ACCTG 201 Chapter 4: acctg textbook notes - ch 4

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Occupational fraud the use of o(cid:374)e"s o(cid:272)(cid:272)upatio(cid:374) for perso(cid:374)al enrichment through the deliberate misuse or misapplication of the e(cid:373)ployer"s resour(cid:272)es. Fraud triangle the three elements necessary for every fraud: opportunity, motivation, rationalization. Internal controls - formal procedures that companies implement to eliminate opportunity: represe(cid:374)t a (cid:272)o(cid:373)pa(cid:374)y"s pla(cid:374) to . Improve the accuracy and reliability of accounting information. Formal procedures for reporting control deficiencies: control activities policies and procedures that help ensure that (cid:373)a(cid:374)age(cid:373)e(cid:374)t"s dire(cid:272)ti(cid:448)es are (cid:271)ei(cid:374)g (cid:272)arried out. For(cid:373)al poli(cid:272)ies related to (cid:373)a(cid:374)age(cid:373)e(cid:374)t"s philosophy, assignment of responsibilities, and organizational structure. There are two types of control activities: preventive and detective: preventive controls designed to keep errors or fraud from occurring. Ex: separation of duties, physical controls, proper authorization, employee management, e-commerce controls: detective controls designed to detect errors or fraud that already have occurred. Top executives are the ones who must take final responsibility for their establishment and success.

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