©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
ACTG 474 Exam 2 Study Guide 100%
Verified.
Fraud - Answer✔an act committed by an employee/manager/owner for thier personal gain or
to cause harm to their organization
Fraud Techniques - Answer✔Sabotage
Misappropriation of Funds
Check Forgery(check fake)
Credit Card Fraud(ID theft)
False Invoices
Theft
Industrial Espionage(stealing competitors secrets, products, customer list, pricing detail, bribe
employees for info)
Fraud Main Element - Answer✔-has to be a false statement about a provable fact (element)
-intent to deceive (scienter)
-done by insiders due to them knowing the system(employees, managers/owners/fradulent
financial reporting)
Lapping (Fraud Techniques) - Answer✔temporarily cash collections, get rid of this scheme by
rotating duties
Kiting(Fraud Techniques) - Answer✔theft from a bank covers up a theft by creating cash
through the transfer of money between banks (create money, not necessarily like money
laundering) "create cash"
-banks have mandatory leave, to detect any issues or fraud
Corruption (Type of Fraud- Occupational) - Answer✔use their position/power inappropriately
and to deceive
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, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
Asset Misappropriation (Type of Fraud-Occupational) - Answer✔stealing cash, assets, inventory,
using asset in a way that it shouldn't be
Financial Statement Fraud (Type of Fraud-Occupational) - Answer✔increasing our revenues,
inflating our asset values to get loans this can be personal
Red Flags - Answer✔-warning signs but not equal to actual fraud
-financial pressures (college, sick spouse)
-change in personality or behavior
-inability to manage money or live within their means
-outside business interest (corruption)
-poor internal controls, especially on cash
-rising business cost creates more pressure
-too much control for an employee (no segregation of duties)
-inattentive management
-no pre-screening employees
Fraud Triangle - Answer✔-an opportunity, a pressure/motive, and a rationalization
pressures - Answer✔-poor credit ratings, heavy financial losses, large gambling debts, high
personal debt, unfair compensation, job dissatisfaction, fear of losing job, overaggressive bonus
plans, non-recognition of performance, family/peer pressure, emotional stability, need for
power or control
Opportunities - Answer✔is the condition that allows a person to commit and conceal a
dishonest act, can arise from a lack of internal controls (the opportunity piece of the fraud
triangle is the most controllable by the company)
Rationalization - Answer✔allows perpetrators to justify their illegal behavior, this can take the
form of a justification, an attitude, or a lack of personal integrity
-"I am borrowing money"
-"I am not hurting a real person just a computer system/organization"
Why Fraud Occurs? - Answer✔-white collar criminals (fraudsters)
-violent criminals (murder assault extortion)
-they are both different types of people
-the first case of fraud is similar to the general public
2|Page
ACTG 474 Exam 2 Study Guide 100%
Verified.
Fraud - Answer✔an act committed by an employee/manager/owner for thier personal gain or
to cause harm to their organization
Fraud Techniques - Answer✔Sabotage
Misappropriation of Funds
Check Forgery(check fake)
Credit Card Fraud(ID theft)
False Invoices
Theft
Industrial Espionage(stealing competitors secrets, products, customer list, pricing detail, bribe
employees for info)
Fraud Main Element - Answer✔-has to be a false statement about a provable fact (element)
-intent to deceive (scienter)
-done by insiders due to them knowing the system(employees, managers/owners/fradulent
financial reporting)
Lapping (Fraud Techniques) - Answer✔temporarily cash collections, get rid of this scheme by
rotating duties
Kiting(Fraud Techniques) - Answer✔theft from a bank covers up a theft by creating cash
through the transfer of money between banks (create money, not necessarily like money
laundering) "create cash"
-banks have mandatory leave, to detect any issues or fraud
Corruption (Type of Fraud- Occupational) - Answer✔use their position/power inappropriately
and to deceive
1|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
Asset Misappropriation (Type of Fraud-Occupational) - Answer✔stealing cash, assets, inventory,
using asset in a way that it shouldn't be
Financial Statement Fraud (Type of Fraud-Occupational) - Answer✔increasing our revenues,
inflating our asset values to get loans this can be personal
Red Flags - Answer✔-warning signs but not equal to actual fraud
-financial pressures (college, sick spouse)
-change in personality or behavior
-inability to manage money or live within their means
-outside business interest (corruption)
-poor internal controls, especially on cash
-rising business cost creates more pressure
-too much control for an employee (no segregation of duties)
-inattentive management
-no pre-screening employees
Fraud Triangle - Answer✔-an opportunity, a pressure/motive, and a rationalization
pressures - Answer✔-poor credit ratings, heavy financial losses, large gambling debts, high
personal debt, unfair compensation, job dissatisfaction, fear of losing job, overaggressive bonus
plans, non-recognition of performance, family/peer pressure, emotional stability, need for
power or control
Opportunities - Answer✔is the condition that allows a person to commit and conceal a
dishonest act, can arise from a lack of internal controls (the opportunity piece of the fraud
triangle is the most controllable by the company)
Rationalization - Answer✔allows perpetrators to justify their illegal behavior, this can take the
form of a justification, an attitude, or a lack of personal integrity
-"I am borrowing money"
-"I am not hurting a real person just a computer system/organization"
Why Fraud Occurs? - Answer✔-white collar criminals (fraudsters)
-violent criminals (murder assault extortion)
-they are both different types of people
-the first case of fraud is similar to the general public
2|Page
