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FRAUD - 3rd Group

This document discusses fraud, including definitions, types, and ways to prevent and detect it. It defines accounting fraud and the three basic types: asset misappropriation, bribery/corruption, and financial statement fraud. Asset misappropriation is the most common type. To prevent fraud, management should [1] educate themselves on fraud indicators, [2] segregate accounting functions, and [3] establish a strong control environment. They should also [4] initiate annual external financial statement examinations. Methods of detecting fraud include checking managerial relationships, the nature of the organization, financial statements, operations, and conducting internal and external audits.

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Dwi Noviana
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122 views18 pages

FRAUD - 3rd Group

This document discusses fraud, including definitions, types, and ways to prevent and detect it. It defines accounting fraud and the three basic types: asset misappropriation, bribery/corruption, and financial statement fraud. Asset misappropriation is the most common type. To prevent fraud, management should [1] educate themselves on fraud indicators, [2] segregate accounting functions, and [3] establish a strong control environment. They should also [4] initiate annual external financial statement examinations. Methods of detecting fraud include checking managerial relationships, the nature of the organization, financial statements, operations, and conducting internal and external audits.

Uploaded by

Dwi Noviana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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FRAUD

3rd Group

HERNINDA PITALOKA
63030170023

ANITA WAHYU ALVIANI


63030170026
DEFINITION OF FRAUD

Accounting fraud is the intentional manipulation


of financial statements to create a false
appearance of corporate financial health.
Furthermore, it involves an employee,
accountant, or the organization itself misleading
investors and shareholders. A company can falsify
its financial statements by overstating its
revenue, not recording expenses, and misstating
assets and liabilities.
Type of Fraud
Three Basic Fraud
It goes by several different
names, including internal fraud,
occupational fraud, or
employee dishonesty. There are
three basic types of fraud
:asset misappropriation, bribery
and corruption, and financial
statement fraud. In many fraud
schemes perpetrated by
employees, more than one type
of fraud is present.
WAIT A MINUTE
FRAUD TREE

Fraudulent Financial
Statement

Asset Misappropriation

Corruption
We hear about asset
misappropriation the most often,
probably because they are the
frauds that occur the most often
and they’re the easiest schemes to
understand. An asset
misappropriation might include
things like check forgery, theft of
money, inventory theft, payroll
fraud, or theft of services.
Fraudulent Financial statements can
be defined as fraud committed by
management in the form of material
misstatements of Financial
Statements that are detrimental to
investors and creditors. This fraud
can be financial or non-financial
fraud.
This type of fraud is the most difficult to detect
because it involves cooperation with other
parties such as bribery and corruption, which is
the most common type in developing countries
where law enforcement is weak and lack of
awareness of good governance so that the
integrity factor is still be questioned.
HOW TO PREVENT FRAUD ?
1 STEP
St

1. Educate management on the three indicators


of fraud.
According to the Association of Certified Fraud
Examiners, financial statement fraud involves
the intentional publishing of false information in
any portion of a financial statement. To help
prevent fraudulent activities, management must
implement internal controls, or structure, and
know what situations to look for. Individuals
commit fraud when under situational or
financial pressure, when the opportunity to
commit fraud is present and when the
perpetrator easily rationalizes the fraudulent
activity.
2nd Step

2. Segregate accounting functions.


One of the main factors of an effective internal control
system is segregation of duties. Management helps to
prevent fraud by reducing the incentives of fraud. One
incentive, the opportunity to commit fraud, is reduced
when accounting functions are separated. The act of
segregating duties separates the recordkeeping,
authorization and review functions in the accounting
process. To segregate duties, involve more than one
person in the financial statement preparation process.
Therefore, or fraud to occur two employees must
collude to perpetrate the crime.
3 Step
rd

3.Establish a strong control environment.


A strong control environment, otherwise known as a strong
tone at the top, involves enlisting management to demonstrate
ethical behavior. The ACFE notes that whatever tone
management sets will have a trickle-down effect on employees
of the company. A strong tone is developed by establishing and
complying with a written set of policies. The policies must be
concise and include consequences when procedures are
disobeyed. In addition, according to the ACFE’s Fraud
Examiners Manual, one of the easiest ways to establish a
strong moral tone for an organization is to hire morally sound
employees.
4 Step
th

4. Initiate annual examinations of financial statements by


an outside party.
In many cases, management is the party committing fraud.
Management may feel pressure to meet financial goals for
the company or may receive incentives if certain goals are
met. To help prevent management from engaging in overly
aggressive adjustments to the financial statements, have
an independent party examine financial statements on an
annual basis. Engaging an auditor to perform a financial
statement review or audit deters employees from
knowingly presenting incorrect financial statements
HOW TO DETECT FRAUD ?
Check managerial

relationship with external


parties

Nature of the organization

Financial statements and operational


characteristics

Intern Audit

Ekstern audit
TAKE IT EASY, GUYS !

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