Fraud Risk

3 Fraud Risk Factors (conditions generally present for fraud to occur):

1. Incentive/pressure - reason to commit fraud
2. Opportunity - lack of effective controls
3. Attitude that allows the person to rationalize fraud - attempt to justify fraudulent behavior 

Types of Fraud:

1. Fraudulent Financial Reporting - LYING
• intentional misstatements/omissions of amounts/disclosures
• manipulation of accounting records
• misrepresentation in financial statements
• intentional misapplication of accounting principles 
2. Misappropriation of Assets - STEALING
• theft of assets 
• unreliable accounting system
• inadequate: internal control, management understanding, access controls, physical safeguard 
3. Corruption - CHEATING