IN THE ORGANISATION AND THE IMPLICATIONS OF FRAUD FOR THE ORGANISATION
Example fraud by management
Financial statement fraud, e.g. ‘window dressing’ and ‘cooking the books’
* Window Dressing/Cooking the books are the deceptive practices of using accounting “tricks” to make a company's balance sheet and income statement appear better than they really are.
A normally used trick is to enter transactions before year end and then they are reversed out after the year end.
Misappropriation of assets – stealing physical assets or selling property
False insurance claims
Using the company’s assets for personal use.
Example frauds by employees
Sales ledger fraud – ‘teeming and lading’
* Teeming and lading is a type of fraud normally on the sales ledger whereby the receipts of later debtors are allocated to pay off earlier debtors
Purchase ledger fraud
* Skimming schemes is when the fraudster diverts small amounts from a large number of transactions, believing that no one will bother to investigate the small differences individually, although in the aggregate they can total to a worthwhile sum.
Example frauds by third parties
False billing fraud – third parties sending bogus invoices to the company
Bank account fraud
Advance fee fraud (419 fraud)
* Advance fee fraud is a trick where a company is invited to pay a modest fee up front in the promise of being paid a large amount in the future.
* Ponzi/Pyramid schemes are fraudulent investments offers that involve paying abnormally high returns to early investors out of the new money paid in by subsequent investors, rather than from any genuine underlying business.
The possible implications of fraud to the company
There is a spectrum of implications of fraud, including:
Misuse of assets
Loss of assets
Collapse of the company