Chapter 2

Question 1

Fraud definition

Answer 1

A knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment. It could be a tort (civil matter) or it could be criminal.

Question 2

Categories of Occupational Fraud

Answer 2

1. Asset misappropriation:
   * Asset misappropriation is the theft or misuse of funds or assets
2. Corruption

• • Corruption schemes involve the employee’s use of his or her influence in business transactions in a way that violates his or her duty to the employer for the purpose of obtaining a benefit for him- or herself or someone else.
• Examples of corruption schemes include bribery, extortion, and conflicts of interest

3. Fraudulent statements

• • Fraudulent statements are those involving the intentional misstatement or omission of material information in the organization’s financial reports. Common methods of fraudulent financial statement manipulation include recording fictitious or premature revenues, concealing liabilities or expenses, and artificially inflating reported assets.

Question 3

Cash theft (3 ways)

Answer 3

Fraudulent Disbursements: involve unauthorized or fictitious payments made by a business or organization, and can include false invoices or timecards to create a false payment obligation for a company. Includes:

• Billing
• Expense reimbursement
• Check tampering.
• Payroll
• Register disbursement

Skimming: is the theft of cash or payments during their collection but before they are recorded on the company books.

Cash Larceny: the theft of cash or payment after it has been recorded.