Principles of Fraud Examination 4th Edition Solution Manual

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ANSWERS TO EXERCISESChapter 1Review Questions1-1(Learning objective 1-1) What is fraud examination?Answer:Fraud examinationis a process for resolving allegations of fraud from inceptionto disposition. Fraud examinations involve not only financial analysis, but alsointerviewing witnesses, taking statements, writing reports, testifying to findings, andassisting in the prevention and detection of fraud.1-2(Learning objective 1-2) What is the fraud theoryapproach?Answer:The fraud theory approachis the methodology used for resolving allegationsoffraudby developing a worst-case scenario of what could haveoccurred, then attemptingto confirm or refute thattheory.1-3(Learning objective 1-3) Occupational fraud and abuseincludes any personalenrichment that results from misuse ormisapplication of the employing organization’sresources orassets. There are four key elements to this activity. Whatare they?Answer:The four key elements to occupational fraudabuse are that it(1) is clandestine,(2) violates the employee’s fiduciary duties to the organization, (3) is committed for thepurpose of direct orindirect financial benefit to the employee, and (4) costs theemploying organization assets, revenues, or reserves.1-4(Learning objective 1-4) Under the common law, fraud generally consists of fourelements, all of which must bepresent. List them.Answer:The four legal elements of fraud are (1) a material false statement, (2)knowledge that the statement was false when it was uttered, (3) reliance on the falsestatement by the victim, and (4) damages as a result.1-5(Learning objectives 1-4 and 1-5) What is the difference between occupational fraudand occupational abuse? Giveexamples.Answer:Occupational fraud tends to be more costly and less common than abuse.Occupational fraud consistsof such actions as asset misappropriations, corruption, andfraudulent financial statements. Occupational abuse consistsof petty offenses such astakingextended lunch periods or breaks, showing uplate forwork or leaving early, anddoing slow or sloppy work.

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