AFM 451 Study Guide - Creative Accounting, Inductive Reasoning, Longrun

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM 451
• Professor: James Wainberg

Document Summary

Chapter 7 fraud risk assessment and illegal acts. Causes of misstatements: errors = unintentional misstatement or omission of amts in f/s, fraud, misappropriation of assets, financial reporting. Fraud = knowingly making material misrepresentations of fact, with the intent of inducing someone to believe the falsehood and act upon it and thus suffer a loss or damage: lie, cheat, steal, dupe others. Auditors are mainly considered with: employees misappropriating company assets, management making false or misleading claims in f/s. Employee fraud: dishonestly taking money or other property from an employer may include falsifying documents, lying, exceeding authority or violating policies. Embezzlement: employees or non-employees wrongfully taking money or property entrusted to their care, custody and control often accompanied by false accounting entries and cover-up. Defalcation: term used when somebody in charge of safekeeping the assets is doing the stealing (maybe due to corruption or misappropriation)