Fraud Analysis

In this case, there are several conspirators who is involved in the fraud receiving punishment from either SEC or federal government. Robert Levin, the AMRE executive and major stockholder, and Dennie D.Brown, the company’s chief accounting officer, were subject to the punishment in the form of a huge amount of fine by the SEC and the federal government. This punishment came from reasons. After AMRE going public, the company have the obligation to publish its financial reports but its performance did not meet expectation. The investigation by SEC shows that Robert took the first step of this scam, fearing the sharp drop of AMRE’s stock price because of the poor performance of company. He abetted Brown, to practice three main schemes to present a false appearance of profitable and pleasant financial reports. Firstly, they instructed Walter W.Richardson, the company’s vice president of data processing, to enter fictitious unset leads in the lead bank and they originally deferred the advertising cost mutiplying “cost per lead” and “unset leads” amount, so that they deferred a portion of its advertising costs in an asset account. The capitalizing of advertising expenses allowed them to inflate the net income for the first quarter of fiscal 1988. Secondly, at the end of the third and fourth quarters of fiscal 1988, they added fictitious inventory to AMRE’s ending inventory records, and prepared bogus inventory count sheets for the auditors. Thirdly, they overstated the percentage

Professional auditing standards discuss the three key “conditions” that are typically present when a financial fraud occurs and identify a lengthy list of “fraud risk factors.”

Cases of fraud have been increasing over the years, and different agencies and authorities that have the task of subduing fraud have to get involved and put a stop to it. In the instance of which fraud has been uncovered, it is crucial to be aware of the red flags that were present in relation to fraud and associate them to the factors related to the fraud risk assessment. As Troy Gillard states in the Rd news magazine, a man that broke free after being acknowledged as suspicious when he wanted to take a loan out at the Cash Canada using a stolen ID amongst other official documents that had been stolen. It seemed that the ID and the other documents

The amount listed is the enrollment agreement was 10,020.00 which gives a difference of :

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].

Fraudulent prescriptions are also on the rise. Physicians are writing illegal prescriptions that are billed for a claim for reimbursement, but have yet to see a bill of rendered services that called for the actual prescription. This often ends up happening to a patient who has little or no medical issues and has never been seen before. The provider who receives the forged prescription profits an anticipated amount of 15% to $20% in profits. (AGHAEGBUNA ,2011). There are four types of fraud that healthcare providers’ organization face. Patient fraud, provider employee fraud, provider billing fraud and payer fraud, even though providers need to receive payment for their service they should be more preventative action in place to ensure that these fraudulent activities can be detected.

In fraud committed against organizations, the victim of fraud is the employee’s organization. In frauds committed on behalf of an organization, executives usually are involved in some type of financial statement fraud; typically, to make the company’s reported financial results appear better than they actually are. In this second case, the victims are investors in the company’s stock. A third way to classify frauds is via the use of the ACFE’s occupational fraud definition, “the use of one’s occupation for personnel enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets” (ACFE, 2010). The ACFE includes three major categories of occupational fraud: asset misappropriations involves the theft or misuse of the organization’s assets, corruption involves the wrongful use of influence in a business transaction in order to procure benefits contrary to their duty to their employer, and fraudulent financial statements involving falsification of an organization’s financial statements for personal gain.

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

In 2008, Expanded taking information offense to any private computer system within the United States (i.e. the outer reach of the Commerce Clause). Expanded extortion offense to cover threats of taking information and demands following damage. Increased penalties. Added criminal

In recent year we have seen numerous companies fail as a result of these bad and/or fraudulent practices. In 1998 the publicly traded Waste Management Company falsely reported 1.7 billion in earnings. They got caught when the new CEO and management team went through the books.

In the case of Phar-Mor fraud, the company was involved in cover up and some accounts were created to hide the fraudulent activities. Bad inventory counts in the stores were made to help with the cover up and deceit about activities that cost hundreds of millions of dollars. (Williams, S.L., 2011)

Ethics in any industry is important, but for Accounting professionals and those in need of their services, it is a particularly stressed element. Information provided by accountants is used to make major decisions, including investing, downsizing, expanding, etc, so accountants are expected to be competent, reliable, and have a high degree of professional integrity. Because of these high expectations, the professional accountancy industry, like many other professions, has adopted professional codes of ethics (Woelfel, 1986). These ethical codes go above and beyond the requirements for state or federal laws and regulations. There are several professional organizations within the

“Audit committee members or their agents may proactively examine areas, functions, and personnel where collusive fraud risk is reasonably likely to be perpetrated,” (Zmags). The search for fraud, even if performed in the same location multiple times, may continue until the audit committee feels confident that they have ruled out the probability that fraud is prevalent. One of the biggest risks of fraud is management override of controls, requiring the extensive search for risk in, “journal entries and other adjustments and reviewing accounting estimates for possible biases that could result in material misstatements,” (Nysscpa).

A good definition of Fraud, Waste and Abuse (FWA) can be found in U.S. Air Force Regulations and can be applied to any government (or private) organization, it states:

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 controls that companies used to protect themselves such as: Segregation of duties, asset purchases, supervisor review, internal audits and adequate documents and records. This paper will discuss several topics from a case study about And the Fraud