alerts that have been cited to point out to the probability that there is a case of fraud in the organization. The auditor will, through the memo, make it clear to the employees that indications of fraud and the steps that will be taken in relation to citing the scam in the instances it occurred. The red flags will be clearly cited in the memo. Through the red flags, the employees will comprehend the shortcomings associated with the†¦ Introduction: An audit is a process of examining the financial statements for accuracy and free of fraud. According to the textbook, Intermediate Accounting by Spiceland chapter one, it said â€Å"Audits add credibility to the financial statements, increasing the confidence of those who rely on the information† (page. 16, 2016). After the frauds scandal of WorldCom and other companies, the investors lost their confidence in the accounting department (page.16, 2016). To increase the investors’ confidence†¦ Financial Statement Fraud Investigation Frisbey (2015) indicated that forensic accountants should be able to effectively communicate with the management and involved personnel as to the factors of the existence of fraud indicators, to be able to perform essential analytics and independent testing such as horizontal and vertical testing techniques to detect fraud or to examine the validity of evidence being investigated (p.8-9). Frisbey mentioned that forensic accountants should, for example, request†¦ Evaluate any damaging financial and ethical repercussions of failure to include the inventory write-downs in the financial statements. Prepare a recommendation to the CFO, evaluating the negative impact of a civil fraud penalty on the corporation as a result of the IRS audit. In the recommendation, include essential internal control procedures to prevent fraudulent financial reporting from occurring, as well as the major obligation of the CEO and CFO to ensure compliance. Inventory write-downs are†¦ Credit Card Fraud is estimated to cost $1.6 Billion Annually each year according to Government reports by Attorney General’s across the US. With 36 Billion transactions are completed annually 1 out of 1100 transactions are fraudulent. It is either because the card is physically lost or stolen off the persons or the information from the card itself has been compromised. The hacker or Thief then uses the card on line to purchase items or gift cards or they use them in person at kiosks, gas stations†¦