Albrecht: Fraud Examination, 4e

Chapter 1

THE NATURE OF FRAUD

DiscussionQuestions

1. Fraudalwaysinvolvesdeception,confidence,andtrickery.Thefollowingisoneof
themostcommondefinitionsoffraud:

a. Fraudisagenericterm,andembracesallthemultifariousmeanswhich
humaningenuitycandevise,whichareresortedtobyoneindividual,toget
anadvantageoveranotherbyfalserepresentations.Nodefiniteand
invariablerulecanbelaiddownasageneralpropositionindefiningfraud,
asitincludessurprise,trickery,cunningandunfairwaysbywhichanotheris
cheated.Theonlyboundariesdefiningitarethosewhichlimithuman
knavery.

Fraudisdeceptionthatincludesthefollowingelements:

1. Arepresentation
2. Aboutamaterialpoint
3. Thatisfalse,
4. Intentionallyorrecklesslyso,
5. Whichisbelieved
6. Andacteduponbythevictim
7. Tothevictimsdamage.

2. Fraudaffectsindividuals,consumers,andorganizationsinvariousways.Fraud
usuallylowersorganizationsnetincomedollarfordollar.Torecoverthesecosts,
consumersandindividualsmustpaymoreforgoodsandservices.Forexample,
healthcarefraudandinsurancefraudincreasepremiumsthatindividualsmustpay.
Thecostoffraudeventuallyreacheseverypartoftheeconomy,includingindividuals,
consumers,andorganizations.

The2008studybyTheAssociationofCertifiedFraudExaminersestimatesthatU.S.
organizationsloseroughly7percentoftheirannualrevenuestofraud.Appliedtothe
U.S.grossdomesticproduct(GDP),this7percentfiguretranslatestoapproximately
$994billioninfraudlosses.

3.

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.a EmployeeEmbezzlement:Inthistypeoffraud,employeesdeceivetheir
employersbytakingcompanyassets.Embezzlementcanbeeitherdirector
indirect.

.b ManagementFraud:Distinguishedfromothertypesoffraudbothbythe
natureoftheperpetratorsandbythemethodofdeception.Initsmostcommon
form,managementfraudisdeceptionperpetratedbytopmanagements
manipulationoffinancialstatements.Thevictimsofmanagementfraudare
typicallystockholders,lenders,andotherswhorelyonfinancialstatement
information.

.c InvestmentScamsorConsumerScams:Atypeoffraudthatisperpetrated
whenfraudulentandusuallyworthlessinvestmentsaresoldtounsuspecting
investors.

.d VendorFraud:Perpetratedbyvendors;comesintwomainvarieties:fraud
perpetratedbyvendorsactingalone,andfraudperpetratedthroughcollusion
betweenbuyersandvendors.Vendorfraudusuallyresultsinanovercharge
forpurchasedgoods,theshipmentofinferiorgoods,orthenonshipmentof
goodseventhoughpaymentwasmade.

.e CustomerFraud:Usuallyinvolvescustomersnotpayingforgoods
purchased,gettingsomethingfornothing,ordeceivingorganizationsinto
givingthemsomethingtheyshouldnothave.

4.
.a Criminallawisthebranchoflawthatdealswithoffensesofapublicnature.
Criminallawsgenerallydealwithoffensesagainstsocietyasawhole.
Violatorsofcriminallawsareprosecutedeitherfederallyorbyastatefor
violatingastatutethatprohibitssometypeofactivity.

.b Civillawisthebodyoflawthatprovidesremediesforviolationsofprivate
rights.Civillawdealswithrightsanddutiesbetweenindividuals.Thepurpose
ofacivillawsuitistocompensateforharmdonetoanindividual.Unlike
criminalcases,wherejuriesconsistof12jurors,juriesincivilcasesmayhave
asfewassixjurors,andtheverdictofthejuryneednotbeunanimous.
Additionally,judgesoftenhearcivilcasesinsteadofjuries.Incivillawsuits,
plaintiffsmustonlyprovetheircasebythepreponderanceoftheevidence.
Inotherwords,thereneedbeonlyslightlymoreevidencesupportingthe
plaintiffthansupportingthedefendant.

5.
.a Civil

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Albrecht: Fraud Examination, 4e

.b Criminal
.c Civil
.d Criminal
.e Criminal
.f Civil
.g Criminal
.h Civil

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Albrecht: Fraud Examination, 4e

6. CharlesPonziwassuccessfulforseveralreasons.First,CharlesPonzibuilt
confidenceinhisschemebygivingearlyinvestorsareturnontheirinitial
investments.Second,CharlesPonzipresentedhiscouponschemeinawaythatwas
easyforinvestorstounderstand.Althoughthecouponschemenevermadeanyreal
profits,investorsbelievedthatithad.Third,Ponziwasextremelytalentedat
manipulatingvictimsemotions.Ponziwasabletocapitalizeonindividualsgreed.
Whenpeoplebegantoseetheirfriendsandfamilymembersreceivedividendsfrom
investments,theytoowantedinontheinvestmentscam.

7. Asthenumberoffraudsandtheamountsoffraudlossesincrease,sodothe
opportunitiesforsuccessfulcareersinfraudpreventionanddetection.InChapter1,
wehavelistedfiveareasinfraudfightingthatwillberewardingandhavehigh
demandinthefuture.Theyincludethefollowing:

.a Government:ThisincludesFBI,postalinspectors,CriminalInvestigation
DivisionoftheIRS,U.S.Marshals,inspectorsgeneralofvarious
governmentalagencies,stateinvestigators,andlawenforcementofficials.

.b CPAFirms,ForensicAccountingFirms,LitigationSupportFirms,and
LawFirms:Theseindividualswillconductinvestigations,supportfirmsin
litigation,dobankruptcyrelatedfraudwork,serveasexpertwitnesses,consult
infraudpreventionanddetection,andprovideotherfeebasedwork.

.c Corporations:Individualswhoworkforcorporationswillprevent,detect,
andinvestigatefraudwithinacompany.Thiscategoryincludesinternal
auditors,corporatesecurityofficers,andinhouselegalcounsels.

.d Lawyers:Lawyerswilldefendorprosecuteorganizationsinciviland
criminalcases.

.e Consulting:UniversityProfessors,HospitalManagement,Technology
Corporations,etc.:Peoplewhoworkintheseareaswillconsult,serveas
expertwitnesses,extractevidencefromcomputersandservers,investigate
publicrecords,andserveongrandortrialjuries.

8. Whenemployeefraudtakesplace,employeesdeceivetheiremployersbytaking
companyassets.Managementfraudisdistinguishedfromemployeefraudandother
typesoffraudinthattopmanagementtypicallycommitsittodeceivefinancial
statementusers.Employeefraudisusuallycommittedagainstanorganization,
whereasmanagementfraudisperpetratedonbehalfofanorganization.

9. Asthenumbersoffraudscommittedandthetotaldollaramountslostfromfraud
increase,thedemandforcareerstopreventanddetectsuchfraudwillincrease.In
fact,afewyearsago,Fortunemagazineidentifiedforensicaccountingorfraud

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examinationasoneofthefastestgrowingandmostfinanciallyrewardingcareers.
TheAmericanInstituteofCertifiedPublicAccountantsrecentlytoutedforensic
accounting/fraudexaminationasoneofthesixfastestgrowingandmostprofitable
opportunitiesforaccountants.

10. Thereareanumberofreasonswhyaccuratefraudstatisticsarehardtofind.First,itis
impossibletoknowwhatpercentageoffraudperpetratorsareactuallycaught.Are
thereperfectfraudsthatareneverdiscovered,orareallfraudseventuallyexposed?
Second,manyfraudsthatarediscoveredarehandledquietlywithinthevictim
organizationsandarenevermadepublic.Inmanycases,companiesmerelyhide
fraudsduetopublicrelationsconcernsandterminateortransferperpetratorsquietly.

11. Lossesincurredfromfraudreduceafirmsincomeonadollarfordollarbasis,
reducingnetincomeby$1foreverydollarthatislosttofraud.Tomakeupforthe
damagefrauddoestonetincome,acompanyhastohavemuchmorerevenuecome
in.Forexample,ifacompanyhasaprofitmarginof10%,tomakeupfora
$1,000,000fraud,thecompanywouldhavetohaveadditionalrevenueof
$10,000,000.

12. Sinceconfidenceistypicallyneededforfraudtooccur,peoplewhoarenottrusted
willnotbeinapositiontocommitafraud.

13. Whileanswersmayvary,thefollowingisonepossibleanswer:ThecaseofCharles
Ponziinvolveddeception,greedonbehalfoftheinvestorsandtheperpetratorand
confidenceintheperpetrator.Thesearetraitsthatarecommoninmanydifferent
casesoffraud.

14. TheAssociationofCertifiedFraudExaminers(ACFE)providestheopportunityfor
individualstobecomeaCertifiedFraudExaminerorCFE.CFEsareconsideredto
beleadersintheantifraudcommunityandhaverecognitionassuchthroughoutthe
world.TheyrepresentthehigheststandardsheldbytheACFEandpossessexpertise
inallaspectsoftheantifraudprofession.TheCFEdesignationisacknowledged
globallyandpreferredbymanyemployers.TheACFEstatesthatbecomingaCFE
immediatelysetsanindividualapartfromothersandlauncheshimorhertothetopof
theprofession.

15. Whileanswersmayvary,thefollowingisonepossibleanswer:Whenanindividual
becomesaCFE,heorsheautomaticallybecomesamemberoftheACFE.The
ACFEistheworldslargestantifraudorganizationandthepremierproviderof
antifraudtrainingandeducation.Togetherwithmorethan50,000members
throughouttheworld,theACFEworkstowardthereductionoffraudandcorruption
aroundtheglobe.

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Albrecht: Fraud Examination, 4e

True/False

1. False.Inmanycases,companiesmerelyhidethefraudstoavoidpublicrelations
issuesandquietlyterminateortransferperpetratorsratherthanmakethempublic.

2. True

3. True

4. True

5. False.Usingphysicalforcetotakesomethingfromsomeoneisrobbery.Fraud
involvesdeceitortrickery,notforce.

6. False.Telemarketingfraudisaformofinvestmentfraudorconsumerfraud.

7. True

8. True

9. True

10. True

11. False.Incivilcases,fraudexpertsoftenserveasexpertwitnesses.

12. True

13. False.Banksarerequiredtoreporttheirfraudstothegovernmentbecauseoftheir
FDICInsurance.

14. False.Technologyhastendedtoincreasethesizeandfrequencyoffraudscommitted.

15. True

16. False.Confidenceisthesinglemostcriticalelementforafraudtobesuccessful.

17. True

18. False.Unintentionalerrorsinthefinancialstatementsarenotconsideredfraud.

19. False.Occupationalfraudisusuallycommittedagainstanorganization.

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Albrecht: Fraud Examination, 4e

20. True

21. False.Directfrauddoesnotinvolvethirdparties;indirectfraudinvolvesathirdparty.

22. False:Customerfraudinvolvesacustomerwhodoesnotpayforgoodsorservices.
Vendorfraudinvolvesavendorwhoprovidesinferiorgoods,overcharges,orpays
bribestogetfavoredtreatment.

23. False.Onlycriminallawsuitsresultinjailtimefortheperpetrator.Negativeoutcomes
incivillawsuitsresultinrestitutionanddamagepayments.

24. True

25. False.Oneofthesevenelementsofafraudisthatthedeceptionmustbeintentional.

26. False.Fraudperpetratorscomeinallkindsandvarieties,butalwayshavetobe
trusted.Iftheydidnothavethetrustoftheirvictims,theywouldnothavebeenputin
apositionwheretheycouldcommitafraud.

27. False:Managementfraudmostoftenmeansthedeceptivemanipulationofa
companysfinancialstatements.

28. True

29. True

30. False.ACertifiedFraudExaminer(CFE)isconsideredtobealeaderintheantifraud
community.ACFEfocusesonthepreventionanddetectionoffraud.ACertified
PublicAccountant,ontheotherhand,focusesonallaspectsofaccounting.

MultipleChoice

1. a

2. d

3. a

4. d

5. a

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Albrecht: Fraud Examination, 4e

6. b

7. b

8. c

9. d

10. d

11. d

12. b

13. b

14. c

15. b

16. b

17. c

18. d

19. a

20. d

21. c

22. d

23. a

24. d

25. b

ShortCases

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Albrecht: Fraud Examination, 4e

Case1

Clever,Inc.,wouldhavetogenerateuptoanother$10,000,calculatedasfollows,torecover
thelossesfromthefraud:

ProfitMargin=NetIncomeDividedbyRevenue

$2,000

ProfitMargin=$20,000=10%

Withaprofitmarginof10%,andespeciallybeingamanufacturingcompany,itcouldtakeup
toanother$10,000inrevenuetorecoverthe$1,000fraudloss.

Alexander,Inc.,wouldhavetogeneratenomorethananother$4,000,calculatedasfollows,
torecoverthelossfromthefraud:

ProfitMargin=NetIncomeDividedbyRevenue

$5,000

ProfitMargin=$20,000=25%

Becauseitsprofitmarginis25%,andbecauseitisaservicefirmwithnocostofgoodssold,
itwouldnottakemorethananother$4,000torecoverthe$1,000fraudloss.

Theseamountsaredifferentbecausetheprofitmarginsofthesecompaniesaredifferent.
Clever,Inc.,isamanufacturingcompany,andforevery$1,000ofnetincomeitmust
generate$10,000.Ontheotherhand,Alexander,Inc.,mustgeneratenomorethan$4,000for
each$1,000lostfromthefraud.Itisusuallyeasierforaservicecorporationwithahigher
profitmargintorecoverfromfraudlossesthanitisformanufacturingcompaniesthatmust
generatemoremoneytorecoverfraudlosses,suchasClever.

Case2

1. Unintentionalerrorsandfraudarequitedifferentfromeachother.Anunintentional
errorisanerrormadebyaccidentorwithoutintent.Fraud,ontheotherhand,is
intentionalandmostofteninvolvestrickeryordeceit.

2. Whileadvancesintechnologyhavehelpedtopreventanddetectsomefraud,these
advanceshaveopenedupnewwaysforperpetratorstocommitfraudthatbeforewere
unthinkable.Computers,theInternet,andcomplexaccountingsystemshavemadeit

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Albrecht: Fraud Examination, 4e

soeasythatperpetratorsneedonlytomakeatelephonecall,manipulateacomputer
program,orpressakeyonthekeyboardtocommitfraud.

Case3

1. Customerfraud

2. Investmentscam/consumerfraud

3. Employeeembezzlement

4. Managementfraud

5. Vendorfraud

6. Miscellaneousfraud

Case4

Fraudstatisticsarehardtoobtainforseveralreasons.First,wecanneverknowexactlywhat
percentageoffraudisdiscovered.Arethereperfectfraudsthatareneverdiscovered,ordo
allfraudseventuallycometolight?Second,thevictimorganizationquietlyhandlesmany
fraudsthatarediscovered,nevermakingthempublic.Victimorganizationsoftenliketo
avoidpublicityandthecostsassociatedwithinvestigatingandprosecutingfraud.Theseand
otherfactorsmakeitverydifficulttoresearchfraudandforaccuratestatisticstobeobtained.

Case5

Asthenumberoffraudsandamountsoffraudlossesincrease,sodotheopportunitiesfor
successfulfraudfightingcareers.Manybelievethatfraudexaminationandforensic
accountingwillbeamongthefastestgrowingandmostrewardingcareersinthefuture.
Governmentfraudfighters,consultantfraudfighters,corporateemployeefraudfighters,and
defenseandplaintifflawyersarejustafewofthepossiblecareersrelatedtofraudprevention
anddetection.

Case6

Whenfraudisdetected,companiesshouldprosecuteifpossible,bothincriminalandcivil
courts.Byproceedinginacivilsuit,thecompanycantrytorecoversomeofthemoneylost
fromthefraud.Bypursuingacriminalsuit,thecompanycanensurethatwhenother
companieshiretheperpetrator,thosecompanieswillknowthattheemployeehascommitted
fraudinthepastandwillbeabletopreventtheprospectiveemployeefrombeingina

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Albrecht: Fraud Examination, 4e

positionthatprovidestheopportunitytocommitfraudagain.Firmsdonotoftenpursueboth
civilandcriminalremedies,andsometimesdoneitherbecauseoflitigationcosts,time
involved,orthedesiretoavoidnegativepress.

Case7

1. Fraudoccurswhenindividualsintentionallycheatordeceiveotherstotheir
advantage.Inthiscase,Bobiscommittingafraud.Regardlessofthemagnitudeof
thecharges,heisintentionallychargingnonbusinesslunchestohisemployer.Thisis
alsoknownasemployeefraud,oroccupationalfraud.

2. Asanemployee,youhaveanethicalresponsibilitytoyouremployertoreportBobs
fraudulentbehavior.Fortunately,inthiscasenothinghasbeendonethatcannotbe
correctedeasily.SinceBobisjustifyinghisbehaviorbysayingtherecentmemo
pertainingtomealexpensesdoesnotapplytohimbecauseheisanintern,youshould
trytohelpBobseetheerrorofhislogicandencouragehimtocorrectthecharges.If
Bobisunwillingtochangehisbehavior,theappropriatesuperiorshouldprobablybe
notified.

Case8

Intheworstcase,theadditionalrevenueneededwillbethefraudlossdividedbytheprofit
margin,or$50,000dividedby0.07,whichequals$714,286.

Case9

1. At5%,amaximumof$50,000,000inadditionalrevenueisneeded.At10%,a
maximumof$25,000,000inadditionalrevenueisneeded.At15%,amaximumof
$16,666,667inadditionalrevenueisneeded.

2. Someofthevarioustypesoffraudthatcanaffectaninsurancecompanyare:
a. Employeefraudindividualsinvolvedinthebenefitsareacancreatefalse
claimsfornonexistentpolicyholders.Thevictimisthecompany,andthe
perpetratoristheemployee.
b. Managementfraudthecompanycancreatenonexistentpolicyholdersto
maketheirrevenuesappeargreater.Thevictimsarethestockholdersandother
financialinstitutionsthatrelyonthefinancialstatements.Theperpetratorsare
membersofmanagementwiththecompany.
c. Customerfraudpolicyholderscancreatefalseclaimstocollectmoney.The
victimisthecompany,andtheperpetratorsarethecustomers.

Case10

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Albrecht: Fraud Examination, 4e

Fraudexaminersinvestigatesuspectedfraudulentactivity,whereasauditorsareconcerned
abouttheoverallfairnessofthefinancialstatements.Oneofthebiggestdifferencesbetween
auditingandfraudexaminationisthatwithauditing,samplingisusedtoassesswhether
managementsassertionsarereasonable.Theauditorusessamplingtotesttheaccount
balancestomakesuretheaccountsarenotoverstatedorunderstated.Fraudexamination
cannotbedoneeffectivelythroughsampling.Infraudexamination,eachtransactionshould
bereviewedandevaluated.

Case11

1. TherearemanyreasonswhyCesarshouldbeterminatedfromemployment.
However,oneofthemostapparentreasonsisthatorganizationsthatdonotwork
proactivelyatfraudpreventionanddetectionfindthemselvesasfrequenttargetsof
fraudschemes,withthefraudbecomingmoreandmorecostly.Amessagethat
perpetratorswillbeprosecuteddetersotherpotentialfraudbyreducingtheperceived
opportunity.

2. Anindividualwhocommitsfraudandisnotpunishedorismerelyterminatedsuffers
nosignificantpenaltyandoftenresumesthefraudulentbehavior.Ifprosecuted,the
individualsufferssignificantembarrassmentwhenfamily,friends,andbusiness
associatesfindoutabouthisorheroffenses.Humiliationisoftenthestrongestfactor
indeterringfuturefraudactivity.

Case12

Nancyshouldbeconcerned.First,thebankhasamandatoryoneweeklongvacationpolicy.
Bobshouldnotbeallowedtobeanexception.Bobalsofitsmanyofthedemographicsfora
fraudperpetrator:hehasalotofexperiencewiththebankandisinatrustedposition,he
oftenworkslateintothenightallbyhimself,everyonetrustshim,andhelikestogivethe
impressionthatheistoughoncredit.NancyshouldnotassumethatBobhascommitted
fraud;however,sheshoulddemandthatBobtakeamandatoryvacation,andsheshouldbe
alertforadditionalsignsoffraud.

Case13

Whileanswersmayvary,thefollowingisonepossibleanswer:Themanagementfraudsto
whichyourfriendrefersinvolvemuchmorethanjuststealingmoney.Theyaresometimes
simple,sometimesverycomplicatedschemeswhichmisstatefinancialstatementsandare
intendedtodeceivethepublic,butthatarealsoorchestratedsothatthefraudisdifficultto
detectinanaudit.Financialstatementfraudcanbeverydifficulttodetectbecauseofthe
sophisticationoftheperpetratorsandtheirpositionoftrustandauthorityinthecompany.

Case14

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Asfrauddetectionmethodsgetmoresophisticated,sodofraudperpetrationtechniques.
Fraudexaminationisoneofthefastestgrowingandmostfinanciallyrewardingcareers.Itis
notpartofafinancialstatementauditbutadistinctprofession.

Case15

Fraudexaminersarehiredbymanydifferentkindsoforganizations.Examplesincludethe
government,CPAfirms,lawfirms,insurancecompanies,publicandprivatecorporations,
universitiesandhospitals.Fraudexaminersarehiredtodoavarietyoftasks,andfraud
examinationisanexcitingandintriguingcareer.

CaseStudies

CaseStudy1

1. Janehadsuspicionsoffraudforseveralreasons.First,shenoticedthattheaccounts
payablechecks,whichwerepayabletodualpayees,lackedtherequiredendorsement
ofbothpayees.Next,Janeobservedthatseveraldifferentpeoplewroteallthechecks
insimilarhandwriting.Then,bothJaneandGusrealizedthateachofthefivechecks
hadbeencashedatthesameconveniencestorelessthanfivemilesfromthehome
office,eventhoughthemailingaddressofoneofthepayeeswasover200miles
away.Finally,afterbeginninginvestigation,JaneandGusfoundthattherewereno
existingdocumentstosupportthepaymentsmadefromthechecks.

2. Fraudisoftencaughtthroughinconsistenciesinfinancialdata.Therefore,any
discrepancy,howeversmallitseems,mayhavethepotentialofassistingtheauditor
indiscoveringfraud.

3. Thereisalwaysmotivationforafraudperpetratorsdishonestactions.Someofthese
motivationsmightinclude,butarenotlimitedto,financialpressures,income
consumingaddictions(e.g.,gambling,drugs,alcohol,andextramaritalrelationships),
familystruggles,workrelatedstrains,taxliens,garnishmentofwages,orother
pressures.Whileresearchingthepersonnelfilesofemployees,theauditorswouldbe
lookingforanypatterns,characteristics,orpastoccurrencesinthelivesofthe
employeesthatwouldindicateanypossiblemotivationsforcommittingfraud.

CaseStudy2

1. Fraudoccurswhensomeonedeceivessomeoneelsethroughconfidenceandtrickery
inordertogetgain.

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2. Byusingphraseslikeguaranteedwinner,PublishersClearingHousedeceived
manyindividualsintobelievingthattheyhadwonwheninrealitytheyhadnt.By
doingso,prosecutorsbelievedthatPublishersClearingHousecommittedfraud.

CaseStudy3

1. Thoseinvolvedinthelatetradingschemehavecommittedbothacivilandacriminal
offense.Byperformingtradesafterapprovedtradinghours,theperpetratorshave
allowedcertaintraderstotradewithperfectinformationandhavepreventedother
tradersandbrokersfromtradingequitiesatapriceatwhichtheynormallywould.As
such,thiscaseisinviolationofcivillaw.Ifprovenguilty,theperpetratorswillbe
forcedtocompensatemonetarilyforthedamagestheycausedtoothers.Theyhave
alsocommittedacriminaloffensebybreakingthelawthatregulatesapprovedtrading
hours.Ifprovenguilty,theperpetratorscouldbesenttojail.

2. WhilethePrudentialtradersinvolvedinthelatetradingschemerealizedquickand
easyprofits,otherstockandmutualfundtraderswerehurt.Theyhadanapparent
disadvantagetothosetradersandbrokerswhopracticedlatetrading.Theother
traderswereforcedtobuystocksandinvestinmutualfundsatahigherpriceandthen
sellthematalowerpricethantheywouldhaveiftherewerenofraudinvolved.
Eventually,however,theperpetratorswillincurthemostdamageastheyareforced
tofulfilltheircivilobligationsandenduretarnishedreputations.

InternetAssignment

OnesolutionistosearchthehomepageoftheAssociationofCertifiedFraudExaminersat
www.acfe.comformoreinformationaboutcareers.There,youwillfindseverallinksto
companiesandgovernmentagenciesthatareinvolvedincombatingfraudandotherwhite
collarcrime.

TheFederalBureauofInvestigation(FBI)isprobablythelargestgovernmentagencythat
employsfraudfighters.TheFBIsWebsitecanbefoundatwww.fbi.gov.Byclickingon
employmentandspecialagentvacancylinks,studentscanseewhatanFBIagent
actuallydoes.

TheInternalRevenueService(IRS)isanothergovernmentagencythatofferscareersinfraud
examination.TheiremploymentWebsitecontainsapagegivingadescriptionofand
qualificationsneededtobecomeacriminalinvestigator.Searchwww.jobs.irs.govandthen
clickonthelinkentitledCriminalInvestigationSpecialAgentopportunities.

Debate

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Albrecht: Fraud Examination, 4e

Duetothesubjectivenatureofthisethicscase,noexactsolutionisprovided.However,the
authorsdobelievethatinthissituation,studentshaveaproactiveresponsibilitytoatleast
terminateemployment.(Youmaylaterbesuedifyoudonot).

AnswerstoStopandThinkQuestions:

1. WhyisitmoredifficulttotellifsomeonecanbetrustedontheInternetthanin
person?
a. Whenyouaredealingwithsomeoneinperson,youcanlearnmuchfromtheir
personality,bodylanguage,andmannerisms.Youcanalsogettoknowthem
better.Youcanseethepersonyouaredealingwith.OntheInternet,youhave
noideawhoyouaredealingwithorwhetherthepersonororganizationisan
imposter.BecauseInternetperpetratorscannotseetheirvictims,suchfrauds
seemmorelikeavictimlesscrime.

2. Whydoyouthinkitiseasierfortopmanagementtomanipulatethefinancial
statementsthanforotherindividualsinanorganization?
a. Topmanagementcanmoreeasilyoverrideinternalcontrolsthanotherscanin
anorganization.Also,itiseasierforotherstofollowtheinstructionsoftop
managementthanothersbecauseemployeeswillsay,itdoesntmakesense
tomebutifthebossisaskingmetodoit,heorsheprobablyknowswhatis
rightorwrong,soIbetterdoit.Thecombinationofdeferencetoexecutives
andtheeaseofoverridingcontrolsmakeiteasierfortopmanagementto
manipulatefinancialstatementsthanitisforothers.Theyalsoseetheentire
financialpictureofanorganizationwhereasotherswouldonlyseeparts.

3. O.J.Simpsonwastriedformurderbothcriminallyandcivilly.Hewasfound
innocentinthecriminaltrialbutguiltyintheciviltrial.Whydoyouthinkthat
isthecase?
a. Inacriminalcase,thejurymustreachaunanimousverdictevenoneperson
whofeelsdifferentlycancauseahungjuryoraninnocentverdict.Inacivil
case,onlythemajorityofthejurorsmustbelievethatthepersonwasguilty.
Theconvictionstandardislowerincivilcases.

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