Fraud Basics for Accountants

It’s important that accountants know what to look for when identifying fraud and how to deal with the various kinds of fraud. All accountants need to know their fraud basics.

fraud basics for accountants

Accountants need to always keep an eye out for fraud. Fraud can be committed by anyone- employees, consumers, organizations, individuals, etc. It’s important that accountants know what to look for when identifying fraud and how to deal with the various kinds of fraud. In this blog, I’ll go over our Fraud Basics – Introduction to Fraud course, which defines different types of fraud.

Who should take this course?
·       CPAs ·       Business Owners
·       CFEs ·       Business Managers
·       CFFs ·       Internal Auditors
·       MAFFs ·       External Auditors
·       CIAs ·       Corporate Accountants
·       CMAs ·       Government Accountants
·       CFOs ·       Risk Management Personnel
·       CEOs  

At Accounting Ed, we have many courses on fraud including:

  • Fraud Basics: Preventing Employee Theft
  • Fraud Basics: Accounts Payable
  • Fraud Basics: Credit Card Frauds
  • Fraud Basics: Payroll Fraud

And more advanced courses including:

  • Basics of Fraud Investigation
  • Common Frauds in Not-For-Profits
  • Common Frauds in Small Businesses
  • Detecting and Preventing Inventory Fraud
  • Detecting Cash Frauds
  • Expense Reimbursement Frauds

So, let’s start with the absolute basics:

Fraud basics for accountants

What is Fraud?

BusinessDictionary.com gives a great, comprehensive definition. Let’s have a look.

“Act or course of deception, an intentional concealment, omission, or perversion of truth, to (1) gain unlawful or unfair advantage, (2) induce another to part with some valuable item or surrender a legal right, or (3) inflict injury in some manner. Willful fraud is a criminal offense which calls for severe penalties, and its prosecution and punishment…is not bound by the statute of limitations. However, incompetence or negligence in managing a business or even a reckless waste of firm’s assets…does not normally constitute a fraud.”

Now, let’s get into the elements of fraud and types of fraud we go over in our Fraud Basics: Introduction to Fraud course.

Types of Fraud

In this course, we break the elements of fraud into three categories: the act or theft, concealment, and conversion. These elements will help accountants detect fraud, regardless of the type. However, it’s still important to get familiar with the types of fraud, whether you are specializing in fraud or not. Identifying fraud is an important responsibility of all accountants. The below list is covered in detail in the course. We dive even deeper into some in subsequent courses.

Fraud basics for accountants

  • Consumer Frauds
  • Occupational Frauds
    • Asset Misappropriation
    • Corruption
  • Financial Statement Frauds
    • Balance Sheet Frauds
    • Income Statement Frauds
    • Disclosure Frauds
  • Money Laundering
    • Structured Payments
    • Cash Businesses
    • Consulting Services
    • Casinos
    • International Transactions
    • Virtual Currencies
    • SARs
    • CTRs
  • Non-Occupational Frauds
    • Medical Insurance Fraud
    • Unemployment Fraud
    • Worker’s Compensation Fraud
    • Product Liability Fraud
    • Advertising Fraud
    • Identity Theft
    • Credit Card Fraud
  • Frauds on the Darknet
    • Credit Cards
    • Fake IDs
    • Federal Actions

Punishment for Fraud

State laws, the type of fraud and the severity of the damage are all factors that come into account when a penalty is being decided. With so much to take into account, the penalties vary widely case-by-case. There are, however, some common penalties given to those who have committed fraud. These penalties include: fines, restitution, probation and incarceration. Fines and restitution are among the most common penalties for fraud. Restitution requires the person convicted of the crime to pay back the amount taken from the victim in full. Probation is common for less serious/damaging cases or after a perpetrator is released from jail/prison. While federal fraud charges often result in longer prison terms, most incarnation penalties range from one to ten years.

This has been an overview of fraud basics. To go more in-depth with our resident expert- Bob K Minnetti’s additional insights, check out the Fraud Basics: Introduction to Fraud course on Accounting Ed!

Accounting Ed

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13 thoughts on “Fraud Basics for Accountants

    1. admin

      Hi Kimberly,

      That’s a great question. Depending on the type of fraud and where it’s happening (in your organization or on a individual level, I would suggest the following:

      1. Have internal controls in place. Make sure your employees know the policies and procedures that address handling information that fraudsters are after (employee records, customer data, financial info).
      2. Train your employees. I can’t emphasize this enough and not because that’s what we offer here at AccountingEd.

      If you have a specific type of fraud, please let me know and if you want to learn more about our training, you can visit this link.

      Thanks,
      Manpreet

      Reply
    1. admin

      Hi Dan,

      Great question. To understand why people commit fraud, it’s best to understand the fraud triangle. The fraud triangle consists of 3 motivating factors (Pressure, Opportunity, and Rationalization). We discuss this in detail in our course.

      Thanks,
      Manpreet

      Reply

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