Fraud Examination, 3rd Edition

Front Cover......Page 1
Title Page......Page 2
Copyright......Page 3
Contents......Page 6
About the Authors......Page 13
Foreword......Page 15
Preface......Page 17
PART 1 INTRODUCTION TO FRAUD......Page 22
CHAPTER 1 THE NATURE OF FRAUD......Page 24
Seriousness of the Fraud Problem......Page 25
What Is Fraud?......Page 28
Types of Fraud......Page 31
Criminal and Civil Prosecution of Fraud......Page 34
How to Prepare to Be a Fraud-Fighting Professional......Page 37
Fraud-Related Careers......Page 38
Key Terms......Page 40
Questions & Cases......Page 41
Short Cases......Page 44
Extensive Cases......Page 46
Debates......Page 49
End Notes......Page 50
CHAPTER 2 WHY PEOPLE COMMIT FRAUD......Page 52
Who Commits Fraud......Page 53
The Fraud Triangle......Page 54
The Element of Pressure......Page 56
The Element of Opportunity......Page 59
The Element of Rationalization......Page 70
Summary of the Fraud Triangle......Page 72
Fraud Recruitment......Page 73
Questions & Cases......Page 76
Short Cases......Page 79
Extensive Cases......Page 83
End Notes......Page 86
CHAPTER 3 FIGHTING FRAUD: AN OVERVIEW......Page 90
Fraud Prevention......Page 91
Fraud Detection......Page 101
Fraud Investigation......Page 104
Follow-Up Legal Action......Page 107
Review of the Learning Objectives......Page 108
Questions & Cases......Page 109
Short Cases......Page 112
Extensive Cases......Page 114
Internet Assignments......Page 116
End Notes......Page 117
PART 2 FRAUD PREVENTION......Page 118
CHAPTER 4 PREVENTING FRAUD......Page 120
Just About Everyone Can Be Dishonest......Page 121
Creating a Culture of Honesty, Openness, and Assistance......Page 122
Eliminating Opportunities for Fraud to Occur......Page 130
Why Insurance Fraud Succeeds......Page 137
Preventing Fraud—A Summary......Page 138
A Comprehensive Approach to Fighting Fraud......Page 139
Organizations & Fraud—The Current Model......Page 140
Review of the Learning Objectives......Page 142
Questions & Cases......Page 143
Short Cases......Page 145
Extensive Cases......Page 147
Debates......Page 149
End Notes......Page 150
PART 3 FRAUD DETECTION......Page 152
CHAPTER 5 RECOGNIZING THE SYMPTOMS OF FRAUD......Page 154
Symptoms of Fraud......Page 155
Accounting Anomalies......Page 157
Internal Control Weaknesses......Page 161
Analytical Fraud Symptoms......Page 163
Extravagant Lifestyles......Page 166
Unusual Behaviors......Page 167
Tips and Complaints......Page 170
Review of the Learning Objectives......Page 176
Questions & Cases......Page 177
Short Cases......Page 179
Extensive Cases......Page 181
End Notes......Page 183
CHAPTER 6 DATA-DRIVEN FRAUD DETECTION......Page 184
Anomalies vs. Frauds......Page 185
The Data Analysis Process......Page 186
Data Access......Page 189
Data Analysis Techniques......Page 191
Real-Time Analysis......Page 199
Analyzing Financial Statement Reports......Page 200
Key Terms......Page 207
Questions & Cases......Page 208
Short Cases......Page 211
Extensive Cases......Page 213
End Notes......Page 218
APPENDIX A: Examples of the Data-Driven Approach......Page 219
PART 4 FRAUD INVESTIGATION......Page 224
CHAPTER 7 INVESTIGATING THEFT ACTS......Page 226
When to Investigate......Page 227
Theft Act Investigative Methods......Page 228
A Comprehensive Example of Using Theft Act Investigation Methods......Page 238
Review of the Learning Objectives......Page 240
Questions & Cases......Page 241
Short Cases......Page 244
Extensive Cases......Page 246
Internet Assignments......Page 247
End Notes......Page 248
CHAPTER 8 INVESTIGATING CONCEALMENT......Page 250
Concealment Investigative Methods......Page 251
Review of the Learning Objectives......Page 264
Questions & Cases......Page 265
Short Cases......Page 267
Extensive Cases......Page 268
End Notes......Page 269
CHAPTER 9 CONVERSION INVESTIGATION METHODS......Page 270
Conversion Searches......Page 271
Government Sources of Information......Page 272
Private Sources of Information......Page 276
Online Databases......Page 277
Internet Search......Page 279
The Net Worth Method......Page 280
Key Terms......Page 282
Questions & Cases......Page 283
Short Cases......Page 285
Extensive Cases......Page 288
Internet Assignments......Page 290
End Notes......Page 291
CHAPTER 10 INQUIRY METHODS AND FRAUD REPORTS......Page 292
Interviewing—An Overview......Page 293
Understanding Reaction to Crisis......Page 294
Planning an Interview......Page 297
Mechanics of the Interview......Page 302
The Fraud Report......Page 327
Review of the Learning Objectives......Page 328
Questions & Cases......Page 329
Short Cases......Page 332
Extensive Cases......Page 335
Internet Assignments......Page 336
End Notes......Page 337
APPENDIX A: Sample Signed Statement......Page 338
APPENDIX B: An Example Fraud Report......Page 339
PART 5 MANAGEMENT FRAUD......Page 374
CHAPTER 11 FINANCIAL STATEMENT FRAUD......Page 376
The Problem of Financial Statement Fraud......Page 379
A Framework for Detecting Financial Statement Fraud......Page 388
Review of the Learning Objectives......Page 399
Questions & Cases......Page 400
Short Cases......Page 402
Extensive Cases......Page 404
End Notes......Page 408
APPENDIX A: Recent Laws and Corporate Governance Changes Following the Sarbanes-Oxley Act......Page 410
APPENDIX B: Strategic Reasoning in the Audit Setting......Page 421
CHAPTER 12 REVENUE- AND INVENTORY-RELATED FINANCIAL STATEMENT FRAUDS......Page 422
Revenue-Related Fraud......Page 423
Inventory and Cost of Goods Sold Frauds......Page 436
Review of the Learning Objectives......Page 446
Questions & Cases......Page 447
Short Cases......Page 450
Extensive Cases......Page 454
Internet Assignments......Page 456
End Notes......Page 457
APPENDIX A: Strategic Reasoning and Detecting Revenue- and Inventory-Related Fraud......Page 458
CHAPTER 13 LIABILITY, ASSET, AND INADEQUATE DISCLOSURE FRAUDS......Page 468
Understating Liabilities......Page 469
Overstatement of Asset Fraud......Page 480
Inadequate Disclosure Fraud......Page 493
Other Types of Financial Statement Fraud......Page 498
Questions & Cases......Page 501
Short Cases......Page 505
Extensive Cases......Page 508
Internet Assignments......Page 511
End Notes......Page 512
APPENDIX A: Strategic Reasoning and Detecting Liability, Asset, and Inadequate Disclosure Frauds......Page 513
PART 6 OTHER TYPES OF FRAUD......Page 522
CHAPTER 14 FRAUD AGAINST ORGANIZATIONS......Page 524
Fraud Statistics......Page 525
Asset Misappropriations......Page 527
Corruption......Page 536
Questions & Cases......Page 541
Short Cases......Page 543
Extensive Cases......Page 546
Internet Assignments......Page 547
End Notes......Page 548
CHAPTER 15 CONSUMER FRAUD......Page 550
Consumer Fraud and Its Seriousness......Page 551
Identity Theft......Page 552
Other Types of Consumer and Investment Scams......Page 564
Review of the Learning Objectives......Page 576
Questions & Cases......Page 577
Short Cases......Page 580
Extensive Cases......Page 582
End Notes......Page 584
CHAPTER 16 BANKRUPTCY, DIVORCE, AND TAX FRAUD......Page 586
Overview of Tax, Divorce, and Bankruptcy Frauds......Page 587
Tax Fraud......Page 588
Divorce Fraud......Page 592
Bankruptcy Fraud......Page 593
Bankruptcy and Divorce Fraud Schemes—The Planned Bankruptcy (Bust-Out)......Page 600
Fraudulent Concealment of Assets or Income in Bankruptcies or Divorces......Page 601
Fraudulent Transfers......Page 602
Money Laundering......Page 603
Key Terms......Page 607
Questions & Cases......Page 608
Short Cases......Page 610
Extensive Cases......Page 614
End Notes......Page 615
APPENDIX A: Affidavit of Proposed Investigator......Page 616
APPENDIX B: Application for Retention of Investigator......Page 620
CHAPTER 17 FRAUD IN E-COMMERCE......Page 624
Fraud Risks in E-Commerce......Page 625
Preventing Fraud in E-Commerce......Page 630
Detecting E-Business Fraud......Page 633
Questions & Cases......Page 635
Short Cases......Page 637
Extensive Cases......Page 638
End Notes......Page 640
PART 7 RESOLUTION OF FRAUD......Page 642
CHAPTER 18 LEGAL FOLLOW-UP......Page 644
The Court System......Page 645
Overview of the Civil Litigation Process......Page 647
Overview of the Criminal Litigation Process......Page 650
Being an Expert Witness......Page 653
Questions & Cases......Page 656
Short Cases......Page 658
Extensive Cases......Page 661
Internet Assignments......Page 662
End Notes......Page 663
Appendix: Financial Statement Fraud Standards......Page 664
Bibliography......Page 672
Glossary......Page 674
Index......Page 684