LECTURE 01 & 02 1

FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen

 Define what Forensic Accounting is and distinguish it
from Financial Audit
 Define Fraud and examine different examples of
Fraud by walking through different business cycles
 Discuss the Fraud Cycle
 Identify key factors for successful fraud
investigations
 Define the Fraud Triangle and understand
conditions that lead to fraudulent acts
 Discuss the Anti-fraud profession

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Forensic accounting is the specialty practice area
of accountancy that describes engagements that result
from actual or anticipated disputes or litigation.
 "Forensic" means "suitable for use in a court of law", and
it is to that standard and potential outcome that forensic
accountants generally have to work
 It includes preventing fraud & analyzing antifraud
controls
 Forensic accountants are experienced, trained, and
knowledgeable in all the different processes of fraud
investigation including: how to interview people
(especially the suspect) effectively, how to write
effective reports for clients and courts, how to provide
expert testimony in court, and rules of evidence.
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Forensic accounting would include:
 the audit of accounting records for evidence of fraud,
 gathering of nonfinancial information, such as interviews of all related
parties to a fraud.
 conducting a fraud investigation
 writing a report to management or court.
 serving as an expert witness and litigation support. Litigation support
refers to a forensic accountant assisting attorneys in prosecuting or
defending a case in the legal system.

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 Financial auditing is a wholly different term that needs to be
distinguished from forensic accounting and fraud auditing.
Financial auditing typically refers to the process of evaluating compliance
of financial information with regulatory standards, usually for public
companies, by an external, independent entity.
 The well-publicized Sarbanes-Oxley Act (SOX) incorporates
concepts and procedures to deter and to catch fraud in audits of
internal controls over financial reporting.
 However, the focus of financial audits and financial reporting ultimately is
concerned with providing reasonable assurance that a material
misstatement to financial statements has not occurred
 These are in line with Generally Accepted Accounting Principles
(GAAP) and International Financial Reporting Standards (IFRS)

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 Financial auditing aims to render an opinion as to whether a set of
transactions is presented fairly in accordance with General Accepted
Accounting Principles (GAAP) The auditor focuses on financial
information and the financial reporting process. They are concerned
about qualitative values (materiality concept) and generally is not
concerned about whether the financial statements communicate the
policies, intentions, or goals of management
 Forensic accounting is a general term used to describe any financial
investigation that can result in a legal consequence. Areas of expertise of
forensic accountants are not only in accounting and auditing but in
criminal investigation, interviewing, report writing, and testifying as
expert witnesses.
 Fraud auditing is a specialized discipline within forensic accounting,
which investigates a particular criminal activity, namely fraud. It focuses
on detecting and documenting fraud in books of records of accounting
and financial transactions and events.
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The Association of Certified Fraud Examiners (ACFE) defines
occupational fraud as:
“The use of one’s occupation for personal enrichment through the
deliberate misuse or misapplication of the employing organization’s
resources or assets.”
 The modern definition derived from case law focuses on the
intent of the fraudster(s) to benefit through deception.
 This deception involves any false or misleading words or
actions or omissions or concealment of facts that will cause
legal injury.
 White-collar crime is a type fraud. It is committed by
individuals embezzling, manipulating accounts, taking bribes,
and so on at their place of business.

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 The Federal Bureau of Investigation (FBI) offers a broad
but useful definition of fraud
“White-collar crimes are characterized by deceit, concealment, or
violation of trust and are not dependent upon the application or
threat of physical force or violence. Such acts are committed by
individuals and organizations to obtain money, property, or
services; to avoid the payment or loss of money or services; or to
secure a personal or business advantage”
 White-collar fraud involves an intentional deception by
employees, management, vendors, and customers to
obtain money or other assets or services from a
business.
 We focus on White Collar crime

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9

FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen

 The most useful way to classify the activity of the
fraudster is to discuss briefly the five typical
accounting cycles of any business where it will likely
leave some kind of audit trail.
 The five cycles follow:
1. Sales and Collections
2. Purchases and Payments
3. Payroll and Personnel
4. Inventory and Warehousing
5. Capital Acquisition and Repayment
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 The sales and collections cycle bills clients for sales of
goods and services and collects the money. This is the
most cash-intensive of the five cycles.
 The most common frauds in this cycle are:
1. Outright cash thefts: usually carried out through unrecorded
sales, under-ringing of sales, lapping schemes, and
overbilling, among others
2. Theft of other assets: Assets can be stolen by ordering and
shipping goods to an address other than that of the business
3. Kickbacks to customers: the fraudster under-bills the
customer for merchandise and they split the difference or
receivables are written off as uncollectible for a fee.
4. Front-end frauds: the fraudster directing customers to take
their business elsewhere or misappropriating a rebate
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Lapping Scheme is an accounting method that involves altering the
accounts receivable section of the balance sheet when cash that is
intended for the payment of a receivable is stolen.
 The method involves taking the first receivable collected and using
that to cover the theft, while the second receivable collected is
accounted to the first, the third receivable to the second, and so on.
 For example: assume that $100 that was to be used to pay for a
receivable is stolen from ZXC Inc. The next receivable ($125) is paid
to ZXC a few days later. In a lapping scheme, the first $100 of this
second payment will be accounted to the first receivable account,
while the remaining $25 will be put toward the second receivable.
 A lapping scheme may initially be a convenient way for a company to
account for theft, but the firm must eventually account for the theft as
a loss and deduct it from net income.

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This cycle includes non-capital procurements and payments for
goods, equipment, and services used in company operations.
 These schemes are often extremely complex and involve bank
accounts, and even corporate filings for the dummy entities.
 Procurement fraud is mostly a collusive employee-vendor fraud.
 The vendor will typically provide a bribe or kickback in return.
 In the case of tendered contracts, the employee may rig the
bidding in favour of the fraudulent vendor.
 Once the vendor has been awarded the contract, the cost of the
bribe may be recovered and profits increased by substituting
products inferior to contract specifications, billing for work not
done, shipping less than ordered, padding overhead expenses etc.

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 This cycle deals with hiring and termination,
salaries, timekeeping, expense account
reimbursements, and health and other types of
employee insurance coverage.
 Common forms of fraud in this cycle are:
1. paying ghost employees,
2. overstating hours worked,
3. overstating expenses e.g. false expense account reports
4. filing false medical claims.
5. improper vetting of job applicants – this is an important but often
overlooked area of personnel fraud is. Collusion between a HR staff
and a fraudster applicant could install a fraudster within the
company with untold consequences.

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 This cycle controls the purchase and storage of goods for later
processing and sale or just for sale.
 The most common frauds in this cycle are:
1. ordering unneeded inventory and then stealing it for personal
use;
2. committing outright theft;
3. charging embezzlements occurring elsewhere in the company
to inventory losses.
 These schemes can often become extremely complex and
involve loading-dock workers, inventory accounting personnel,
truck drivers, and receivers of stolen goods in other parts of the
state or country

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This cycle accounts for debt and equity financing, interest, and
dividend payments.
 The results of these transactions are reflected on the financial
statements of the company.
 Because these accounts are developed at the executive level, this
type of fraud is committed almost exclusively by management.
 The usual frauds are:
 borrowing company money for personal use,
 misuse of interest income, and
 misuse of proceeds from financings

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1. Customer fraud: occurs through filing of false applications and
fraudulent claims, especially those for personal injury.
 This affects insurance companies. Banks and other financial
institutions suffer through submission of false information on loan
applications.
2. Management fraud: In addition to fraud in capital acquisition
and repayment cycle, management can commit fraud through
the manipulation of earnings reported on the financial
statements prepared for shareholders and creditors.
 This type of fraud can affect the stock price, management bonuses,
and the availability and terms of debt financing.
 Enron, WorldCom, Global Crossing are examples where
management fraud enriched a few but caused the collapse of
company pension plans, enormous losses to innocent shareholders,
and unemployment for thousands of staff.
 These frauds have also contributed to the downfall of a major
accounting firm (Arthur Andersen), and the decline in the public’s
confidence in the accounting profession.
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Case 15 - Pg 25 Albrecht et. al (2016)
 Explain the career opportunities available to
you as a forensic accountant and fraud
examiner.
 What kind of organizations would hire you
and what kind of work would you be doing?

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20

FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen

 Singleton (p66) gives a good breakdown of the fraud cycle
(processes/steps in the life cycle evolution of fraud) as follows:

Step Description Explanation

1 Motivation (pressure, Financial need, greed, ego, revenge, psychosis

incentive)
2 Opportunity Knowledge and opportunity to commit the fraud.
Fraudster holds a position of trust, has tenure,
and/or access to records or assets. Control
weaknesses, lack of audit trail, lack of segregation
of duties, no internal audit function, weak culture
3 Rationalization Mentally juxtapose the crime against personal
code of ethics to formulate intent without self-
incrimination; e.g., ‘‘just borrowing’’, entitlement

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Step Description Explanation

4 Commit the fraud Execute a particular scheme, usually the fraud

escalates as time goes by and fraud goes
Undetected - larger amounts or add more schemes
5 Convert asset to cash If necessary (not necessary if already cash), an
official check is same as cash, sell inventory at
reduced prices in a ‘‘black market’’- type venue;
financial statement fraud leads to stock options,
which leads to cash out of stock
6 Conceal the crime If necessary (not necessary if no one looking! Or if
off the- books fraud), false refunds/credits, use
large volume accounts, rely on apathy, alter
documents, destroy documents

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Step Description Explanation

7 Red flags In the process of commit, convert, and conceal,

fingerprints are left that are known as ‘‘red flags’’;
behavioural red flags could be a lifestyle change -
true even for off-the-books frauds; transactional red
flags are missing data or anomalies (e.g.,
unfavourable variances, unusual increases)
8 Suspicion or Tip, discovery of variance or anomaly including a
discovery sufficient analysis, discrepancies, internal controls,
internal audit, external audit, accident
9 Predication Before a fraud investigation can begin, predication
determined has to be determined to exist; a fraud professional
believes a fraud has occurred, is occurring, or will
occur because of circumstances
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Step Description Explanation

10 Fraud theory Unless the specific fraud is known, the fraud theory
approach helps to identify the most likely schemes
and how they are being perpetrated
11 Fraud Identify and gather forensic evidence, loss of
investigation assets confirmed, loss documented, interrogations
performed, nonfinancial evidence acquired
12 Write a report Almost all fraud investigations require a
report at its conclusion, whether to victim’s
management, insurance company, or court
officials/lawyers
13a Disposition: Most often, the victim company extricates itself
Termination from the fraudster employee and hopes that
ends the episode, employee terminated for
cause, where possible insurance claim is filed to
FIC 4020: Forensic Accounting andrecover some
Fraud Investigation orKigen
- Paula all of the losses 24
Step Description Explanation

13b Disposition: Either criminal or civil prosecution is sought by

Prosecution the victim entity, prosecuting entities may
not even take the case, and may not successfully
prosecute the case
14 Trial Presentation of facts and testimony before trier of
fact, use of expert witness, presentation of forensic
evidence

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26

FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen

 Fraud is usually detected by:
1. an allegation, complaint, or a rumour of fraud brought by a third
party (a disgruntled supplier or a fellow employee);
2. an investigator’s intuition or suspicion that something is wrong;
3. an exception from an expectation of a person senior to the
suspect (an unacceptable condition, profits, sales, costs, assets,
or liabilities are too low or too high);
4. the accidental discovery that something is missing—cash,
property, reports, files, documents, or data;
5. results from an audit; or (proactive)
6. results of controls, especially antifraud controls. (proactive)
 Association of Certified Fraud Examiners (ACFE) states an average of
about 60% of all frauds reported were discovered either by a tip or
accident, indicating the need for more effective proactive detection
methods such as internal controls and internal audits.
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Evidence gathered may consist of:
1. the testimony of witnesses,
2. documents,
3. items (means and instruments, or fruits of the crime)
4. possibly the confession of the perpetrator.
 Interviewing the alleged, or known, fraudster is done only after
competent and sufficient data have been gathered, assessed, and
reasoned.
 If prosecution of a civil or criminal charge is sought, evidence must
be presented in court. This is where the expert witness skill of a
forensic accountant or fraud auditor is valuable – who can explain,
in layperson’s terms, the records, data, documents, financial
information, and files supporting the prosecutor’s position.
 The court then resolves the charge of fraud ending the fraud cycle.
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The following principles are key to guiding effective fraud
investigations:
1. Predication: This is the set of circumstances that would lead the
prudent, reasonable, and professionally trained individual to
believe that a fraud has occurred, is occurring, or will occur.
2. Fraud Theory Approach: This is employed if the specific fraud is
not known, or if there is limited information on the fraud. In this
approach, the forensic accountant, probably in a brainstorming
setting, would propose the most likely fraud scheme, and the
manner in which that fraud scheme could have been
perpetrated on the victim organization.
3. Develop The Case: Using the theory, the forensic accountant
develops a plan to gather sufficient &competent evidence
(forensic evidence). An examination of accounting records,
transactions, documents, and data is made to obtain sufficient
evidence to prove or disprove that the fraud identified earlier
has occurred.
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4. Gather non-financial evidence: gather evidence from
eyewitnesses, using interviews. This process goes from people
the greatest distance from the fraud (not involved but possibly
knowledgeable), to an ever-narrowing circle of people close to
the fraud (firsthand knowledge)
5. Approach the Suspect: This should be the last step in the
investigative process. This is because the fraudster could
quickly come up with a viable excuse, and start a process of
destroying evidence or covering fraudulent activity – thus
making the possibility of gathering evidence difficult or
impossible. Also the auditor could unknowingly offer a viable
excuse or explanations and let the person off the hook.
6. Investigative Report: The forensic accountant writes up the
findings in a report to the party who hired him. If the case goes
to court, this report, or a similar one, may be necessary during
the trial and the FA may be called upon as an expert witness.
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FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen

This is a thesis of why a person in a position of trust
would become a violator of that trust developed by
Donald Cressey and Edwin Sutherland in the 1950s.
Every fraud had three things in common:
1. Pressure: (sometimes referred to as motivation, and
usually a ‘‘non-shareable need’’);
2. Rationalization (of personal ethics); and
3. Knowledge and opportunity to commit
the crime.

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 High Pressure Low

High Opportunity Low

Low Integrity High

High Chance Small Chance

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1. Pressure: (or incentive, or motivation) refers to something
that has happened in the fraudster’s personal life that
creates a stressful need that motivates to steal.
 Usually that motivation centres on some financial strain but could be
from bad habits (drugs, gambling, debt, greed)
 Social and political survival provide incentives, in the form of
egocentric and ideological motives e.g. to survive politically, or
have a burning desire for power or aggrandize their egos, put on
airs, or assume false status
 Motivation might be psychotic, because it cannot be explained in
terms of rational behaviour. E.g. the pathological liar, the
professional confidence man, and the kleptomaniac.

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Divided into four main groups:
1. Financial pressures e.g. Greed, Living beyond one’s means,
High bills or personal debt, Poor credit, Personal financial
losses, Unexpected financial needs
2. Vices e.g. Gambling, Drugs, Alcohol, Expensive extramarital
relationships
3. Work-related pressures e.g. underpayment
4. Other pressures e.g. Spouse’s lifestyle demands, Family
Crisis, Social Pressures of “Being successful

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2. Rationalization: Most fraudsters do not have a criminal record. In
fact, white-collar criminals usually have a personal code of
ethics. It is not uncommon them to be religious. They simply
justify their crime under their circumstances. E.g.
 Many will steal from employers but mentally convince
themselves that they will repay it (‘‘I am just borrowing’’).
 Others believe it hurts no one so that makes the theft benign.
 Some believe they are entitled to the benefits of the fraud and
are simply administering fairness (e.g., deserve a raise or better
treatment).
 Some benevolent ones do not actually keep the stolen funds or
assets but uses them for social purposes (e.g., to fund
environmental or human right causes).

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3. Opportunity: fraudsters always have the knowledge and
opportunity to commit the fraud. A simple explanation is that
employees and managers who have been around for years
know quite well where the weaknesses are in the internal
controls and have gained sufficient knowledge of how to
commit the crime successfully.
 A prerequisite to opportunity is that the perpetrator be in a
position of trust (it is difficult to commit a fraud without being
in a trusted position over assets)
 The main factor in opportunity is internal controls. A
weakness in or absence of internal controls provides the
opportunity for fraudsters to commit their crimes.

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Six major factors that increase opportunity:
 Lack of controls and even overriding or ignoring existing
controls
 Inability to judge performance quality e.g. with service
contracts where performance/pricing may be subjective
 Fail to discipline fraudsters - this encourages repeat offense
 Lack of access to information – victims may not know the full
picture or details allowing them to be deceived
 Ignorance, apathy and incapacity – popular targets being
foreign nationals, elderly and the sick
 Lack of audit trail – cash intense processes that have
insufficient documentation or approvals

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39

Research has been conducted to ask employees whether they

are honest at work. 40% say they would not steal, 30% said
they would, and 30% said they might

FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen

Why Do Employees Lie, Cheat, and Steal on the Job? There are 25
reasons proposed
1. Employee believes he can get away with it.
2. Employee thinks she desperately needs or desires the money
or articles stolen.
3. Employee feels frustrated/dissatisfied by some aspect of the
job.
4. Employee feels frustrated or dissatisfied about some aspect of
his personal life that is not job related.
5. Employee feels abused by the employer and wants to get even.
6. Employee fails to consider the consequences of being caught.
7. Employee thinks: ‘‘Everybody else steals, so why not me?’’

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Why Do Employees Lie, Cheat, and Steal on the Job?
(cont..)
8. Employee thinks: ‘‘They’re so big, stealing a little bit wont
hurt them’’
9. Employee doesn’t know how to manage her own money, so
is always broke and ready to steal.
10. Employee feels that beating the organization is a challenge
and not a matter of economic gain alone.
11. Employee was economically, socially, or culturally
deprived during childhood.
12. Employee is compensating for a void felt in his personal
life and needs love, affection, and friendship.
13. Employee has no self-control and steals out of compulsion.
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Why Do Employees Lie, Cheat, and Steal on the Job? (cont..)

14. Employee believes a friend at work has been subjected to humiliation or abuse
or has been treated unfairly.
15. Employee is just plain lazy and will not work hard to earn enough to buy what
she wants or needs.
16. The organization’s internal controls are so lax that everyone is tempted to steal.
17. No one has ever been prosecuted for stealing from the organization.
18. Most employee thieves are caught by accident rather than by audit or design.
Fear of being caught is not a deterrent to theft.
19. Employees are not encouraged to discuss personal or financial problems at
work or to seek management’s advice and counsel.

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Why Do Employees Lie, Cheat, and Steal on the Job?
(cont..)
20. Employee theft is a situational phenomenon. Each theft
has its own preceding conditions, and each thief has her
own motives.
21. Employees steal for any reason the human mind and
imagination can conjure up.
22. Employees never go to jail or get harsh prison sentences
for stealing, defrauding, or embezzling from their
employers.
23. Human beings are weak and prone to sin.
24. Employees today are morally, ethically, and spiritually
bankrupt.
25. Employees tend to imitate their bosses. If their bosses
steal or cheat, then they are likely to do it also.
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Can you place each of the 25 reasons on a
specific side of the fraud triangle?
 Is the fraud triangle a good model for
explaining why people commit fraud?

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FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen

 The fraud triangle is useful in that it helps us understand how one person
gets involved in fraud. However, majority of frauds are committed by more
than one person.
A Business Week forum for CFOs, participants were
queried about whether or not they had ever
been asked to “misrepresent corporate results.”
Of the attendees, 67 percent of all CFO
respondents said they had fought off other
executives’ requests to misrepresent corporate
results. Of those who had been asked, 12
percent admitted they had “yielded to the
requests,” while 55 percent said they had
“fought off the requests.”

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 In 1947 Max Weber introduced power as the probability that a
person can carry out his or her own will despite resistance.
 When a fraud takes place, the conspirator can influence another
person to act and do as the perpetrator wishes – regardless of
resistance
 In 1959, two researchers (French and Raven) classified power
into 5 separate variables, each stemming from different aspects
of the relationship

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Types of Power
 Reward Power
 A’s ability to provide benefits to B

 Coercive Power
 A’s ability to punish B if B does not comply with A

 Expert Power
 A’s possession of special knowledge or expertise

 Legitimate Power
 A’s legitimate right to prescribe behavior for B

 Referent Power
 The extent to which B identifies with A

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 Pressure

Conspirator (A) Potential Co-Conspirator (B)

Desire for Reward or

Perceived Reward Power Benefit
Perceived Coercive Fear of Punishment
Power
Successful Collusion Lack of Knowledge
Perceived Expert Power
(Recruitment)
Perceived Legitimate Level of Obedience
Power
Perceived Referent Relationship Needs
Power

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FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen

Type of Career Types of Employers and Career Description
FBI, postal inspectors, Criminal Investigation Division of the
Government
IRS, U.S. marshals, inspector generals of various
and law
governmental agencies, state investigators, and local law
enforcement
enforcement officials.
Conduct investigations, support firms in litigation, do
CPA firms bankruptcy-related accounting work, provide internal audit
and internal control consulting work.
Prevent, detect, and investigate fraud within a company.
Corporations Includes internal auditors, corporate security officers, and
in-house legal counsels.
Serve as an independent consultant in litigation fraud work,
Consulting serve as expert witness, consult in fraud prevention and
detection, and provide other fee-based work.
Lawyers provide litigation and defense work for companies
Law firms and individuals being sued for fraud and provide special
FIC 4020: Forensic Accountinginvestigation
and Fraud Investigationservices
- Paula Kigen when fraud is suspected. 51
 Analytical Skills
 examine data for symptoms of fraud

 Communication Skills
 effectively interview witnesses and suspects
 communicate findings to witnesses, courts and
others
 Technology Skills
 search for fraud by effectively using information
systems

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 More Skills for a Fraud-fighting Professional
 Understanding of accounting and business – fraud may involve
altering accounting records
 A knowledge of civil and criminal laws, criminology, privacy issues,
employee rights, fraud statutes, and other legal fraud-related issues
 The ability to speak and write in a foreign language – cross-boarder
investigations are common
 A knowledge of human behavior – psychology, sociology

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Criminal vs Civil Law
Civil Law
 Body of law that provides remedies for violations of private rights.
Deals with rights and duties between individuals. The purpose of a
civil law suit is to compensate for harm done to another individual.
 Civil claims begin when one party files a complaint against another
– usually for financial restitution.
 Plaintiffs in civil cases must only prove their case by the
“preponderance of the evidence”
 i.e. there need only be slightly more evidence supporting the plaintiff
than the defendant

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 Criminal Law
 Body of law that deals wit offenses of a public nature. Deals with
offenses against a society
 Prosecuted by a state for violating a law/statute that prohibits some
type of activity
 The guilty serve jail sentences and/or pay fines
 Perpetrators must be proven guilty “beyond a reasonable doubt”

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Several professional organizations focus on fraud and forensic
accounting, or are key players in education, training, and
identifying forensic accountants through certification e.g.:
 Association of Certified Fraud Examiners (ACFE)
www.acfe.com
 Offers; The Certified Fraud Examiner (CFE)

 American Institute of Certified Public Accountants (AICPA)

www.aicpa.org
 Offers: Certified in Financial Forensics (CFF) program

 Association of Certified Forensic Specialists (ACFS)

www.acfsnet.org
 Offers: Certified Forensic Specialist (CFS)

 American College of Forensic Examiners Institute (ACFEI)

www.acfei.com
 Offers: Certified Forensic Accounting (Cr.FA)

FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen 57

 Be an associate member of the ACFE in good
standing
 Meet minimum academic and professional
requirements:
 Bachelors Degree
 Two years of professional experience directly or indirectly
related to fraud examination
 Be of high moral character
 Agree to abide by the Bylaws and Code of
Professional Ethics of the ACFE

FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen 58

Visit the websites of the Forensic Accounting and
Fraud Investigation Professional Associations. In
addition, carry out your own research on the
following:
1. Names of certification offered
2. Certification curriculum
3. Training and Exam centers
4. Requirements for certification
5. Cost of certification
Prepare a 2pg summary of this information
FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen 59
60

FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen

We have been able to:
 Define what Forensic Accounting is and distinguish it from
Financial Audit
 Define Fraud and examine different examples of Fraud by
walking through different business cycles
 Discuss the Fraud Cycle
 Identify key factors for successful fraud investigations
 Define the Fraud Triangle and understand conditions
that lead to fraudulent acts
 Discuss the Anti-fraud profession

FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen 61

Q1. Distinguish between Financial Auditing, Fraud Auditing and
Forensic Accounting (9 marks)
Q2. What is white collar crime? What examples of white collar
crime can you give by tracing through the typical accounting
cycles of any business? (20 marks)
Q3. FAI Inc has contracted you as a Forensic Accountant to
investigate the loss of 2 million shillings through a kick back
scheme collusion between Mr Wrong and their biggest
supplier of raw materials. Mr. Wrong has been given forced
leave pending the conclusion of the investigations and possible
legal action. How would you go about investigating this case as
a Forensic Accountant? (10 marks)

FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen 62

Q4. What motivates people to commit fraud? (3 marks)
Q5. Explain the fraud triangle and why it is important for
understanding fraud (4 marks)
Q6. What are some different pressures that could lead
someone to commit fraud? (6 marks)
Q7. Discuss some factors in an organization provide
opportunities for committing fraud (5 marks)
Q8. Wambui works at a 24hour pharmacy on the night shift.
She is the only worker because the management is cost
conscious and business is slow at night. She is given the
responsibility of doing the accounting of the previous day.
She is a single mother of two school going children.
Discuss why the pharmacy is at risk of fraud using the fraud
triangle and fraud scale. (10 marks)
FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen 63