NCJ Number
68363
Journal
Journal of Accountancy Volume: 149 Issue: 5 Dated: (MAY 1980) Pages: 63-66,68-69
Date Published
1980
Length
6 pages
Annotation
BASED ON A 2-YEAR STUDY OF FRAUD, THE ARTICLE EXPLAINS REASONS FOR FRAUD, DESCRIBES CHARACTERISTICS OF PERPETRATORS, AND PRESENTS A FRAUD-RISK EVALUATION QUESTIONNAIRE FOR AUDITORS.
Abstract
THE INCREASED INCIDENCE OF MANAGEMENT FRAUD HAS RESULTED IN GREATER PRESSURES ON AUDITORS TO DETECT FRAUD. IN RESPONSE, THE ACCOUNTING PROFESSION HAS ESTABLISHED STANDARDS CONCERNING AUDITORS' RESPONSIBILITIES TO DETECT ERRORS OR IRREGULARITIES, AND A COMMISSION CREATED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS CONCLUDED THAT THE AUDITOR HAD A DUTY TO SEARCH FOR FRAUD. AN INTERDISCIPLINARY STUDY OF FRAUD FUNDED BY THE PEAT, MARWICK, MITCHELL FOUNDATION INCLUDED AN EXTENSIVE REVIEW OF LITERATURE AND A SEARCH OF CRIMINAL RECORDS, LEGAL DOCUMENTS, AND A COMPUTER FRAUD FILE GATHERED BY A MANAGEMENT SYSTEMS EXECUTIVE. THIS EVIDENCE SUGGESTED THAT FRAUD RESULTED FROM AN INTERACTION OF SITUATIONAL PRESSURES, OPPORTUNITIES TO COMMIT FRAUD, AND PERSONAL CHARACTERISTICS. FRAUD IS INCREASING BECAUSE IT IS DIFFICULT TO DETECT, NOT SUBJECTED TO SERIOUS PUNISHMENT, AND CONDONED TO SOME EXTENT BY SOCIETY. A COMPARISON OF FRAUD PERPETRATORS WITH OTHER PROPERTY OFFENDERS AND COLLEGE STUDENTS SHOWED THAT THEY CLOSELY RESEMBLED THE STUDENTS AND COULD NOT BE EASILY DETECTED ON THE BASIS OF DEMOGRAPHIC OR PSYCHOLOGICAL PROFILES. THE QUESTIONNAIRE FOCUSES ON SITUATIONAL PRESSURES, OPPORTUNITIES, AND PERSONAL CHARACTERISTICS TO IDENTIFY KEY EXECUTIVES WHO MIGHT BECOME INVOLVED IN FRAUDULENT ACTIVITIES. QUESTIONS COVER ECONOMIC PRESSURES ON EMPLOYEES, MORALE PROBLEMS, FINANCIAL DIFFICULTIES OF A COMPANY, PERSONNEL POLICIES, MANAGEMENT, SECURITY SYSTEMS, DEGREE OF COMPUTERIZATION, AND ACCOUNTING PRACTICES. MANY OF THE QUESTIONS ARE SENSITIVE AND OUTSIDE THE NORMAL CONCERNS OF AUDITORS, BUT THEY CAN INDICATE THE POSSIBLE EXISTENCE OF FRAUD IN THE FUTURE. FURTHER RESEARCH IS NEEDED TO DETERMINE WHICH VARIABLES ARE MOST INFLUENTIAL IN FRAUD. (MJM)