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Assignment 24

- Forensic accounting is the use of accounting and investigative techniques to detect financial crimes. It involves discovering evidence of fraud, embezzlement or other financial wrongdoing. - Management fraud involves fraud committed by members of management or governance, while employee fraud only involves non-management employees. - The fraud triangle identifies motivation, opportunity, and rationalization as factors that contribute to why individuals commit fraud. Forensic accountants study the fraud triangle to understand why fraud occurs.

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Shamraj E. Sunderamurthy
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271 views4 pages

Assignment 24

- Forensic accounting is the use of accounting and investigative techniques to detect financial crimes. It involves discovering evidence of fraud, embezzlement or other financial wrongdoing. - Management fraud involves fraud committed by members of management or governance, while employee fraud only involves non-management employees. - The fraud triangle identifies motivation, opportunity, and rationalization as factors that contribute to why individuals commit fraud. Forensic accountants study the fraud triangle to understand why fraud occurs.

Uploaded by

Shamraj E. Sunderamurthy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Accounting Research (1st Sem AY 2020-2021) Assignment 24

Javier, Jaypee T.

Discussion Question 3.

Define Forensic Accounting.

- Forensic accounting is a combination of accounting and investigative techniques used to


discover financial crimes.1

Discussion Question 4.

Define Fraud and identify four examples of Fraud.

- Fraud is an intentionally deceptive action designed to provide the perpetrator with an


unlawful gain or to deny a right to a victim. Types of fraud include tax fraud, credit card
fraud, wire fraud, securities fraud, and bankruptcy fraud. Fraudulent activity can be
carried out by one individual, multiple individuals or a business firm as a whole.2
The four examples of Fraud are:
 Falsifying time cards
 Duplicating payments made by his/her employer
 Stealing assets of his/her employer or using assets for personal needs
 Recording false refunds for personal gain

Discussion Question 5.

What are the three components of the fraud triangle? Of what concern are they to the
fraud examiner?

- The three components of the fraud triangle consist of Motivation, Opportunity, and
Justification. The Fraud Triangle helps fraud examiners understand why individuals
commit fraud.

Discussion Question 7.

Differentiate between management fraud and employee fraud.

Management fraud involves one or more members of management or those charged with
governance.

Those charged with governance -"Governance” is the term used to describe the role of persons
entrusted with the supervision, control, and direction of an entity. Those charged with
governance ordinarily are accountable for ensuring that the entity achieves its objectives,
Accounting Research (1st Sem AY 2020-2021) Assignment 24
Javier, Jaypee T.

financial reporting, and reporting to interested parties. Those charged with governance include
management only when it performs such functions.

Employee fraud involves only employees of the entity. Fraud may also involve third parties
outside the entity through collusion by management, those charged with governance or
employees.

Exercise 4.

Access the Fraud Information Center (www.fraud.org), and locate and describe three
types of fraud reported by the Fraud Information Center.

- Three types of fraud reported by the Fraud Information Center on its Web site include: 3
1. Telemarketing Fraud involves someone fraudulently trying to sell a product over the
phone.
2. Internet Fraud involves utilizing the internet as a way of conducting fraudulent
activities.
3. Identity Theft involves illegally taking possession of another person’s identity in order
to have access to the person’s private information and to engage in fraudulent
activities for personal gain.

Exercise 6.

Access a recently issued SEC Accounting and Auditing Enforcement Release related to a
fraud action (www.sec.gov). Click on enforcement and determine incentive(s)/ pressure
to commit the fraud, accounting issue(s), and the motive for the fraud.

- A recently issued SEC Accounting and Auditing Enforcement Release related to a fraud
action involved a revenue fraud scheme that helped the corporation to report untruthful
information in the financial statements by overestimating its revenues and earnings. The
accounting issue was that the company overestimated profits by accelerating material
amounts of revenues to make the company look better compared to its competitors. The
incentive/pressure to commit the fraud was to make sure that the company met the
financial results estimated by the market in order to increase the price of the company’s
common stock. The motive of the fraud was to show to investors that the company is
profitable and healthy.4

Exercise 8.
Accounting Research (1st Sem AY 2020-2021) Assignment 24
Javier, Jaypee T.

Locate four websites on fraud, and briefly describe their contents.

- Four Web sites that are about fraud include the following:
1. KnowX Web site helps investigators in cases involving fraudulent activities by
providing them access to information about companies, individuals and assets so
that they can more easily locate and analyze information.
2. Zoominfo.com is a Web site that provides useful information about companies and
individuals to fraud examiners so that they are able to locate and analyze information
needed for cases involving fraudulent activities.
3. The Association of Certified Fraud Examiners provides publications, newsletters,
articles, reports, official documentation and other tools to fraud investigators in order
help them identify and assess fraudulent activities.
4. The Fraud Information Center Web site informs fraud examiners about any current
form of fraudulent activities and how to locate and evaluate them.

Knowledge Busters 1.

During an audit engagement, the audit partner informs the audit team that the
engagement this year should include some forensic services as part of the audit.
However, the audit manager informs the team that not only would the auditing standards
need to be followed. But also, the new Statement on Standards for Forensic Services.
Discussion among the team focuses on the issue as to whether both sets of standards
must be adhered to in this year’s audit engagement. Therefore, you are required to
develop a report to the partner as to this concern.

InstPh 3.

Differentiate “Forensic Accounting” from “Accounting Research” with regards to subject


for research. List at least 2 research titles pertaining to Forensic Accounting. Do not
forget to list your “References.”

-
1
https://www.investopedia.com/terms/f/forensicaccounting.asp
2
https://www.investopedia.com/terms/f/fraud.asp
3
https://fraud.org/
4
https://www.sec.gov/

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