Organizational Fraud

According to the SAICA (South African Institute of Chartered Accountants) Handbook (2011: 240), “fraud refers to the ‘intentional act’ by one or more individuals amongst the management, those charged with governance, employees, or third parties, involving the use of deception to obtain an unjust or illegal advantage.” The primary function of the auditor is not to unearth fraudulent acts , but while performing the audit , the auditor is concerned acts of fraud which result in material misstatements in the financial statements. Cases of fraud involving one or more members of management or those charged with governance of an institution is referred to as Management Fraud.

“Fraud is less likely to occur when employees believe that security is everyone’s business, when they see themselves as protecting the company assets, and when they believe it is their responsibility to watch for and report evidence of computer fraud” (Haugen and Selin 4). When employees resemble sound morals, the probability of employees harboring intentions to steal company secrets decrease. “Behind this growth in monitoring policy is a business goal aimed at ensuring the continued viability and success of the company, which should be in every employee’s long-term best interest” (Fleming 110). Situations that promote employee fraud in the workplace include poor internal controls, poor personnel policies and practices, and a lack of integrity principles (Haugen and Selin 2). Management needs to present the image that it is vital to secure the assets of the firm to protect the longevity of not only your career but also the company’s existence in the corporate world. When employees feel like they are valued member of their company, they are less inclined to act in a manner that would defraud their place of employment for personal gain. Likewise, increasing the perception of detection inspires employees to refrain from deceptive activities. People generally refrain from unethical behavior when there is a perceived notion of harsh consequences should they engage in those actions. Unwarranted disclosures of company trade secrets threaten the livelihood as

In the past few years, enterprise integrity has come up on a regular subject of conversation. In the past ten years only, we have seen numerous situations associated with collaborative scams which have shaken the people 's trust in businesses and also the general economic climate. A few of the many salient frauds are the WorldCom and Enron 's scams, the ponzi scheme perpetrated by Bernard Madoff 's, the latest accusations of Goldman Sachs tricking option traders to guarantee the company 's personal profit. Incidents such as these designed us all, as upcoming corporation professionals as well as market leaders, think about ethics and its particular function in the commercial world (Gross, 2010.)

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].

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 and corruption is one of the biggest issues that the society is facing and is also one of the most challenging issues that have yet to be tackled worldwide. Organizations end up losing a lot of profits due to the scrupulous nature of its employee’s fraudulous

Prior to 2002, financial statement reporting for publically traded companies within the United States was overseen with far less oversight in comparison to current reporting standards and procedures. Appropriate financial reporting is merely one element that was not occurring prior to 2002. An element of corporate dishonesty and deception existed within some the largest publically traded companies and this idea of deceitfulness was perpetuated by the executive staff of the businesses. Enron’s financial disintegration became the facilitator for the need of more rigid financial oversight, but they were not the only company that added to the idea of corporate fraud.

What type of fraud could be related to your chosen activity? It is called occupational fraud. Occupational fraud is when “the use of one's occupation for personal enrichment through the deliberate misuse. Or misapplication of the organization's resources or assets.”

Still, regardless of the accounts’ expertise, year after year there are cases ranging from small frauds at small business to massive scandals that outrage the financial market and the business world as a whole. The potential costs of unethical behavior are extremely high and can compromise the company’s reputation and even end up in a

This presentation is on the organization integrity and social responsibilities. As the leaders of the company, if we “act unethically and/or without integrity” (Ross, 2009, para 1), our employees will lose confidence and trust in our organization, however, if our employees do the same than our customers will “lose confidence and trust in our products and services” (Ross, 2009, para 1). For example, Intel had issues with its Pentium chip. They used unethical practices, which consisted of a five-point plan. This presentation will discuss the following:

The point of this article is to inform business owners of the dangers of embezzlement, and heists performed by employees inside the business. Some businesses find corruption within itself. The article provides statistics that state embezzlement is common within a business, and the owner must be careful when trusting other employees. The article is proficient, focusing on the importance of fraud prevention programs.

offered at their providers’ office that they may have never received. Healthcare organizations work strictly with health care provides to provide optimum care. Because health care organizations work so thoroughly with primary care practices, it allows health care organizations an insight on how they function. Complications that may contradict the program include falsifying patient signatures to unearned incentives. This termed is widely known as health care fraud, further detailed by study as “the basis of the scheme or artifice to defraud in a mail or wire fraud conviction, including billing for services not rendered, false descriptions of services rendered, and false representations that services were medically necessary” (McGuire,2007).

The readers should read this specific study to understand corporate fraud. Corporate fraud occurs more regularly than one may think, therefore, understanding what corporate fraud is and the history surrounding it would allow companies and accounting professionals to understand how to help prevent it from occurring within their workplace. In addition, the research provides vital information and history regarding SOX, PCAOB, and AICPA and the rules and regulations required with financial statement reporting and how to better implement rules and regulations to make the company a safer place of business. The research is also vital to companies and accounting professionals as it explains the type of people that commit financial statement fraud

The perfect fraud storm occurred between the years 2000 and 2002 involving two of the largest energy and telecom corporations in the United States: Enron and WorldCom. It was determined that both organizations fraudulently overstated assets, created assets from expenses or overstated revenues, costing investors billions of dollars and resulting in both organizations declaring bankruptcy (Albrecht, Albrecht, Albrecht & Zimbelman, 2012). Nine factors contributed to fraud triangle creating this perfect fraud storm, and assisting management in concealing the fraud until exposed and rectified.

Every organization also has a profession responsibility to conduct business honestly and ethically. Our readings reported, “Experts estimated that U.S. companies lose about $600 billion a year from unethical and criminal behavior” Kinicki and Kreitner (2009). The organization could avoid having ethical issues by meeting the