A GUIDE FOR FINANCIAL FRAUD INVESTIGATION & PRECAUTION by SHIVANI SHARMA (books to read for beginners .txt) 📕

INDEX

 

 

 

                                                                                                       I      

 

                                                                      FORENSIC  ACCOUNTING  AND   FRAUD  INVESTIGATION

 

CHAPTERS  OR   TOPICS

SUBJECT  TO INTRODUCTION  TO  FRAUD FINANCIAL  INVESTIGATION

WHY  ARE  THESE  FRAUDS  HAPPEN

FINANCIAL  INVESTIGATION

TRIANGLE  OF  FRAUD  ACTION: THE  CRIME

FINANCIAL  INVESTIGATION 

STRATEGIES  FOR  FRAUD  PREVENTION  IN  YOUR  BUSINESS

FINANCIAL  INVESTIGATION

PREVENTION  OF  MONEY  LAUNDERING   ACT  2002

FINANCIAL  INVESTIGATION

'Anti Money Laundering - AML'

FINANCIAL  INVESTIGATION  CRYPTO-CURRENCY FINANCIAL  INVESTIGATION BIT-COINS FINANCIAL  INVESTIGATION WHISTLEBLOWER FINANCIAL  INVESTIGATION EXAMPLE OF WHISTLEBLOWER POLICY  FINANCIAL  INVESTIGATION 20  WAYS  OF  FRAUD  DETECTION FINANCIAL  INVESTIGATION FORENSIC  ACCOUNTING FINANCIAL  INVESTIGATION INTELLECTUAL   PROPERTY   RIGHT  ACT

FINANCIAL    INVESTIGATION

Type of Fraud

FINANCIAL  INVESTIGATION

FORGERY

FINANCIAL  INVESTIGATION

LOAN SHARKIG  FINANCIAL  INVESTIGATION Corruption   FINANCIAL  INVESTIGATION  Insider trading  FINANCIAL  INVESTIGATION INTRODUCTION TO FRAUDS

                                                    Some  of  the  common  myths  associated  with  frauds   are  " It  won't  happen  to  me!"  or  "We  have  everything  under  control"  or  " We  have  hired  efficient  auditors". Bu the  one  can  say  that this  attitude  stems  from  that  lack of  accurate  knowledge  of   the  depth  and  volume of  fraud   that  penetrates ( make a hole in)  cooperation  this  days. The  first  question  which  errupt  in  our  mind  is  what  is  fraud.

 

 

              1).  WHAT    IS    FRAUD ?

            

             ANS: Fraud  can  be  defined  as   the " Illegal  act  of  obtaining  something  valuable  through  willful  misrepresentation" OR " a  deception  practiced  in  other  to  secure  unfair  or  unlawful  gain".  Risk  and  materiality  are  two  concepts  closely  associated  with  fraud. Risk  refers  to  the  simple  risk  of  a  potential  fraud  and  materiality   to  a  amount  of  losses  due  to  these  frauds.

 

            2).  HOW  SIGNIFICANT  ARE  THE THESE  LOSSES  TO  A  COMPANY?

           

            ANS:  How  significant  are  these  losses  to  a  company  is  a  second  question  that  arrive  in  our  mind  related  to  fraud.  From  small  internet  banking  to  credit  card  fraud, stupendous  scams  to  contract  breaches, internal  frauds  to  hacking and  cyber crimes. We are constantly  being  defrauded  in  more  than  one  way. Handling  this  type  of  frauds  requires   a  solid  technical knowledge-base. And  its  is  equally  important  for  individual  and  organization (both  big  and  small)  to  understand  the  risk  and  materiality  associated  with  frauds.

 

                     The  significance  of  these  losses  to  a  company  can  be  accuratelly  computed  only  if  the  likelihood  of  a  risk  incurring  in  an  organization  can  be  estimated. Certainly  not  an   eassy  figure  to  compute.

 

                        Howerver  studies  conducted  in  past  have  shown  that  an  organization  in  the  1990's  had  more  than  60% risk of  experiancing a   fraud  incidences  in  a  period  of  one  year. Clearly  the  likelihood  of  such  an  occurance  today  can  only  be  higher  due  to  sudden  spurt  in  the  number  and  complexity  of  prossesing  and transactions  and  the  uncanny (strange or mysterious, especially in an unsettling way.) growth  of  cyber  crimes  today.Not  only  frauds  increasing,  but  so  are  the  incidence  of  these  frauds !

 

                             

WHY ARE THESE FRAUD COMMITTED?

                              

                                  Why  are  these  frauds  even  commited? What  prompts  these  first  timers  to  commits  them? This  can  be  explain  by  fraud  triangle  given  below.

 

       

 

                                         THE fraud  triangle is a frame work  designed  to  explain  the   reasoning  behind a  worker's  decicion to commit  workplace  frauds. The  popularly  known  as   fraud  triangle  encompasses  the  basic  factors  that   influence the  occurance  of  frauds; name  pressure, opportunity  and  rationalization. its  is  often  said  that  breaking  the  fraud's  triangle  is  the  key  of  brakeing  the  fraud  occurrance  in  the  organization.

 

               1).PRESSURE:-  The  pressure  of  the  individual is  the  motivation behind  the  crime  and  can  be  either personal fiancial pressure, such  as debth  problems or  workplace  debth  problem, such  as  a  shortfall  in  revenue. The pressure is  seen  by the  individual  as  unsolveable  by orthodox , legal, sanctioned routes and  unsharable  with  other  who  may  be  able  to  offer assitance.A  common  example  of  perecived  unsharable  fiancial  problem  is  glambling  debts. Maintenance  of  a  lifestyle  is  another  common  example.

 

                2).OPPORTUNITY:-   the  opportunity  to  commit  fraud  is  the  means  by  which the  individual  will  defraud  the  organization.In  this  stage  the  worker  see  a  clear  course  of  action by  which  they  can  abuse  their  position  to  solve  the  perceived  unsharable  financial  problems  in a  way  that  again  preceived  by  them is  unlikely  to  be  discovered . In  many  cases  the  ability  to  solve  the  problem  in  secret  is  the  key  to  perception  of  a  avilable  opportunity.

 

                3).RATIONALIZATION:-   The  ability  rationalize  the  crime  is  the  final  stage  in  the  fraud  triangle. This  is  a  congnitive  stage  and  requiers  the  fraudster  to  beable  to  justify  the  crime  in  a  way  that  is  accepted  to  his  or  her  internal  moral  compass. Most  fraudster  are  first  tme criminals  and  do  not  see  themself  as  criminals  but  rather  as  a  victim  of  a  circumtances. rationalization  are  offten  based  on  external  factor  such  as  need  to  take  care  of  a  family or  a  dishonest  employers.

 

   Using The Fraud Triangle                                                        

                                      The fraud triangle provides a useful framework for organizations to analyze their vulnerability to fraud and unethical behavior, and it provides a way to avoid being victimized. Almost universally, all three elements of the triangle must exist for an individual to act unethically. If a company can focus on preventing each factor, it can avoid creating fertile ground for bad behavior.

 

              Relieve Pressure

                                       Companies only have so much impact on the personal lives of customers and employees. Identifying any possible pressures that the company could have an impact on – such as money problems, substance abuse, etc. – can be helpful. Working to relieve these issues can help prevent criminal behavior.

 

           Minimize Opportunity

                                          Companies should always be looking to minimize the opportunity for fraud and unethical behavior. Brumell Group can assist with this. Working as a Fraud Consultant, Brumell Group can help companies analyze operations, review internal controls and address any current or future vulnerabilities. It is a worthwhile investment for any organization that wants to remain secure against the hazards of fraud.

 

           Target Rationalization

                                         One way to prevent fraud is to keep individuals from ever being able to rationalize the behavior in the first place. Companies can create a “zero tolerance” policy towards fraudulent behavior, and remind employees and customers of this policy on a regular basis. Companies can also make certain that individuals know the cost of fraud to other customers and other employees. Letting individuals know that there are heavy consequences makes it more difficult to minimize the unethical behavior.

 

                 OTHER   INFORMATION:-  FRAUD  EXAMINER  relie  on  th  fraud  triangle  to  find  the  weak  points  in  the  buisness  and  identify  possible  suspets   in  cases  of  fraud. Its  consists  three  core  concepts  that  togather  create  a  situation  ripe  for  fraud; incevtives , oppourtunity and  rationalization.People  must  have  incentives  and  opportunity  to  commit  frauds  as  well  as  the  abality  to  justify  it. Recent  analysis  has  suggested  adding  the  fourth  concept  makeing  it  diamond  and  that  is  capability. Just  because  someone  has  a  oppourtunity  or  incetives  to  steal,  that  dosen't  mean  they  have  capability  to  do  so. For  example  if  someone  dosen't   how  to  do  journals  or  ledger  enteries  they  would  not  know  how  to  maniuplate  the  number  no  matter  what  the  insentives  and  oppourtunity  is.

TRIANGLE OF FRAUD ACTION : THE CRIME

                                                                   Triangle  of  fraud  action  is  a  process  that  explain  how  the  frauds or  crime  are  conducted.The Triangle of Fraud Action is valuable to the investigator where proof of intent is required. The  triangle  of  fraud  action  can  be  determinded, controlled  and  detected  by  anti  fraud  professionals.Where  fraud  triangle  points  investigator  to  why  people  might  commit  fraud ,  the  evidenitary  trail  might  be  weak  or  non-existant  for  instance  pressure  and  rationalization  are  not  directly  observable. According to  Ramamooril  (2008)  a  lack  of  fraud  evidance  is  not  a  proof  that  fraud  has  not  occur, hence  anti  fraud  professional  need  an  evidance  based  approach  to  conduct  investigation.

 

                                                                  Therefore, anti-fraud professionals need an evidenced-based approach to conduct investigations. The Triangle of Fraud Action is helpful in this regard because the elements can be directly observed and documented. The Triangle of Fraud Action, therefore, represents a model for detecting white-collar crimes and obtaining prosecutorial evidence. Evidence of the act, concealment, and conversion can be collected and presented during adjudication. Further, when considered in total, the Triangle of Fraud Action makes it difficult for the perpetrator to argue that the act was accidental or to deny his/her role in the act. Evidence of concealment, in particular, provides a compelling argument that the act was intentional.This  is  where the  forensic  techiques  was  relevant.

 

                                                                                       Albercht  et al  (2006) and kranacher  el  al  (2011)  describe  an  action  of  an  individual  must  perform  to  prepetrate  fraud  as  follow:

 

                                                                                                                                 THE   TRIANGLE   OF  FRAUD  ACTION

 

                                                      The  triangle  of  fraud  action consists  three  elements: the  act , concealment  and  converstion.

 

                                                    1). THE  ACTION:-  it  is  a  stage  where  the  fraud is  already  perform  like  the  execution  of  the  fraud, emberzzlement, check  kritting  or  material  fraudulent fiancial  reporting.

 

                                                    2). CONCEALMENT:-  IN  this  stage  the  fraudster  deliberately try  to  hide  the  fraud  by  not  desclosing  it  or  by  suppresing  of  a  material fact  or  circumstances