ANALYSIS OF FRAUD CASES - AIDS TO THE AUDITOR

• NCJ Number: 64582
• Author(s): W H SILVESTER
• Date Published: 1978
• Length: 241 pages
• Sale Source: UMI Dissertation Services
• Publication Type: Thesis/Dissertation
• Language: English
• Country: United States of America
• Note: SPECIAL PRICES FOR ACADEMIC INSTITUTIONS UNIVERSITY OF MISSOURI DOCTORAL DISSERTATION

Annotation

TO AID AUDITORS IN DISCOVERING EMPLOYEE FRAUD, THIS DISSERTATION IDENTIFIES METHODS USED BY EMPLOYEES TO PERPETRATE AND CONCEAL FRAUDS THROUGH ANALYSIS OF 514 EMPLOYEE FRAUD CASES.

Abstract

AUDIT TESTS AND OTHER PROCEDURES ARE IDENTIFIED WHICH MAY ASSIST INDEPENDENT PUBLIC ACCOUNTANTS IN THE DETECTION OF EMPLOYEE FRAUD. THE FRAUD STUDIED IS LIMITED TO THAT INVOLVING CLAIMS BY INSURED PERSONS AGAINST THEIR SURETIES AS A RESULT OF ACTS OF DISHONESTY BY BONDED EMPLOYEES. THE 514 CASES ARE CROSS-TABULATED IN ORDER TO IDENTIFY THE NUMBER OF INSTANCES AND AMOUNTS OF LOSSES CONCEALED BY VARIOUS MANIPULATIONS OF ACCOUNTING RECORDS AND BUSINESS DOCUMENTS. THE RESULTS ARE USED AS A BASIS FOR IDENTIFYING POINTS OF RISK OF EMPLOYEE FRAUD. PREVIOUS RESEARCH ON EMPLOYEE FRAUD AND SOME WORKING DEFINITIONS ARE REVIEWED. FINDINGS INDICATE THAT BUSINESSES AND OTHER ECONOMIC UNITS REPRESENTING EACH MAJOR STANDARD INDUSTRIAL CLASSIFICATION (SIC) WERE VICTIMS OF EMPLOYEE FRAUDS. SIC MAJOR DIVISION H (FINANCE, INSURANCE, AND REAL ESTATE) FIRMS SUSTAINED THE LARGEST PROPORTION OF MONETARY LOSSES WHILE RETAIL FIRMS EXPERIENCED THE HIGHEST INCIDENCE OF FRAUD. PERPETRATORS, WHOSE AVERAGE AGE WAS 35.5 YEARS, HELD POSITIONS RANGING FROM PRESIDENTS TO MAINTENANCE WORKERS. OFFICIALS WERE FOUND TO HAVE PERPETRATED ALMOST 11 PERCENT OF THE CASES, ACCOUNTING FOR 65 PERCENT OF THE LOSSES. THE MOST COMMON CONCEALMENT METHOD WAS TO MANIPULATE VARIOUS BUSINESS DOCUMENTS, WITH ACCOUNT MANIPULATIONS APPEARING INFREQUENTLY. TWO CATEGORIES OF POINTS OF RISK--DEFICIENCIES IN INTERNAL CONTROL AND LIMITATIONS OF INTERNAL CONTROL--ARE CATALOGUED AS THEY APPEARED IN EACH CASE. FOR AUDITORS TO BECOME MORE EFFECTIVE IN DETECTING FRAUDS, THEY MUST APPROACH THEIR WORK WITH PROFESSIONAL SKEPTICISM AND WITH THE AWARENESS THAT THE LARGEST FRAUDS MAY BE PERPETRATED BY COLLUSION OR BY MANAGEMENT AND THUS DIFFICULT TO DETECT. ALL AUDITS SHOULD CONTAIN TREND AND PROPORTIONAL ANALYSES TO ESTABLISH THE REASONABLENESS OF ACCOUNT BALANCES. SUGGESTIONS FOR FUTURE RESEARCH ARE PRESENTED. REFERENCES, A BIBLIOGRAPHY, AND TABULAR DATA ARE INCLUDED. APPENDIXES CONTAIN TABLES, AN INTERNAL CONTROL QUESTIONNAIRE, AND AN INTERNAL CONTROL FLOW CHART. (WJR)