Types Of Occupational Fraud

Fraud

Fraud is best defined as “a knowing misrepresentation of the truth or the concealment of a material fact to induce another to act to his or her detriment” (What Is Fraud 2017). Fraud can be committed internally through occupational fraud, externally through bid-rigging and bribery, or against individuals through Ponzi and phishing schemes. Occupational fraud is classified into three categories: corruption, asset misappropriation, and financial statement fraud. The potential fraud occurring at Wayland Manufacturing Company is asset misappropriation, which occurs when “an employee steals or misuses the employing organization’s resources” (The Fraud Tree-Asset Misappropriation 2016). Therefore, the type of asset misappropriation supposedly

Unlike the Accounts Payable master file and the company’s receiving reports, which are maintained by independent third parties, Wayland Manufacturing Company’s Accounts Payable and Purchases accounts are completed in-house with insufficient internal controls. The lack of sufficient internal controls increases an employee’s opportunity to commit and conceal fraud. In addition, the high employee turnover places the accounting department’s responsibilities on the company’s Chief Accountant, Fred Newbaker. The lack of a separation of duties enables Newbaker to create vendor invoices to commit fraud and the lack of a third party approval system enables him to conceal his wrongdoings (Arens, Elder, & Borsum 2013) (Accounts Payable and Disbursements Fraud

Public records like bankruptcy and property records are more available as they can be retrieved over the internet or face-to-face. For example, Fred Newbaker buys a house with the funds stolen from Wayland Manufacturing Company. If the fraud investigator can match the houses deed found on the city’s website with the Accounts Payable account, he or she may have found Newbaker’s motive for committing fraud. In addition, internet search engines like Google or Yahoo can be utilized for data collection. For example, the fraud investigator obtains Wayland Manufacturing Company’s 10-K report from the Securities Exchange and Commission’s (SEC) website. The information includes the length of the alleged fraud as well as the accounts being impacted like Cash, Accounts Payable, and Purchases (Arens, Elder, & Borsum 2013) (Coenen