Richard G. Brody

Accountants' perceptions regarding fraud detection and prevention methods

Purpose – The purpose of this study is to examine the extent to which accountants, internal auditors, and certified fraud examiners use fraud prevention and detection methods, and their perceptions regarding the effectiveness of these methods.Design/methodology/approach – A survey was administered to 86 accountants, internal auditors and certified fraud examiners.Findings – The results indicate that firewalls, virus and password protection, and internal control review and improvement are quite commonly used to combat fraud. However, discovery sampling, data mining, forensic accountants, and digital analysis software are not often used, despite receiving high ratings of effectiveness. In particular, organizational use of forensic accountants and digital analysis were the least often used of any anti‐fraud method but had the highest mean effectiveness ratings. The lack of use of these highly effective methods may be driven by lack of firm resources.Practical implications – Organizations should consider the ...

The Effect of National Culture on Whistle-Blowing Perceptions

Society continues to be concerned about the impact of ethics on decision making. While many researchers have focused on this issue, the increased globalization of todays business suggests that more emphasis should be given to the potential impact of culture on ethical decisions. The current study is based, in part, on the work of Hofstede (1980, 1991) who identified multiple dimensions on which countries differ in terms of culture. As such, it gives consideration to the impact of national culture on ethical decision making. The study focuses on ethical decisions made by U.S. and Taiwanese accounting students and examines cross-cultural differences in business-related ethical perceptions. Results indicated significant differences between the ethical perspectives and judgments of U.S. and Taiwanese accounting students in a whistle-blowing scenario, particularly with respect to Hofstedes individualism dimension. These findings enhance our understanding of cross-cultural ethical differences. The implications of these results are discussed and suggested areas for future research are proposed.

An Empirical Investigation of the Interface Between Internal and External Auditors

Professional standards place specific responsibilities on auditors for the discovery of material mis-statements in reports of corporate financial performance. Certain factors have been shown to increase the likelihood of fraudulent financial reporting. One warning sign is the potentially pervasive effect of a weak internal control environment consistent with a weak internal audit group. This study investigates the impact of internal audit department quality differences on auditors ‘willingness to place reliance on the work performed by internal auditors. The study also gives consideration to auditors’ recent experiences with material errors and irregularities and examines the influence of two previously untested individual auditor differences on audit judgment decisions: (1) conflict management style and (2) perception of internal/external auditor communication barriers. The results indicate that auditors attend to internal audit department quality differences and that individual auditor differences exhibit significant influence over auditor judgments. Implications for audit practice are considered and directions for future research are suggested.

Social Engineering: The Neglected Human Factor for Information Security Management

Effective information systems security management combines technological measures and managerial efforts. Although various technical means have been employed to cope with security threats, human factors have been comparatively neglected. This article examines human factors that can lead to social engineering intrusions. Social engineering is a technique used by malicious attackers to gain access to desired information by exploiting the flaws in human logic known as cognitive biases. Social engineering is a potential threat to information security and should be considered equally important to its technological counterparts. This article unveils various social engineering attacks and their leading human factors, and discusses several ways to defend against social engineering: education, training, procedure, and policy. The authors further introduce possible countermeasures for social engineering attacks. Future analysis is also presented.

The Sallie Rohrbach story: lessons for auditors and fraud examiners

Purpose – The purpose of this paper is to understand workplace violence risk factors linked to fraud detection and safeguards professionals can implement to reduce such risk.Design/methodology/approach – Sources of information consisted of published news media, scholarly articles, and articles retrieved from the web.Findings – Findings suggest that there may be an underestimation by anti‐fraud professionals as to the possibility of a white‐collar criminal resorting to violence to prevent his or her fraud schemes from being detected and disclosed.Practical implications – The paper represents a useful guide for anti‐fraud professionals to incorporate into their practice by considering workplace risk factors and solutions to mitigate such risks.Originality/value – This paper serves to educate anti‐fraud professionals to recognize workplace violence risk factors, the behavioral traits of violent white‐collar criminals, and the steps they can take to mitigate such risks.

Findings on the Effects of Audit Firm Rotation on the Audit Process under Varying Strengths of Corporate Governance

Abstract While performing an annual audit of a clients financial statements, an audit firms staff identified what seems to be a material misstatement. Two discussions with the client have led to an impasse in that the client refuses to record what the auditor regards as a necessary adjustment. Our experimental study analyzes whether the likelihood of public accountants modifying their audit report for this departure from generally accepted accounting principles is affected by whether audit firm rotation is about to occur (no rotation v. rotation) under each of the two levels of corporate governance (weak v. strong). Our subjects include 105 CPA firm employees and partners who have an average experience level slightly less than 14 years. Results suggest that auditors in the rotation condition are more likely to modify their audit report as contrasted to those in a situation in which a continuing relationship is expected.

Flying under the radar: social engineering

Purpose - One of the key components to fraud prevention is strong internal controls. However, the greatest threat to an organizations information security is the manipulation of employees who are too often the victims of ploys and techniques used by slick con men known as social engineers. The purpose of this paper is to help prevent future incidents by increasing the awareness of social engineering attacks. Design/methodology/approach - A review of the more common social engineering techniques is provided. Emphasis is placed on the fact that it is very easy for someone to become a victim of a social engineer. Findings - While many organizations recognize the importance and value of having strong internal controls, many fail to recognize the dangers associated with social engineering attacks. Practical implications - Individuals and organizations remain vulnerable to social engineering attacks. The focus on internal controls is simply not enough and is not likely to prevent these attacks. Raising awareness is a good first step to addressing this significant and potentially dangerous problem. Originality/value - This paper provides a concise summary of the most common social engineering techniques. It provides additional evidence that individuals need to better understand their susceptibility to becoming a victim of a social engineer as victims may expose their organizations to very significant harm.

The optics of fraud: affiliations that enhance offender credibility

Purpose – The purpose of this paper is to illustrate how a financial fraud practice, known as affinity fraud, relies on building trust with victims based on shared affiliations or characteristics such as age, race, religion, ethnicity or professional designations, for the purpose of exploiting the trust factor for financial advantage.Design/methodology/approach – Sources of information consisted of scholarly articles and articles retrieved from the web.Findings – Findings suggest that these fraud offenders rely on a myriad of persuasion techniques to overcome offender skepticism coupled with victims engaging in a psychological concept known as projection bias to evaluate the credibility of these offenders. These factors create a negative synergy that dilutes the perceived need for due diligence normally required prior to engaging in securities transactions. In addition, these offenders display a predatory quality, debunking the myth that fraud offenders exhibit a homogenous crime group behavioral profile....

From white-collar crime to red-collar crime.

PURPOSE The purpose of this paper is to explore the issue of violence with respect to white-collar criminals. DESIGN/METHODOLOGY/APPROACH The analysis is conceptual, focusing on the historical underpinnings of white-collar crime and reviewing the evolution of white-collar criminals. FINDINGS Findings suggest that white-collar criminals do display violent tendencies and, contrary to popular belief, can become dangerous individuals. PRACTICAL IMPLICATIONS The paper represents an extremely useful and practical source for fraud examiners and other white-collar crime investigators. Raising the mvareness of investigators dealing with white-collar criminals may prevent them from becoming victims of a violent act. ORIGINALITY/VALUE The paper fulfills a need to highlight a dangerous trend with white-collar criminals in that they may be driven to violence against those involved in investigating their crimes.

The dark triad: organized crime, terror and fraud

Purpose – The purpose of this paper is to recognize that organized crime and terrorism do not always operate independently from each other but, at times, rely on each other to create synergistic outcomes and use the same tactics and methods to advance their goals such as the use of fraud.Design/methodology/approach – Sources of information consisted of scholarly articles and articles retrieved from the web.Findings – Findings suggest that over time the crime‐terror nexus has increased its collaborative nature and terrorists have adopted the use of fraud schemes that were initially believed to be methods used only by organized crime to finance their organizations and goals.Originality/value – This paper serves as a useful guide to alert and educate anti‐fraud professionals, law enforcement and policy makers of the nexus between organized crime, terrorism and fraud and that fraud should not be viewed as a peripheral issue in the crime‐terror nexus.