A straightforward guide explaining the nature of financial fraud Fraud continues to be one of the fastest growing and most costly crimes in the United States and around the world. The more an organization can learn about fraud in general and the potential fraud risks that threaten the financial stability of the organization's cash flow, the better that organization will be equipped to design and implement measures to prevent schemes from occurring in the first place. Fraud 101, Third Edition serves as an enlightening tool for you, whether you are a business owner or manager, an accountant, auditor or college student who needs to learn about the nature of fraud. In this invaluable guide, you will discover and better understand the inner workings of numerous financial schemes and internal controls to increase your awareness and possibly prevent fraud from destroying your organization's financial stability. It offers guidance, understanding, and new, real-world case studies on the major types of fraud, including An understanding of why fraud is committed An overview of financial fraud schemes White-collar crime Uncovering employee embezzlements Establishing internal fraud controls The nature of collecting evidence With case studies included throughout the book to gain insight to the real world of fraud, Fraud 101, Third Edition describes the features of fraud and then provides proven methods of prevention, as well as solutions to expose different types of fraud.

A straightforward guide explaining the nature of financialfraudFraud continues to be one of the fastest growing and most costlycrimes in the United States and around the world. The more anorganization can learn about fraud in general and the potentialfraud risks that threaten the financial stability of theorganization's cash flow, the better that organization will beequipped to design and implement measures to prevent schemes fromoccurring in the first place.Fraud 101, Third Edition serves as an enlightening toolfor you, whether you are a business owner or manager, anaccountant, auditor or college student who needs to learn about thenature of fraud. In this invaluable guide, you will discover andbetter understand the inner workings of numerous financial schemesand internal controls to increase your awareness and possiblyprevent fraud from destroying your organization's financialstability.It offers guidance, understanding, and new, real-world casestudies on the major types of fraud, including* An understanding of why fraud is committed* An overview of financial fraud schemes* White-collar crime* Uncovering employee embezzlements* Establishing internal fraud controls* The nature of collecting evidenceWith case studies included throughout the book to gain insightto the real world of fraud, Fraud 101, Third Editiondescribes the features of fraud and then provides proven methods ofprevention, as well as solutions to expose different types offraud.

Preface ixAcknowledgments xvIntroduction xviiChapter 1 The World of Fraud 1Definition of Fraud 1The Many Types of Fraud 2Chapter 2 Why Is Fraud Committed? 19A Rationalizing Society 20Financial Statement Fraud 22Financial Fraud Comes in Different Shapes and Sizes 23Motivators Differ by Type of Business 25Employee Schemes 27In the End 32Chapter 3 Financial Statement Fraud Schemes 33Where Do Things Go Wrong? 34Trend Analysis 42Beyond Traditional Audits 45Chapter 4 Employee Embezzlements 51The Fraud Triangle 55Areas for Concern 57Chapter 5 Other Fraud Schemes 69Duplicate Payment Fraud 71Multiple Payee Fraud 72Shell Fraud 73Defective Delivery Fraud 77Defective Receipt Fraud 88Defective Shipment Fraud 89Defective Pricing Fraud 91Chapter 6 Contract Rigging Schemes 97Stage One: Obtaining the Contract 97Stage Two: Contract Change Orders 102Unbalanced Bidding 114Detection Recommendations 118Rotation Fraud 119Where Do We Go from Here? 121Chapter 7 Responses to Fraud 123Government's Response to Fraud 124Accounting Profession's Response to Fraud 129Internal Audit Profession's Response to Fraud 133New Credentials, More Training, Better Awareness 134Articles, Books, and More Resources 136Chapter 8 The Importance of Internal Controls and Internal Audit 143Why Have Internal Controls? 144Déjà Vu 148Good Internal Controls 150Internal Audit 152Chapter 9 Evidence 159What Is Evidence? 160Documentation 163Chapter 10 Conducting Fraud Investigations: A Practical Approach 171Proactive Fraud Investigations 171Discovery Investigations 172Supportive Investigations 175Strategy 178Predication 180The Investigative Plan 181Conducting the Procedures 183Findings 186Use of the Findings 188Chapter 11 Fraud Investigation Alternatives 189Assessing the Feasibility of a Full Investigation 189Monitoring Operational Areas at Risk of Fraud 197Revamping Internal Controls: Closing the Barn Door 200Doing Nothing? 203Appendix A Vending 209Lessons Learned 213Appendix B Living a Façade 217Prevention Techniques 221Appendix C Disappearing Inventory 225Internal Controls 230Index 231