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Fraud 101

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Fraud 101

Techniques and Strategies for Detection

Wiley,

15 min read
10 take-aways
Text available

What's inside?

With diligence your company can avoid being the victim of fraud. Start by teaching ethics. Then watch carefully.

Editorial Rating

8

Qualities

  • Applicable

Recommendation

Fraud is ever present, especially now. Authors Howard Silverstone and Howard R. Davia suggest that in recent years fraud has moved from the periphery of the corporate world to the center of it - from small, unprofitable, marginal companies to the biggest blue chips. The headlines about Enron, WorldCom and Global Crossing suggest that the authors are right. They do a commendable job of categorizing and explaining various kinds of fraud and the circumstances that make scams profitable. They offer enough anecdotes to fill a mystery novel writer’s idea file for a year. Given that their book is also accessible, intelligible and, at times, even entertaining, getAbstract.com recommends protecting your company by reading it carefully. This may be your opportunity to avoid ever finding yourself at a board meeting trying to figure out "Who done it?"

Summary

Fraud Basics

No business is exempt from exposure to fraud. A company that considers itself immune offers a fraudster both a great advantage and a big target. Fraud is a form of human behavior and while some people seem predisposed to fraud, circumstances can determine whether fraud occurs. Reform legislation enacted after the great corporate scandals of the late 1990s and early 2000s now focuses managerial and regulatory attention on recognizing the risk of fraud, establishing preventative controls and developing appropriate hiring practices to ensure that employees are honest.

Fraud used to affect small companies more than large ones, but that has changed in recent years. The Treadway Commission report, "Fraudulent Financial Reporting: 1987-1997," found that companies involved in financial fraud at that time were usually small and barely profitable, or else were losing money. Their top executives usually participated in the fraud, aided - at least passively - by weak boards and audit companies that were heavily invested in the company. The industries involved tended to be financial services, technology and health care. Since 1997, frauds have gotten much bigger. Earnings...

About the Authors

Howard M. Silverstone, CPA, FCA, CFE, is the founder and director of a forensic accounting firm. He has written numerous articles on financial fraud. The late Howard R. Davia was a certified public accountant, author of the first edition of Fraud 101 and co-author of Accountant’s Guide to Fraud Detection and Control.

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