fraud

Examples of fraud in the following topics:

• Managing to Prevent Fraud

  • Employees are more likely to commit fraud when under situational or financial pressure, and when the opportunity to commit fraud is present .
  • Management helps to prevent fraud by reducing the incentives of fraud.
  • One incentive, the opportunity to commit fraud, can be reduced when accounting functions are separated.
  • For fraud to occur in this situation, two employees must collude to perpetrate the crime.
  • Explain how a company can prevent fraud by establishing internal controls

• Avoiding Potential Fraud

  • Consumer education, web security tactics, and government legislation are measures used to protect consumers from potential fraud.
  • Internet fraud can occur in chat rooms, email, message boards, or on websites.
  • Another tactic users employ to avoid fraud is erasing hard drives when throwing away old computers.
  • Erasing the hard drive can reduce the possibility of identity theft and other forms of fraud.
  • Clearing private data such as individual browsing history can also reduce potential fraud.

• Consumer Misbehavior

  • Consumer misbehavior is specifically related to retail and other markets, and includes things from cutting in line to fights between customers to credit card fraud.
  • Credit card fraud is a wide-ranging term for theft and fraud committed using a credit card or any similar payment mechanism as a fraudulent source of funds in a transaction.
  • Estimates put the cost of credit card fraud to billions of dollars .
  • Many also use electronic tracking devices on products and closed-circuit television to fight shoplifting and fraud.
  • Credit card fraud is a form of consumer misbehavior that can cost billions of dollars a year.

• Forced Entry

  • Cybercrimes are those committed via computer networks for such purposes as fraud, identity theft, and the hacking of sensitive information.
  • Computer fraud is any dishonest misrepresentation of fact intended to get another to do or refrain from doing something which causes loss.
  • In this context, the fraud will result in obtaining a benefit by one of a number of means:
  • Other forms of fraud may be facilitated using computer systems, including bank fraud, identity theft, extortion, and theft of classified information.
  • Identity fraud is often but not necessarily the consequence of identity theft.

• Organized Crime

  • Organized crime groups often victimize businesses through the use of extortion or theft and fraud activities like hijacking cargo trucks, robbing goods, committing bankruptcy fraud, insurance fraud, or stock fraud.

• Limitations of the Income Statement

  • Income statements have several limitations stemming from estimation difficulties, reporting error, and fraud.
  • Aggressive earnings management is a form of fraud and differs from reporting error.

• Corporate Fraud

  • The Enron Corporation declared bankruptcy in 2001 and became the universal symbol for corporate fraud.Enron managers created Special Purpose Entities (SPE) with the sole purpose to wipe debt and liabilities from Enron's financial statements.A Special Purpose Entity consists of a company or subsidiary of the corporation.A SPE could be a shell company, where the company does not physically exist, except on paper.
  • The U.S. economy rebounded from the strong, overly optimistic real estate market.Everyone forgot Enron's misdeeds until the 2007 Great Recession, when the scale of fraud became much larger.For example, Lehman Brothers used exotic securities such as credit default swaps and collateralized debt obligations to buy real estate (Discussed in Chapter 18).After the recession had struck, unemployment doubled, and many households started defaulting on theirmortgages.Commercial and investment banks stopped lending overnight, and real estate prices began tumbling.Unfortunately, Lehman Brothers went on a spending spree, buying real estate toward the peak of the housing bubble.It held $768 billion in bank and bond debt while it had $639 billion in assets that dropped rapidly as real estate prices fell.Lehman Brothers filed for bankruptcy in 2008 and had closed its doors after 158 years of business.
  • Countries differ in corporate structure and planning.The U.S. corporations usually focus on short-term profits, and thus, they have problems with corporate fraud.On the other hand, the Japanese plan long term and they form a Keiretsu, a conglomerate of many companies with a bank member.Consequently, the bank could grant low-interest loans to its partner companies, and the Keiretsu usually focuses on long-term profits and market shares.Furthermore, corporations in South Korea, Germany, and Russia also established conglomerates, which are similar to a Keiretsu.

• Sarbanes–Oxley Act of 2002

  • Title VIII consists of seven sections and is also referred to as the "Corporate and Criminal Fraud Accountability Act of 2002. " It describes specific criminal penalties for manipulation, destruction or alteration of financial records, or other interference with investigations, while also providing certain protections for whistleblowers.
  • Section 1101 recommends a name for this title as "Corporate Fraud Accountability Act of 2002. " It identifies corporate fraud and records tampering as criminal offenses and joins those offenses to specific penalties.

• Political Participation and Party Loyalty

  • Some counties passed the 100-percent mark not because of fraud but because the parties tracked people down whom the census missed.
  • Fraud did take place in municipal elections in large cities, where the ward-heelers could expect tangible rewards.
  • Apart from some Reconstruction episodes in the South, there was little fraud in presidential elections, because the local workers were not in line for presidential rewards anyway.

• Protecting Whistleblowers

  • The misconduct may be classified as a violation of a law, rule, regulation or a direct threat to public interest in the realms of fraud, health/safety violations and corruption.
  • One of the first laws that protected whistleblowers was the 1863 United States False Claim Act, which tried to combat fraud by suppliers of the United States government during the Civil War.
  • The original source must be the first to file a federal civil complaint for recovery of the funds fraudulently obtained, while also avoiding publicizing the fraud claim until the Justice Department decides whether to prosecute the claim.