Internal Auditing: Stock Market and Fraud

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Definition of fraud: It is the conscious intention to steal or cause an individual to lose or give up something that is rightfully theirs.
Stock Fraud:
When brokers or people in the stock market influence or make investors buy stock based on false information which is a major violation of the laws put in place in order to protect us from these scandals and in usual cases, it results into a loss for investors. The main targets of stock market investment fraud are seniors. In the market it is estimated that there is a loss of about 40 billion dollars every year and 1 to 3 billion from that amount is from microcap fraud. What is a microcap stock fraud? It’s a form of security fraud involving stocks of microcap companies which are
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Internet Fraud is a type of fraud done through the internet and which is done in the way of identity or information theft. It can be done using spams or fake emails in order for the price of certain stocks to increase and is more and more common through PayPal.
Insider Trading is when members of a corporation trade the company’s stocks when the information of that stock is not yet public. Therefore it can result in giving you an advantage.
Accountant Fraud is done in many ways but the most common way is falsifying statements to mislead people on the actual stability of a company.
Ponzi scheme is an investment done fraudulently where the corporation or the individual who initiate the fraud pays old investors with new investor’s money and is similar to a pyramid scheme. It is a never ending Ferris wheel that is the result of a vicious cycle.

Past Frauds Relating to Stock Fraud
Popular cases
- ENRON
- WorldCom
Unpopular cases
- The ZZZZ Best Inc. (1986) Berry MinKow was a teenager and created a multimillion dollar corporation based on fraud.

- Centennials Technologies Inc. (1996) over stated their revenue which caused for their stocks prices per shares to go up to about 18x the original price.(NYSE)

- BRE-X Minerals (1997) a Canadian company involved in one of the largest stocks swindles in history. They said that they had a lot of gold when they truly didn’t and the ones who suffered and paid the price were the Quebec

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