Lesson 55 - Advanced Accounting Course

Lesson 55: Fraud Risk Assessment and Prevention Techniques

🧠 What Is Fraud in Accounting?

Fraud in accounting is any intentional act to deceive or mislead for personal or financial gain.
It often involves manipulating financial data, stealing assets, or bypassing internal controls.

🔐 Fraud = Theft or deception that causes financial loss.

💥 Common Types of Accounting Fraud

🧪 What Is Fraud Risk Assessment?

A Fraud Risk Assessment (FRA) is the process of identifying, analyzing, and responding to the risk of fraud in an organization.

🎯 Goals:

• Find where fraud could happen
  
  

• Understand how it might happen
  
  

• Put controls in place to prevent or detect it
  
  

🛠️ Key Steps in Fraud Risk Assessment

🔍 Fraud Triangle: Why People Commit Fraud 

📌 If all 3 are present, fraud becomes much more likely.

🛡️ Prevention Techniques

🧾 Example Scenario

Problem: An accountant creates fake vendor invoices and approves payment to a personal account.
Why it happened:

• No separation of duties (opportunity)
  
  

• Financial pressure from debt (pressure)
  
  

• Believes they’ll pay it back later (rationalization)
  
  

Prevention:
✔ Require manager approval for all vendor setups
✔ Segregate invoice creation and payment authorization
✔ Monitor vendor bank accounts and audit regularly

🧱 Quick Comparison: Prevention vs. Detection

✅ Summary