Knowledge = Prevention: Know Your Fraud Terms

Fraud is everywhere – and it could be in your business right now.  The more you know about fraud the better equipped you will be to prevent, detect and fight fraud when it makes an unwelcome appearance in your business.  Are you familiar with some of the fraud terms that are currently being used by Certified Fraud Examiners and forensic accountants?  The more you know about fraud and how it is investigated, the more likely you are to put internal controls in place to prevent these various fraudulent schemes from occurring in your company:

Asset Misappropriation: The theft of misuse of company assets.

Cash Larceny: The theft of money that has already appeared on the accounting system.

Cash Schemes: The theft of money in any form, currency or checks.

Certified Fraud Examiner (CFE): Trained to conduct a complex fraud case from inception to conclusion

Chain of Custody: Refers to (1) who has possession of an object and (2) what they have done with it.

Computer Crime: Any illegal act for which knowledge of computer technology is used to commit the offense.

Computer Forgery: When a computer is used to create a forged document or to illegally alter existing documents.

Computer Fraud: Computer-aided activity involving misrepresentation of fact or alteration of data in order to obtain or receive something of value that causes a financial loss to some person or organization.

Data Manipulation: The use or manipulation of a computer to perpetrate a crime.

Embezzlement: The fraudulent taking of personal property with which one has been entrusted.

Employee Reimbursement Scheme: When employees falsify information about their business expenses and cause their employers to overcompensate them by submitting inflated expense reimbursements.

Evidence: Anything perceivable by the five senses, and any proof such as testimony of witnesses, records, documents, facts, data or tangible objects legally presented at trial to prove a contention and induce a belief in the minds of a jury.

False Invoicing Scheme: Generating and submitting a false invoice for payment.

Financial Statement Fraud: Typically takes the form of (1) overstated assets or revenue, (2) understated liabilities and expenses.

Fraud Examination: A methodology for resolving fraud allegations from inception to disposition, involving the following: obtaining evidence and taking statements, writing reports, testifying to findings, and assisting in the detection and prevention of fraud.

Occupational Fraud: The use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.

Payroll Scheme: False documents are produced that cause the victim company to unknowingly make fraudulent disbursements.

Ponzi Scheme: A fraudulent investment scheme in which money contributed by later investors generates artificially high dividends for the original investors, whose example attracts even larger investments.

Skimming:  The theft of cash that has not yet been recorded in the accounting system.

Theft: The unlawful taking and removing of another’s personal property with the intent of deriving the true owner of it.

Source: Definitions by Association of Certified Fraud Examiners (ACFE) or Black’s Law Dictionary.


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