Advantages And Disadvantages Of Fraudaud

Based on Paul Feldman’s findings, the authors of Freakonomics argue that a person, who is faced with an efficient way to cheat, will not necessarily choose to. The data involved in Feldman’s accidental bagel study proves that not all humans are corrupt. However,

1. The three aspects of fraud - Perceived pressure, Rationalization, and Opportunity were present in the CIT case as follows:

In today's day and age sales workers are taught to lie and cheat to get a good price. Also studies show, greed is closely related to envy, they’re the evil step sisters of life. That same study shows, almost everyone in today’s society show traces of greed. Greed has an impact of destruction of relationships, and most times leads to loneliness. Greed seems to be a common motive of fraud. Fraud is the “wrongful or criminal deception intended to result in financial or personal gain”. Also executives of big companies have a goal to rip you off, to make the maximum amount of money

(TCO 5) Fraud is an intentional misrepresentation of facts, made for the purpose of persuading another party to act in a way that causes injury or damage to that party. In our readings and discussions we have seen several examples of fraud in business. Using that experience (1) provide an example of a common fraudulent practice in business with an explanation of how the practice works and (2) name and describe each of the elements of the Fraud Triangle.

Internal fraud consists in “a type of fraud that is committed by an individual against an organization. [Furthermore], a perpetrator of fraud engages in activities that are designed to defraud, misappropriate property, or circumvent the regulations, law, or policies of a company”[8]. Not only has the incidence of internal fraud increased in frequency because of the availability of sensitive information such as client details or confidential business documents; moreover, this type of fraud is found in various types of organizations, ranging from corporations, public service institutions and financial institutions. Our analysis will concentrate on the most common and prolific types of internal fraud, namely identity theft, insider trading, loan fraud and wire fraud. Interestingly, PriceWaterhouseCooper conducted a survey that revealed that the “demographics of a typical fraudster are as follows: males (85% of cases), 31-50 years (72% of cases), reached high-school level (50%), Bachelor’s or post graduate degree (50%) and middle or senior management (52%)”[9].

It is important to first gain an understanding of the various types of fraud, in order to aid understanding in regards to the prevention of fraudulent activity. This paper begins with a review of the definition of financial fraud, and identification of the different fraud types. Further, included is an examination of what motivates individuals to commit fraud, including an identification of some of the method in which people commit fraud. A discussion of the importance of the fraud triangle, and how rationalization contributes to fraud is a key area of focus. Finally, there is an examination of some controls that prevent and detect fraudulent behavior, including the value and importance of understanding the nature of fraud for

Fraud deterrence occurs in several stages, and the key is to know that prevention is not to same as deterrence. First is the impact of controls

Financial stress to include high medical bills, credit card debt rising, drug or gambling addictions and divorce. A few may feel neglected and underappreciated at the work place, underpaid and possibly overworked. All these pressures may motivate that person to commit fraud.

In the article “Psychology of Fraud: Why Good People Due Bad Things” by Joffe-Walt, Chana and Alix Spiegel they contend that most people are able to be unethical “without realizing it”. They show this by the story of Toby Graves and his bad behavior. They tell why Toby breaks his promises and believe that it may be unintentional. The authors also explain that many people commit fraud for the simple fact of that they like the person they are helping. Joffe-Walt and Spiegel briefly look at how Toby felt after his plans failed.

This is opposed to strain theory which argues that social and personal strain “force the hand” of individuals and cause them to commit crimes. However, the weakness of this theory in regards to white-collar crime is the question of why those who've already gained financial success wish to seek more of it through illegitimate ways, particularly if they earned their initial success in a legal manner.

Some industry-specific factors, such as having valuable near-cash assets, can increase the organization's vulnerability. Also they will need to rationalize the actions as justifiable. The individuals committing the fraud must first convince themselves that their behavior is acceptable or will be temporary. For example, Barry Minkow’s believed that the lies and deceit are for the betterment of his company and that with time everything will eventually return to normal.

The second part is opportunity. The opportunity to commit fraud usually arises through weak internal controls.

“The first leg of the fraud triangle represents pressure. This is what motivates the crime in the first place. The individual

Fraud is defined as a deliberate misrepresentation that causes a person or business to suffer damages, often in the form of monetary losses through deception or concealment. And Occupational Fraud as defined by the ACFE is the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets. Traditional fraud triangle theory by Donald Cressey explains that propensity of fraud occurring in an organization lies on three critical elements which are Pressure, Opportunity, and Rationalization.

Among the nine factors of the perfect fraud storm; the economy, incentives, and expectations all fulfilled the three elements of the fraud triangle providing the necessary motivation for management to succumb to