Internal Controls and Fraud

Flashcards about internal controls and fraud.

Fraud

A dishonest act by employees or managers of a company involving stealing company assets or falsifying accounting records (Cooking the books).

Fraud Triangle

Explains why an employee commits fraud; its three conditions increase the chances of fraud taking place: Opportunity, Financial Pressure, and Rationalization.

Opportunity (Fraud Triangle)

The employee has the ability to commit fraud.

Financial Pressure (Fraud Triangle)

The employee has financial troubles.

Rationalization (Fraud Triangle)

The employee has a reason to justify the fraud (e.g., believing they should have received a raise).