Occupational Fraud Research Paper

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Fraud is a global phenomenon which will affect all country and nation's economy growth and prosperity. One of the most commonly found frauds within the company is “occupational fraud”. Occupational fraud is defined as “the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets”. This fraud is committed by the employees with the presence of the four factors such as motive, means, opportunity and rationalization. There are three categories of occupational fraud which comprises of asset misappropriations, corruption and financial statement fraud. However, this research project will be focusing on one of the category which is the financial
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The financial statement fraud also include improper revenue recognition for example overstated the revenues, manipulation of assets and liabilities such as overstated assets or understated liabilities, understated expenses, timing differences, improper valuation of inventories or assets and etc. Spathis (2002) has identifies three methods of committing financial statement fraud such as changing accounting methods, manipulating managerial estimates and improper recognition of revenues and expenses. Through falsify the financial data in improving the financial position or omission of the negative accounting data, third parties such as investors would be encouraged to buy company’s shares, lend money which is beneficial for the…show more content…
Generally, it can be best explained in three factors: a supply of motivated offenders, the availability of suitable targets and the absence of capable guardians- control systems or someone to mind the store (Sheetz and Silverstone 2007,18).

Therefore, the financial statement fraud typically include three characteristics, which are known as the “fraud triangle” (Turner, Mock and Srivastava ,2003)

Management performed fraudulent financial reporting mainly due to the rewards and pressure. They always overstated the company assets and net income when there is a pressure from poor cash position, uncollectable receivables, losing of customers, slow moving and obsolete inventories, market decline, restrictive borrowings which caused the unrealistic revenue, violating the profit expectations, meet the shareholders expectations, pending for bankruptcy or delisting (Harfenist 2005).

The following circumstances may lead to material misstatement the financial reporting (Taylor 2004):
1)Absence or improper oversights by Board of directors and audit committee
2)Weak or nonexistent internal

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