Question

Professional auditing standards discuss the three key "conditions" that are typically present when a financial fraud occurs and identify a lengthy list of "fraud risk factors." Briefly explain the difference between a fraud "condition" and a "fraud risk factor" and provide examples of each. What fraud conditions and fraud risk factors were apparently present in the Madoff case

Answer 1

Answer: Fraud is a crime or an offense to deliberately mislead others for the purpose of harming them, currently obtaining their property or services unfairly. Fraud can be done through aid to counterfeit objects.

Fraud risk factors are events or conditions that include encouragement or pressure for fraud to be perpetrated or offered the opportunity to occur. If there is a large amount of bills and coins, or cash in bank accounts, there is a very high risk of fraud.

In Bernard Madoff's case, he promised about 1% return per month, his strategy was to attract more and more new customers and use this money to pay older customers who wanted to redeem their income.

Generally scammers who use this system, using very aggressive marketing to attract more and more new investors, they also recruit large and renowned investors to give their business more credibility.

To justify the high return to the month, scammers always claim to have an innovative and exclusive technique in the market, and because of commercial strategy, can not reveal the operation of this technique.