Question: Based on authoritative sources (including peer reviewed articles from the library, Fraud Examiners Manual, AICPA, etc), compare and contrast at least 4 definitions of fraud. Why do you think fraud is defined differently and do you think there should be a uniform definition?
My answer: Different organizations and professionals define fraud differently. The Institute of Internal Auditors-Australia (2017) define fraud as an act characterized by concealment, deceit, and violation of trust; as such, it is an illegal act. According to the Committee of Sponsoring Organizations of the Treadway Commission-COSO (2016), fraud is an intentional omission or act aimed at deceiving others such that the victim suffers a loss while the perpetrator achieves some gain. AICPA (2011) defines fraud as alteration of financial data by the organization’s management with the aim of achieving a fraudulent result based on which the management is rewarded. In common law, fraud entails using deception to gain; however, there must be four elements for it to qualify as fraud, they are; existence of the false statement, understanding that the statement was false, relying in the false act, resultant damages (Akers & Gissel, 2006).
The above highlighted definitions have some similarities, the first is the intention of the act; that means individuals will engage in the practice knowingly or deliberately; secondly, there is legal aspect the definitions recognize that fraud is an illegal act. The last similarity is about the categorization of fraud, that is fraud does not only involve financial reporting, but also misappropriation of assets due to the benefits achieved by the fraudster. However, the rationale of the definition among the organizations is different; for instance, Institute of Internal Auditor associate fraud with avoiding payment of services or obtaining money or property (Akers & Giseel, 2006). The differences in the definition are due to the psychological perspectives of the definers; psychologists will consider the motivations and the intentions, while the financial auditors will consider the criteria. Fraud should be defined uniformly in order to avoid confusions that may arise during investigations
Second Question: You make some interesting points, first you noted that fraud needs to be intentional. Do you think that is difficult to prove? Second, you say there should be a uniform definition, what would you include in this definition so that fraud is defined the same way universally?
Question: Based on authoritative sources (including peer reviewed articles from the library, Fraud Examiners Manual, AICPA, etc), discuss the differences and similarities between the AICPA Professional Code of Conduct and the ACFE Code of Ethics. How do you think each codes relates to the specific area of expertise covered? Do you think the codes need updating? Why and what sections?
Based your past or current leadership experience and/or your potential future experience as a leader, how have or could a code of ethics be used in professional and/or personal decision making? If you have a mentor or coach, then ask this person about experience with codes of ethics. If you do not have a mentor or coach, then ask someone who you would like to be a mentor or coach in your life. Share the insights that you gain from this person.
My answer: AICPA aims at availing financial statements that are understandable and usable by the investors, creditors and investors in the organization such that they can be relied on to make investment decisions such as formulating credit terms or making financial investment decisions. Due to the importance of AICPA to external customers, they must trust it. On the other hand, ACFE, which is an acronym for Association of Certified Fraud Examiners focus on examination of fraud; however, the initiation of examination starts only when there are suggestions, suspicion or allegations that fraud occurred (Allen, 2010).
Both AICPA and ACFE have to practice professional skepticism, that means ACFE and ACE cannot assume dishonesty or honesty; they work on the assumption that fraud is possible. AICPA and ACFE must maintain integrity and competence. AICPA are auditors of financial statements, but they have a responsibility in detecting fraud just like ACFE professionals.
AICPA was formulated as an accounting profession focusing on lenders, investors, and creditors. That means it focuses on the organization’s external stakeholders rather than the internal management of the organization. ACFE are answerable to the client, they do not serve the public interest.
AICPA code of conduct is rule based, that means professions in the sector must adhere to all the rules. In the case of ACFE, the fraud examiners need not to conform to all the code of professional ethics when working or reporting. It means AICPA must adhere to all auditing standards while in ACFE the professional may reach an agreement with the client on the limits of fraud examination (Carmichael, 2018). AICPA honor public trust and serves the interest of the public. On other hand, ACFE are hired by the defrauded organization; therefore, the client determines the extent of the investigation. The codes should not be updated.
Second Question: Nice layout for the post. In your differences you make a good point about who uses the work of a CPA vs a CFE. In other words, an auditor is looking out for the public (external users), while a fraud examiner is asked to investigate something typically by the company. Do you think this makes the biggest difference in how the 2 codes are written?