Recognizing Fraud Symptoms

Flashcards focused on key concepts related to recognizing fraud symptoms in accounting and forensic contexts.

Fraud Symptoms

Indicators or signs that a fraud may be occurring, which can include accounting anomalies, internal control weaknesses, and unusual behavior.

Accounting Anomalies

Irregularities in the accounting process such as problems with source documents, faulty journal entries, and ledger inaccuracies.

Internal Control Weaknesses

Deficiencies in policies or procedures that are supposed to safeguard assets and ensure accurate financial reporting.

Extravagant Lifestyle

A tendency of fraud perpetrators to maintain an excessive lifestyle based on the financial pressures they encounter, often funded by stolen money.

Unusual Behavior

Behavior changes in individuals, particularly first-time offenders, that may indicate stress and guilt associated with committing fraud.

Tips and Complaints

Reports or concerns raised by employees regarding potential fraud, often categorized as symptoms rather than direct evidence of fraud.

Whistleblower Protections

Legal provisions, such as the Sarbanes-Oxley Act and the Dodd-Frank Act, that protect individuals who report fraudulent activities from retaliation.

Analytical Fraud Symptoms

Irregularities in financial data such as unexplained inventory shortages, excessive costs, or unusual account relationships.

Source Document Issues

Problems related to original documents necessary for financial transactions, which could indicate fraud, such as missing documents or duplicate payments.

Faulty Journal Entries

Accounting entries that lack documentary support, balance, or are made by unauthorized individuals, suggesting potential fraud.