Question

Explain the three methods of fraud (Financial Statement Fraud, Occupational Fraud, Collusion), which means analyze each one and provide an example for each.

***Please make it short and simple.

Answer 1

Financial fraud: Financial fraud is the situation where unethical and illegal management of resources happens. This type of fraud generally happens when deliberate unethical decisions are made by people who are in the position of handling money and resources on behalf of others. In most of the cases, the fraudulent handling of financial resources will lead to a loss for an investor or clients. This type of frauds is sometimes hidden from the accounting records until a great deal of money or assets are siphoned off and are no longer in the control of the owner. Falsification of the financial records can also be termed as financial fraud.

Occupational Fraud: This kind of fraud is generally done by the employers to the employees of the organisation.This kind of fraud can be classified into three categories

Asset misappropriation: This happens when an employee commit stealing or misusing the organisation's resources. This can include cash theft, inflated reports of expense, false billing and payrolls, skimming cash larceny etc.

Corruption schemes: When employee misuse thier influnece over the employers to violet their duties for any direct and indirect benefits. This can include bribery. extortion, kickbacks and conflict of interest.

Financial statement fraud: when an employee intentionally cause a misstatement or omission of vital information in the organisation's financial reports. It includes over and understatement of income and revenues , improper valuation of assets etc.

Collusion: Collusion is secret , non-competitive and illegal agreements between the rivals which aims to disrupt the market equilibrium. When the peope and organisation who would typically compete against each other, work together to gain a illegal market advantage The parties to the collusion may illegally choose to control the supply of a goods and agree on specific pricing level that can help them to maximize their profits at the detroment of the other competitor in the market. An example of collusion can be if a mutinational technology company illegaly conspire with book publisher, to price the ebooks to in way that can maximize their profits.