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Fraud

 

            The Association of Certified Fraud Examiners, the recognized authority in fraud examination, 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." In the association's "2002 Report to the Nation on Occupational Fraud and Abuse," they estimate that 6% of gross revenue is lost to fraud. In 2002, that translated to approximately $600 billion dollars when applied to the Gross Domestic Product. Fraud falls into three broad categories: asset misappropriations (theft of cash or assets), corruption (transacting business deals that provide the perpetrator some personal benefit) and fraudulent financial statements (falsification of the financial statements for some personal gain).
             Financial statement misrepresentation was found in only 5% of all fraud cases examined, but it was the most costly form of fraud with median losses of $4.25 million per occurrence. It also took the longest amount of time to detect. While the average fraud scheme lasted approximately 18 months before it was detected, fraudulent financial statement schemes went on average 25 months before they were detected. Unlike most forms of fraud, financial statement fraud is a crime normally committed by senior level management. While these executives are always motivated by some personal gain (financial or career advancement), inflating the stock price of the company is the method used to achieve that goal.
             Types of Financial Statement Fraud.
             There are five primary types of financial statement fraud.


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