Fraud Risk in Governmental and Not-for-Profit Organizations

SOLUTIONS

CHAPTER 1

Solutions to Practice Questions

1.     Ways to prevent, detect and deter computer fraud include the following:

•     Separation and rotation of duties both within and external to the technology function,

•     Timely update of accessible computer applications when personnel change jobs or when the requirements of their current position change,

•     Periodic and surprise inspections and security reviews,

•     all control policies and procedures required to be written (zero tolerance for deviations from this policy, and

•     Offline controls and limits such as batch controls and hash totals where indicated and cost-effective

2.     Fraud research consistently indicates the common characteristics of individuals that perpetrate financial statement fraud are

•     a trusted employee

•     dedicated and often works long hours,

•     dislikes mandatory vacation policies,

•     resents cross-training,

•     seen as likeable and generous, and is

•     deceptive and usually an adept liar.

Solutions to Knowledge Check Questions

1.    

a.     Incorrect. Organizational culture of arrogance and management entitlement is a general warning sign of fraud.

b.     Incorrect. Overly centralized control over financial reporting is a general warning sign of fraud.

c.     Correct. Open and honest communication between key accounting or finance personnel and top management of the organization is not a general warning sign of fraud.

d.     Incorrect. Transactions that ...