TYPES OF FRAUD

TYPES OF FRAUD

The following are the different types of fraud:

1. False Accounting

Some of the most dramatic corporate failures over the years have been characterized by false accounting.

I. The main aim of false accounting is to present the results and affairs of the organization in a better light than the reality.

II. This is often done by overstating assets or understanding liabilities to reflect a financially strong; the reasons for doing this are varied and include obtaining financing, supporting the share price, and attracting customers and investors.

Asset misappropriation:

Any business asset can be stolen by employees or third parties, or by employees and third parties acting in collusion. Example of common employees and management fraud includes:

I. Direct theft of cash or realizable assets, such as stock or intellectual property, such as price or customer lists.

II. Make false expenses claim.

III. Payroll fraud diverting payments or creating fictitious employees.

Computer fraud:

There is no such thing as “computer fraud” rather, a computer can be the object, subject or tool of a fraud. As technology evolves, so we see new of perpetrating fraud through computers such frauds have included:

I. Diverting funds from one bank account to another, having gained unauthorized access to the bank, perhaps by hacking.

II. Holding out to be legitimate business on the internet and obtaining payment for goods that are not delivered or a lower specification than that advertise.

III. Manipulating the share price of a company by publicizing invalid news items or claims on bulleting boards.

Each of these frauds could have been carried out without the use of computer. What computer and the internet in particular, have provide is access by connected parties, where previously an insider would need to have been involved. Computer also allow processing of large amount of data to be performed quickly, enabling the creating of password.

Insurance Fraud:

Insurance fraud covers a number of areas are varies widely in its nature; it includes but is not limited to:

I. Overstated claims

II. False claims losses that never occurred

III. Multiple claims

IV. Obtaining property fraud Intellectual Property Fraud

Intellectual property includes items such as patents, design rights and customer lists, and is just as much a business assets as plant a machinery or stock like any other asset, intellectual property is therefore, susceptible to theft by staff and third parties, although it is not always apparent intellectual property right are being misappropriated or infringed.

Employee and management fraud could include direct theft of intellectual property, for example by departing employees using critical business information to set up in competition or through the sale of price lists or it by existing employees.

Theft or Infringement by Third Parties:
I. Deliberate under reporting of royalties by a party selling or manufacturing the product under license.

II. Knowingly developing competing products and infringing design rights that have already been registered and protected by the creator.

III. Passing off fake product as the genuine article, e.g. branded luxury goods, perfumes, CDs and computer software. Corruption:

General, bribery and corruption are off book frauds that occur in the form of:
I. Kicking back or commission

II. Bid rigging

III. Gifts or gratuities. Investment Scheme Fraud:

Investment scheme fraud can also be thought of as third party asset misappropriation. It involves taking money from customers on the promise of spectacular returns but using the cash from one‟s own purpose.

Such frauds result from a combination of motivational and situation factors in which the crucial element is the presence of both opportunity and motivation. Effective control structures, whether preventive or detection based, can serve to reduce or deny the opportunity to a potential fraudster.

Others includes;

Financial Fraud: Cross-border fraud, charities frauds, Romance schemes, debt elimination Nigerian “4-1-9” scams.

It is not the auditor‟s purpose in carrying out an audit to determine whether or not frauds. Or any kinds have been perpetrated by servants of his clients. Kingston cotton mill (2005) he auditor does not guarantee the discovery of all fraud.

The auditor‟s duty is to assess whether or not the published accounts accurately represent the true state of his client‟s business and to produce report addressed to the owner‟s in which he expresses his opinion of the truth and fairness, and sometime other aspects of the financial statements. The phrase “true and fair” does not imply that the accounts are corrects in every detail and the presence of minor in accuracy would not invalidate the auditor‟s opinion. It is however, obvious that if a material frauds has been perpetrated and is not reflecting the true state of the client‟s business.

REFERENCE

Anyanwu, A.(2004): Data Collected and Analysis Okwe, Auan Global Publication

Alvin, A.S & James, K.L (2002): Auditing and Investigation Approach. Longman Group Limited, London.

Ephramin, E.U (2006): Principle of Auditing, Ibandon, Clean Hands production.

Horby, A.S (2001): Oxford Advance Learning Dictionary London, Special Price Edition Oxford University Press

Howlard, R (2001) Auditing Served Edition, Macdonald and Evans Limited, London.