What did BF Skinner say is the least effective method of changing behavior?

Punishment because The behavior continues as soon as the punishment is

discontinued

How is behavior most effectively modified?

Managing and modifying desires through reinforcement (replacing destructive behaviors

with productive ones)

What are the two different types of reinforcement?

Positive and negative

What is negative reinforcement?

With drawl a negative stimulus in exchange for the response

What is positive reinforcement?

Present a positive stimulus in exchange for the desired response

What does punishment involve?

Either applying a negative stimulus or withdrawing a positive stimulus

How does punishment work?

By providing negative consequences. For example and ministry in penalties and taking
away desirables

What does Skinner say about conditioning?

We can condition incompatible behavior that interferes with a persons usually acts by
encouraging the improper behaviors opposite (rewarding a for child controlling
outbursts)

What can you do to condition fraudsters?

Reward honesty, openness, and cooperation

What is the theory of differential association?

deviance is learned behavior that results from continual exposure to others who violate
norms;

What are the main points of theory of differential association? Edwin Sutherland
1. Criminal behavior is learned
2. Acquired through communication and personal groups
3. Learning differs from pure invitation
4. Criminal behavior is an expression of general needs and values
5. Motives and drives are learned from definitions of legal codes as being favorable or
unfavorable

What is social control theory?

A persons chances of violating the law are increased when a person fails to become
attached to the variety of control agencies of the society

Under social control theory, what are people likely to ask themselves when possibly
violating the law?

What will my spouse or my mother or father think if they find out?

Under social control theory, what deters people from committing criminal acts?

People whose opinion or important to them will be disappointed or shamed. They feel
deeply about what these people think

What does differential reinforcement theory state?

Criminal behavior is begun or persists depending on the degree that is being rewarded
or punished, as well as the rewards or punishments attached to his alternative

What does differential reinforcement theory say about behavior?

Behavior is reinforced with positive rewards are gained or punishment is avoided

What type of behavior is differential reinforcement theory?

Learned behavior

What is white collar crime?

The violators position of economic power, influence, or trust in a legitimate economic or
political institution order for the purpose of illegal gain

What is organizational opportunity?

Organization and complexity make a larger different then the offenders social status

What are some aspects of trials of punishment for white collar defendants?
1. White collar defendants are more likely to insist on a trial
2. The higher the social status, the more likely to be imprisoned
3. Offenders want fined rather than prison
4. The higher the status of the higher the penalty
What factors are contributing to the rise of white-collar crime?
1. Rising personal debt due to the economy
2. New technology gives rise to opportunity
3. A culture that promises that no one has to settle for second-best

What is organizational crime?

Crime committed by businesses, particularly corporations and the government. Money
goes to the organization

What is occupational crime?

illegal activities committed in the workplace by individuals acting solely in their own
personal interest

What type of companies are more prone to misbehavior?

1. Complexed companies because department and locations are isolated making it less
likely to detect criminal behavior
2. Specialized companies because people don't know how things work

What does Edward Gross state about the nature of organizations and crime?
All organizations are inherently prone to crime because the reliance on the bottom line.
They're not necessarily criminal.

What are Diane Vaughan findings on criminal organizations?

Organizations can be criminogenic because they encourage loyalty
How do you companies encourage loyalty?
1. Recruiting and attracting similar individuals
2. Rewarding the "company man"
3. retirement and benefits
4. Company parties and social functions
5. Long hour
6. Specialized skills keep employee from seeking elsewhere

What is the findings of Charles McCaghy?

Profit pressure
What is managements role in supporting criminal conduct?**
1. Government regulations are unjust because their cost and cut into profits
2. Regulations are unnecessary bc they regulate unimportant things
3. Damages are diffused through a large number of consumers making it a small loss
4. Valuations occur out of economic necessity - rise stock value

What are the three approaches to control corporate crime?

1. Voluntary change in corporate attitude and structure
2. Government intervention and legal measures to deter and punish
3. Consumer action
What represents the most feared consequence of sanctions imposed on the
corporation?
Mass media publicity about law violations

What are the two main theories about how to prevent and reduce fraud?
Compliance and Deterrence

What is compliance designed to do?

Conformity to the law without having to detect, process, or penalize Violators

What does compliance involve?

Providing economic incentives for voluntary compliance to the laws And using the
administrative efforts to control violations before they occur

What is the Deterrence designed to do?

Detect law violations, determine who is responsible, and penalize offenders to deter
future violations

What does deterrence involved?

Effort to control individuals immediate behaviors, not the long term behaviors targeted
by compliance systems

What are US corporate sentencing guidelines designed to do?

Provide incentives for organizations to Maine internal mechanism preventing, detecting,
and reporting criminal conduct
Are corporate sentencing guidelines mandatory?
No. They're advisory

What most federal judges do for US corporate sentencing guidelines?

Consider the guidelines when sentencing but not required to sentence within the range
that by them. But judges are required to consider the adequacy of company compliance
policies

How much can fines be increased and decreased for a company?

They can be increased by as much as 400% or reduced by as much is 95%

What are some factors that contribute to an increase in fines?

1. Tolerance of criminal activity
2. Prior history
3. Violation of the prior court order
4. Obstruction of justice

Factors that contribute to a reduction

1. Self reporting
2. Implementing an effective program to prevent and defect violations of law
What are the guidelines state about victims?
Whenever possible the organization must pay for restitution to the victim of the crime

What does Donald R Cresseys findings state?

The fraud triangle model to explain why people commit fraud
What are the three legs of the fraud triangle?
1. Perceived non-shareable financial need (pressure)
2. Opportunity
3. Rationalization

What elements of the fraud triangle need to be present for a violation to occur?
All three

What does Dr. Steve Albercht's finding state are the most highly ranked factors from the list of
personal characteristics that contribute to fraud?
1. Living beyond their means
2. An overwhelming desire for personal gain
3. High personal debt
4. Close association with customers
5. Feeling pay was not enough

What does Dr. Steve Albercht's Find means they are the most highly ranked factors from the list
of Organizational environment?
1. Placing too much trust in key employees
2. Lack of proper procedures for authorization of transactions
3. Inadequate disclosures of personal investments and incomes
4. Not separating authorization of transactions from the custody of related us assets
5. Lack of independent checks on performance

What were the 2016 report to the nations on occupational fraud and abuse's findings?
1. Cost of occupational fraud
2. How occupational fraud is committed
3. Detection of fraud schemes

What is the cost of occupational fraud according to the 2016 report?

Typical organizations lose an estimated 5% of annual revenues to fraud

How are occupational fraud committed according to the 2016 report?

1. Asset misappropriation is the most common occupational fraud and it's the least costly
2. Financial statement fraud causes the greatest median loss

What does the 2016 report say about the detection of fraud schemes?
Tips are the most common detection method for occupational fraud

Who are the perpetrators of a white-collar crime?**

1. Owners/executives more than managers and managers 10 times that of employees
2. Men more than women

What percentage of fraudsters have been convicted of fraud related offenses prior to committing
the crime's?**
5.2%

What is the biggest behavioral red flag for white collar crime?
Living beyond financial means

What is corporate governance?

Oversight responsibilities of an organization's direction, operations, a performance

How does the organization for economic cooperation and development (OECD) define corporate
governance?
Procedures and processes on how organization is directed and controlled. The structure specifies
the distribution rights and responsibilities among the different participants in the organization.

What did sir Adrian Cadberry say was the purpose of corporate government?
To encourage the officiant use of resources and to acquire accountability for the stewardship of
those resources. To align the interest of individuals, corporations, and society

When are solid corporate governance practices most necessary?

In organizations in which the owners are not responsible for setting the company strategy in
carrying out it's business activities

Who are the parties involved in corporate governance?

1. Board of Directors
2. Management
3. Stakeholders

Who makes up the Board of Directors?

Individuals were generally elected by the end of these voting members (shareholders, members)

What does the board of directors do?

1. Represent the middleman between the corporations owners and those who carry out its
activities (management)
2. Overseas business operations by assessing the strategy and managements decisions and
actions
3. Delegate members to oversee specific issues

What committees might the Board of Directors create?

1. Audit committee
2. Compensation committee
3. Nominating committee
4. Governance committee
5. Risk committee
What is management responsible for?
The day-to-day decisions that affect the company

What is management role pertaining to corporate governance?**

1. Starburst strategic goals under BOD oversight
2. Direct employees and managing performance of those tasks
3. Determine the use and allocation of company assets
4. Evaluation for success and failure of an organization
5. Internal controls
6. Setting ethical tone

Who are shareholders?

an owner of shares in a company - Investors or institutional investors

What is shareholders role pertaining to corporate governance?

1. Holding the border directors accountable for governance and oversight
2. Remaining informed on company operations and performance
3. Reading annual reports
4. Electing individuals to serve on the BOD
5. Voting on significant issues
What does the COSO/ACFE Fraud risk management guide say is one of the principles of
effective fraud risk management?
Governance

What does managing the business risk of fraud state?

Lack of effective corporate governance undermines any fraud risk management program

What are the principles of corporate governance?

1. Accountability
2. Transparency
3. Fairness
4. Responsibility

What does the Accountability corporate governance principles state?

Management is accountable to the board and the board is accountable to shareholders

What does the transparency principle of corporate governance state?

Processes must include policies and procedures designed to ensure transparent disclosure of all
matters stakeholders need to make timely and informed decisions regarding their investment
What does the fairness principle state for corporate governance?
All stakeholders are treated equitably and given just and appropriate consideration

What does the responsibility principle of corporate governance state?

Internal parties must act in the best interest of the organization to act in best interest of society

What is the hallmark source of guidance for corporate governance practices for organizations
throughout the world?**
OECD Principles of Corporate Governance

What does the OECD Principles of Corporate Governance intended to help?

Help policy makers evaluate and Improve the legal, regulatory, and institutional framework for
corporate governance with a view to support economic a growth, sustainable growth, and
financial stability

Are the OECD principles of corporate guidance binding?

They are non-binding as their implementation must be adapted to different legal economic and
cultural circumstances

Who is responsible for enforcing OECD principles of corporate governance?

Individual governments

What do the OECD principles of corporate governance state about an entity's corporate
governance framework?
1. They should ensure the equitable treatment of all shareholders, including minority and foreign
shareholders
2. Encourage active corporation to create wealth, jobs, and to sustainability of enterprises
3. Ensure timely disclosure regarding the corporation's performance, ownership and governance
What do you do OECD principles of corporate governance state?
There's no single model of good corporate governance. They should be determined based on the
needs of each organization

What most directors and management consider when developing a corporate governance
framework for an organization?
The legal, regulatory, institutional, and ethical environments in which the company operates.
And be fluid to changes

What did the Sarbanes-Oxley act intend to do?

Improve governance and oversight practices to mitigate risk that shareholders suffer
consequences of financial misconduct

What were the requirements for audit committee is that the Sarbanes-Oxley act established?
1. They are responsible for fraud prevention - , outside audit and internal reporting
2. They hire, oversee, and fire external auditors. Approve audit engagement terms.
3. They resolve disputes between management and external auditors
4. They establish procedures such as hotlines for complaints
5. Pre-approve our audit in non-audit services provided by the external auditors

What do the NYSE and NASDAQ rules require?

1. A majority of the directors on the companies board are independent
2. Listed company's Board of Directors have an audit committee
3. List of companies adopt and disclose the code of conduct for all directors, officers, and
employees - waivers must be approved by BOD
4. Non-management directors must meet regularly without management present
5. Listed companies BODs must have a compensation committee

What additional requirements are required by the NYSE?

Each listed company is to have an internal audit function

What must NYSE and NASDAQ companies Board of Directors audit committee consisting of
the what are they do?
They have a minimum of three members, whom are all independent directors and are financially
literate. They're charged with oversight of external audit functions
What was the purpose of the Treadway commission?

Define in the auditors responsibility and preventing and detecting fraud

What recommendations do the Treadway commission make it to reduce the probability of fraud
and financial reports?
1. Board of Directors should have mandatory independent audit committee is made up of outside
directors
2. There must be a written charter stating the audit committee duties and responsibilities
3. Audit committee's should have adequate resources to do their job

Who ultimately has the responsibility for the prevention and detection of fraud within an
organization?
Management

Can corporations be held Liable for criminal acts committed as a master of organizational
policies?
Yes

Are corporations liable for criminal acts of their employees?

Yes, if the acts are done in the course of the employment (Actually or apparent authority) and for
the purpose of benefiting the corporation even if they don't profit (in some jurisdictions)

Can a corporation avoid liability by claiming that it did not know what was going on?
No, because they are deemed to have knowledge of all facts known by its officers and employees
Can companies be held responsible even if management had no knowledge or participation of
criminal events and there were policies prohibiting it?
Yes

Can companies be held responsible even if they were policies prohibiting the activity of the
employee?
Yes

Who is responsible for ensuring that internal controls are in place to prevent and detect fraud?
Management even if they do not execute all of the controls

Who is responsible for monitoring and remediating internal controls?

Management

Why was the committee of sponsoring organization (COSO) formed?

To provide guidance for organizations internal controls (It was formed based on the treadway
commissions recommendations)

Who is responsible for issuing the internal control integrated framework?

COSO

Who does the internal control integrated frame work apply to?
Both public and private entities regardless of size
According to the internal control integrated framework how is internal control defined?
A process, affected by entities BOD, management, personnel, designed to provide reasonable
assurance regarding the achievement of objectives related to operations, reporting and
compliance

What are operation objectives?

Do you efficiency and effectiveness of the organizations operations

What are the reporting objectives?

The reporting of financial and nonfinancial information to internal and external parties

What are the five components of internal control?

1. Control Environment
2. Risk Assessment
3. Control Activities
4. Information and Communication
5. Monitoring

What is the control environment?

The moral and ethical tone of an organization

What is risk assessment?

The organization considers the potential for fraud and assesses the risk to the achievement of
objectives

What are control activities?

Policies and procedures to ensure that the appropriate actions are taken in response to identified
risks

How do organizations deploy control activities?

Policies to establish what is expected and procedures that put policies into actions

What is monitoring?
Assess the effectiveness of a control system over time.

Who must personally certify their company's annual and quarterly SEC filings?
The CEO and CFO of publicly traded companies

What are the two categories officer certifications that are required?
1. Criminal certifications
2. Civil certifications

What is Included in the criminal certification?

The statement that certifies the report for the complies with SEC reporting requirements and the
information fairly presents of the company

What 6 items must the CFO and CEO certify in every Annual and quarterly report?
1. They personally reviewed the report
2. There are responsible for the design, maintenance, and valuation of the company's internal
controls
3. It doesn't contain any material misstatement
4. It's presented fairly in all material respects
5. Any material weaknesses have been disclosed
6. No significant changes in internal controls

Who must assess the operating effectiveness of internal controls over financial reporting?
Management

How is internal controls over financial reporting defined?

Providing reasonable assurance Regarding financial reporting and the preparation of financial
statements in accordance with GAAP

What must be additional internal control report contain?

1. A statement of managers responsibility for establishing and maintaining adequate ICOFR
2. The framework management use in conducting the assessment of the effectiveness of the
companies ICOFR
3. Management assessment of the effectiveness of the companies ICOFR as of the fiscal year
4. The companys Independent Auditor issued an attestation report covering Management's
assessment of ICOFR

What most public US companies disclose in their annual report about ethics?
Whether they have adopted a code of ethics for senior financial officers. If they have not, they
must explain their reasoning

What two provisions did the sSarbanes Oxley act create to protect whistleblowers?
1. Civil liability
2. Criminal liability

Who does the Serbian Oxley act cover?

Employees a publicly traded companies

What does the Sarbanes Oxley act say about civil liability for corporate whistleblowers?
Employers are civilly liable for acting out against an employee who assisted in an investigation
of fraudulent activity OR Or about an allegation of violations of securities laws and regulations
The Sarbanes-Oxley act says criminal sanctions will be in force if what happens?
Anyone intentionally retaliates against another party for providing information regarding a
federal offense to a law Enforcement officer

What does the PCAOB do?

Overseas public audit companies, setting audit standards, and investigates non-compliance for
auditors and audit firms

What is the purpose of PCAOB AU section 240 - Consideration of fraud in the financial
statement audit?
The auditor has responsibility to plan and perform audit to get reasonable assurance for financial
statements as a whole and weather due to fraud and error. To establish standards and provide
guidance to auditors in fulfilling
their fraud responsibilities

What types of Financial statement misstatements are there?

Error and fraud, depending whether the action was intentional or unintentional

What are two types of intentional misstatements?

1. Arising from fraudulent financial reporting
2. Arising from Missappropriation of assets

Does the auditor make legal determination of whether fraud actually occurred?
No

What must the audit team is brainstorming discussion on fraud include?

1. How and where the entities financial statements might be susceptible to fraud
2. How management can conceal fraudulent financial reporting
3. How assets could be misappropriated
4. Known internal and external pressures that create incentives, opportunity, or culture
rationalizing to commit fraud,

What considerations of external and internal factors affecting the entity that should be
considered?
1. Create incentives or pressure to commit fraud
2. Provide opportunities for fraud to be committed
3. Indicate a culture or environment that rationalizes committing fraud

What risk assessment procedures should be done?

1. Ask management and others whether they have knowledge of any actual, suspected, or
knowledge of fraud
2. Evaluate any unusual relationships that have been identified in performing analytical
procedures
3. Evaluate whether the risk assessment procedures so that fraud risk factors are present

At what level should you identify risks of material miss statement due to fraud?
At the financial statement level and the assertion level for classes of transactions, account
balances, and disclosures

What can be done to assess risk of material misstatement due to fraud at the financial statement
level?
1. Incorporate an element of unpredictability in audit procedures
2. Assignment and supervision of personal
3. Evaluate the entities selection and application of accounting policies

What is the purpose of PCAOB AS 2200 - An audit of internal control over financial reporting
that is integrated with an audit of financial statements?
To improve the efficiency and effectiveness of internal control audits, while reducing
unnecessary costs, especially in small public companies

What are the fraud considerations mandated by PCAOB AS 2200?

1. Evaluate the controls to address the risk of management override of other controls
2. Evaluate whether the companies include internal controls to adequately address the risk of
material missstatement due to fraud

What are the fraud consideration controls?

1. Over significant unusual transaction
2. Over journal entries and adjustments made at the end of the period
3. Over related party transactions
4. Over significant management estimates
5. That mitigate the motives and pressure for management to engage in inappropriate earnings
management and financial statement fraud
What should the auditor due to a test to management assessment of effectiveness over ICOFR?
1. Evaluate evidence from all sources (Auditors test of controls and miss statements detected
during the FSA, identified control deficiencies)
2. Review report is issued by internal auditors that pertain to ICOFR and evaluate the
deficiencies they identified
3. Review management assessment of IC0FR to ensure all required elements are present it and
complete

What are the internal audit standards related to fraud?

1. Proficiency
2. Due professional care
3. Governance
4. Risk management

What does the IIA standard 1210 on proficiency state?

Knowledge, skills, and other, but competencies are needed to perform individual and collective
auditor responsibilities

What does IIA standard 1220 on due professional care state?

Internal auditors must apply the care in skill expected of a reasonably prudent incompetent
internal auditor
Does do you care imply infallibility?
No

What does that IIA standard 2110 on governance state?

Internal audit activity must assess and make recommendations for improving the governance
process when performing its objectives (Ethics and values, performance management and
accountability, and communicating risk control information)

What does the IIA standard 2120 on risk management state?

Internal audit activity must evaluate the effectiveness and contribute to the improvement of risk
management processes

What must internal audit activity do under section 2120.A1?

The risk exposure is relating to the organizations governance, operations, and information
systems

What must internal audit activity do under section 2120.A2?

Evaluate the potential for the occurrence of fraud and how the organization manages fraud risk

What must IIA IPPF practice guide on internal auditing and fraud say the internal auditors
should do?
1. Consider fraud risks in the assessment of internal control design and determination of audit
steps to perform
2. Have knowledge of fraud risks
3. Be alert to opportunities that could allow fraud such as control deficiencies
4. Evaluate management oversight of fraud risk management programs, timeliness to correct
control deficiencies, and monitor the programs ongoing success

What is the purpose of Geo auditing standards or yellow book?

Provide GAGAS that provides guidance for auditors the government entities in entities that
receive government awards

What do you the yellow book or GAGAS standards include?

Ethics, Independence, professional judgment and competence, quality control, audit
performance, and reporting

What are the two types of government audit engagements?

Financial and performance audits

What do you financial audits provide?

Independent assessment of whether in entities financial information is presented fairly in
accordance with recognized criteria.

What can also be included in addition to traditional financial statement audits?

1. Reporting on internal control over financial reporting and on compliance with laws, rules, and
regulations
2. Providing special reports for specified elements, accounts, or items of a financial statement
3. Issuing letters for underwriters

What do you performance audit provide?

Findings or conclusions based on a valuation of sufficient, appropriate evidence against criteria.
Audit objectives vary

What are in auditors fraud related responsibilities under GAGAS?

Considered non-compliance and abuse during a financial audit as well as all requirements under
AU Section 240