Accountants' Handbook, Volume Two, Special Industries and Special Topics, 12th Edition

Chapter 40

Detecting Fraud

From Fraud Examination, First Edition by W. Steve and Chad O. Albrecht© 2003. Reprinted with permission of South-Western, a division of Thomson Learning: www.thomsonrights.com. Fax [phone]. (Currently in its 4th Edition).

W. Steve Albrecht

Brigham Young University

Conan C. Albrecht

Brigham Young University

40.1 Introduction

40.2 Types of Fraud

40.3 Fighting Fraud: An Overview

40.4 Fraud Detection: The Earliest Approaches

40.5 Fraud Detection: The Red-Flag Approach

40.6 Management and the Board of Directors

(a) Understanding Management and Director Backgrounds

(b) Understanding Management and Director Motivations

(c) Understanding the Degree of Influence of Key Members of Management and the Board of Directors

40.7 Relationships with Others

(a) Relationships with Financial Institutions

(b) Relationships with Related Parties

(c) Relationships with Auditors

(d) Relationships with Lawyers

(e) Relationships with Investors

(f) Relationships with Regulatory Bodies

40.8 Organization and Industry

40.9 Financial Results and Operating Characteristics

40.10 Strategic Fraud Detection

40.11 Conclusion

40.1 Introduction

Fraud is different from most crimes in that it is seldom observed. Traditional crimes usually leave evidence that can be seen. For example, if a bank is robbed, there are usually witnesses, physical money is missing, and the entire episode is often captured on video. Similarly, the discovery of a body that is obviously the victim of murder leaves ...