Glossary of Forensic Accounting Related Terms

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Mayur Joshi
Mayur Joshi
Mayur Joshi is a forensic accounting evangelist based out of Pune. He regularly contributes to the Regtechtimes. He is the forensic accounting and financial crimes evangelist in India who is instrumental in designing india's first certification program in Anti Money Laundering. He is the author of 7 books on the financial crimes and compliance subjects.

This is the glossary of the forensic accounting related terms.

This article talks about the glossary of forensic accounting related terms. It gives you the summary of forensic accounting.

Bid pooling

A process by which several bidders conspire to split contracts, thereby ensuring that each gets a certain amount of work.

Bid rigging

A process by which an employee assists a vendor to fraudulently win a contract through the competitive bidding process.

Bid splitting

A fraudulent scheme in which a large project is split into several component projects so that each sectional contract falls below the mandatory bidding level, thereby avoiding the competitive bidding process.

Billing schemes

A scheme in which a fraudster causes the victim organization to issue a fraudulent payment by submitting invoices for fictitious goods or services, inflated invoices, or invoices for personal purchases.

Bribery

The offering, giving, receiving, or soliciting of something of value for the purpose of influencing an official act.

Certified Forensic Accounting Professional (CFAP)

The Indiaforensic centre of studies has launched different types of courses related to forensic accounting. A professional who is trained to conduct complex forensic accounting assignments from inception to conclusion. A CFAP has training in all aspects of Forensic Accounting, including identifying fraudulent transactions, obtaining evidence, and interviewing witnesses.

Chain of custody

A record of who has had possession of an item of evidence and what they’ve done with it. The chain of custody must be preserved or else the item cannot be used at trial.

Financial statement fraud

A type of fraud where an individual or individuals purposefully misreport financial information about an organization in order to mislead those who read it. Certified Stock Market Forensic Accounting program offered by Riskpro Learning covers this area in detail.

Forgery

The signing of another person’s name to a document (such as a check) with a fraudulent intent, or the fraudulent alteration of a genuine instrument.

Fraud

Any crime for gain that uses deception as its principal modus operandi. There are four legal elements that must be present: (1) a material false statement, (2) knowledge that the statement was false when it was uttered, (3) reliance on the false statement by the victim, and (4) damages as a result.

Fraud deterrence

Discouraging fraudulent activities through the threat of negative sanctions.

Fraud examination

A process of resolving allegations of fraud from inception to disposition. It involves not only financial analysis, but also taking statements, interviewing witnesses, writing reports, testifying to findings, and assisting in the detection and prevention of fraud.

Fraud prevention

Removal of the root causes of fraudulent behavior, such as economic deprivation and social injustices.

Fraud risk

Risk of material misstatements in financial statements arising from fraudulent financial reporting and misappropriations of assets.

Fraud theory approach

The methodology used to investigate allegations of fraud. It involves developing a theory based on a worst-case scenario of what fraud scheme could have occurred, then testing the theory to see whether it is correct.

Fraud triangle

A model developed to explain the research of Cressey, who noted that most occupational frauds were caused by a combination of three elements: non-shareable financial problems, perceived opportunity, and the ability to rationalize conduct.

Fraudulent disbursements

Schemes in which an employee illegally or improperly causes the distribution of funds in a way that appears to be legitimate. Funds can be obtained by forging checks, submission of false invoices, or falsifying time records.

Fraudulent write-offs

A method used to conceal the theft of noncash assets by justifying their absence on the books. Stolen items are removed from the accounting system by being classified as scrap, lost or destroyed, damaged, being bad debt, scrap shrinkage, discount and allowances, returns, etc.

Kickbacks

Schemes in which a vendor pays back a portion of the purchase price to an employee of the buyer in order to influence the buyer’s decision.

Lapping

A method of concealing the theft of cash designated for accounts receivable by crediting one account while abstracting money from a different account. This process must be continuously repeated to avoid detection.

Related-party transactions

Occur when a company does business with another entity whose management or operating policies can be controlled or significantly influenced by the company or by some other party in common. There is nothing inherently wrong with related-party transactions, as long as they are fully disclosed.

Shell company

A fictitious entity created for the sole purpose of committing fraud.

White-collar crime

Originally, the definition included criminal acts only of corporations and individuals acting in their corporate capacity (e.g., management fraud or crime). However, it is now used to define almost any financial or economic crime.

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