BTF1
Syllabus C. Accounting And Reporting Systems And Compliance C7. Fraud and Fraudulent Behaviour and Their Prevention

C7bcf. Different Types of Fraud 2 / 6

Syllabus C7bcf)

b) Identify different types of fraud in the organisation.

c) Explain the implications of fraud for the organisation.

f) Give examples of recognised offences under typical money laundering regulations.

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

    * 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.

  • Payroll fraud.

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

    * 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:

  1. Misuse of assets

  2. Loss of assets

  3. Financial difficulties

  4. Collapse of the company