The Theory Of Accounting Fraud - 3500 Words

A number of cases of fraudulent accounting have been reported over the last fifty years. However, in each case the manner in which the fraud was perpetrated was different In the UK there is no legal definition of fraud (Levi, Information Gathering Working Party and Doig, 1999). Black’s Law Dictionary (1999) defines fraud as â€Å"a knowing misrepresentation of the truth or concealment of a material fact†. When we apply this to the world of accountancy there can be confusion between fraud and ‘creative accountancy’. Amat et al (1999) defines creative accounting as a process whereby accountants use their knowledge of accounting rules to manipulate the figures reported in the accounts of a business . Despite accounting standards and their related punishments, many companies consistently use fraudulent methods to increase profits, reduce costs and increase equity. A number of theories have been developed to explain the dynamics behind accounting frauds. The most important theory of accounting fraud is the ‘fraud triangle’. Developed by Cressey (1953), the fraud triangle and attempts to explain the 3 factors that must be present for an ordinary person to commit fraud of any kind (Appendix 1). The first factor, ‘pressure’ relates to the motivation of the fraud itself, for example, from competitors, directors or investors (ACFE, 2014). ‘Opportunity’ represents the method used (ACFE, 2014); most commonly the fraudulent individual is aware of a lack of adequate controls for monitoringShow MoreRelatedKey Elements For Commit Fraud1673 Words   |  7 PagesElements There are five elements needed to commit fraud: (1) a false statement containing material fact, (2) the defendant possesses the knowledge that the statement is untrue, (3) the false statement’s intent is to deceive the intended victim, (4) the intended victim justifiably relies on the statement, and (5) the ending result is financial injuries to the intended victim. All false statements do not constitute for fraud; it needs to contain a material fact. The materiality of the statementRead MoreWhat Are Five Elements Necessary For Commit Fraud?1739 Words   |  7 PagesIntroduction Elements There are five elements needed to commit fraud: (1) a false statement containing material fact, (2) the defendant possesses the knowledge that the statement is untrue, (3) the false statement’s intent is to deceive the intended victim, (4) the intended victim justifiably relies on the statement, and (5) the ending result is financial injuries to the intended victim. All false statements do not constitute for fraud; they need to contain a material fact. The materiality of theRead MoreCommunication And Interviewing Skills Are Important For Entry Level Accountants1228 Words   |  5 Pagesrequire students to work together culling information for the given topic, write reports outlining their findings, and then present the results or information to their respective class. These are sound skills all students need to have in their accounting toolkits, yet, in many instances their toolkits are still missing vital tools relating to interviewing which universities are not provi ding. A review was completed of the colleges and universities in the States of Colorado and Wyoming as outlinedRead MoreThe Factors of a Good Fraud Examiner926 Words   |  4 PagesThe development of fraud examiner/forensic accounting profession since the 2001 Enron Fraud After the Enron and WorldCom business climate, there came a new US federal law called Sarbanes – Oxley Act. The SOX contains 11 titles that describe specific mandates and requirements for financial reporting. It makes corporate executives more accountable for their actions. Companies invested a tremendous amount of resources, time, and effort in order to comply with the requirements. It clearly improved theRead MoreFinancial Crimes1610 Words   |  7 PagesDepartment of Justice, Pricewaterhouse-Coopers, and the Association of Certified Fraud Examiners (ACFE) (Houck, Kranacher, Morris, Riley, Robertson, Wells, 2006). An understanding of effective fraud and forensic accounting techniques can assist forensic accountants in identifying illegal activity and discovering and preserving evidence. Forensic accounting is a science that deals with the application of accounting facts gathered through auditing methods and procedures to legal problems usuallyRead MoreCase Study 1 Fraud Essay1128 Words   |  5 PagesCase Study1: And the Fraud Continues A business can not work out without an account system, which includes internal. Internal controls are used by companies to make sure financial information is accurate and valid. Strong internal controls are signs of a financially healthy company and protect the company’s integrity. Strong internal controls can also increase a company’s profitability. There are several types of internal controlsRead MoreFinancial Statements And Report The Illegal Behavior1723 Words   |  7 PagesAs a auditorï ¼Å'it is impossible to report all the frauds that exist in the financial statements, but auditor has the responsibility to expose the almost fraud in the financial statements and report the illegal behavior, which has a direct significant impact on the financial reporting. However, preventing fraud not only using management method, but also other methods. (1). Professional judgment of fraud auditors Auditors have to face internal managers of the companies and the CPAS in companies,Read MoreRelationship Between Ethics And Business Performance1181 Words   |  5 Pagesfor the tragic sinking (in the documentary the company is compared to the Titanic), can include the practice of fraud and accounting manipulation that led to the loss of thousands of people, was certainly influenced by the market economy. In this sense, all the attitudes of administrators also demonstrate the weakness of the accounting system and auditing. Enron created a blind accounting system, using business structures such as the Joint Ventures and Special Purpose Entities (SPEs). The pensionRead MoreThe Rise and Fall of Enron1170 Words   |  5 Pagesbillion in 2000. (Yahao, 2010) â€Å"White-collar crime is planned or organized illegal acts of deception or fraud, usually accomplished during the course of legitimate occupational activity, committed by an individual or corporate entity† (Benson, 2009 pg. 11). In October of 2001 it was revealed that Enron’s financial condition was only sustained by systematic and creatively planned accounting fraud. Enron’s stock price dropped from $90 per share to $1 a share, with shareholders loosing around $11 billionRead MoreAdelphi Accounting Scandal Case Study1511 Words   |  6 Pagesï » ¿Introduction Cable provider Adelphia was one of the major accounting scandals of the early 2000s that led to the creation of the Sarbanes-Oxley Act. A key provision of the Act was to create a stronger ethical climate in the auditing profession, a consequence of the apparent role that auditors played in some of the scandals. SOX mandated that auditors cannot audit the same companies for which they provide consulting services, as this link was perceived to result in audit teams being pressured to