Risk Of Fraud And Illegal Act

1. Fraud Triangle

1.1. 1. Perceived Opportunity

1.2. 2. Perceived Need ( Pressure )

1.3. 3. Rationalization

2. GOVERNANCE OVER THE FRAUD RISK MANAGEMENT PROGRAM

2.1. 1. Board ownership of agendas and information flow.

2.2. 2. Access to multiple layers of management and effective control of a whistleblower hotline.

2.3. 3. Independent nomination processes.

2.4. 4. Effective senior management team ... evaluations, performance management, compensation, and succession planning.

2.5. 5. A code of conduct specific for senior management, in addition to the organization's code of conduct.

2.6. 6. Strong emphasis on the board's own independent effectiveness and process through board evaluations, executive session, and active participation in oversight of strategic and risk mitigation efforts."

3. Definition Of fraud

3.1. The IIA's definition is probably the broadest, referring to ''Any illegal act characterized by deceit, concealment, or violation of trust."

3.2. The American Institute of Certified Public Accountants' (AICPA's) definition is, not surprisingly, much narrower. It specifically focuses on "misstatements arising from fraudulent financial reporting and misstatements arising from misappro￾priation of assets."

4. KEY PRINCIPLES FOR MANAGING FRAUD RISK

4.1. 1. Fraud Risk Governance

4.1.1. it is important for organizations to develop a strong governance structure to oversee risk management and other activities that are in place to help ensure achievement of business objectives.

4.2. 2. Fraud Risk Assessment

4.2.1. A fraud risk management program will not be successful without management first understanding the inherent fraud risks the organization faces

4.3. 3. Fraud Control Activity

4.3.1. ''A fraud control activity is a specific procedure or process intended either to prevent fraud from occurring or to detect fraud quickly in the event that it occurs."

4.4. 4. Fraud Investigation and Corrective Action

4.4.1. Control activities can only be expected to provide reasonable-not absolute-assurance against fraud.

4.5. 5. Fraud Risk Management Monitoring Activities

4.5.1. The final COSO fraud risk management principle "relates to monitoring the overall fraud risk management process.