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Fraud

In: Business and Management

Submitted By zuolan1991
Words 799
Pages 4
As is mentioned in the “The CPA Journal”, “many studies suggest fraud is more likely to occur when someone has an incentive (pressure) to commit fraud, weak controls or oversight provide an opportunity for the person to commit fraud, and the person can rationalize the fraudulent behavior (attitude).” This is known as the fraud triangle.
There are two types of fraud: fraudulent financial reporting and misappropriation of assets. For the first one, this kind of frauds came from the top management. Most of the pressures are the decline in earnings, which may influence the financing as well as the stock price. Moreover, the top management is afraid to get fired. At the same time, since the financial statement include many significant judgments or estimates, which maybe the opportunity for the top management to commit frauds. For the attitude, the top management displays a significant disregard for the financial report process. These factors will increase the risk of fraud. Secondly, misappropriation of assets, this kind of frauds came from the employees, such frauds like this may not have a great impact on the company. The employees with much more financial pressures when the economic situation getting bad. Moreover, the weak internal controls are the major source of opportunity to the employees; the examples include the inadequacy of the assignment of responsibility. And for the rationalization, the top management displays a significant disregard for controls and ethical conduct maybe one of the factors.
In order to reduce the risk of fraud, the company should set some regulatory to reduce the fraud risks. In my opinion, the internal control is the key point. The AICPA has already set a guideline in order to help the Board of Directors and Management to anti-fraud. First, the company can create and maintain a culture of honesty and high ethics. The top management...

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