Auditing & Assurance Services (Auditing and Assurance Services)
Auditing & Assurance Services (Auditing and Assurance Services)
7th Edition
ISBN: 9781259573286
Author: Timothy J Louwers, Allen Blay, David Sinason Associate Professor, Jerry R Strawser, Jay C. Thibodeau Associate Professor
Publisher: McGraw-Hill Education
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Chapter 6, Problem 1RC
To determine

State the defining characteristics of employee fraud and embezzlement.

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Explanation of Solution

Employee Fraud:

Employee fraud refers to the use of fraudulent ways to take some property from the employer such as, money. It includes falsification (presenting false documents), lying about some important matters, or going against the employer’s policies and hiding it.

The defining characteristics of employee fraud are:

  • It is a fraudulent act. It is not an appropriate act to be done by the employee according to the norms of professionalism.
  • It is the conversion of assets for the use of fraudster. It becomes easier when cash is involved in the fraud.
  • The final characteristic is of the cover-up which implies, to hide or to make the fraud disappear from employers eyes so that the fraudster does not catch.

Embezzlement is a type of fraud done by the employee. This includes stealing of the assets by an employee, which were entrusted to her or his custody or care or control. In various situations, embezzlement is followed along with lying to the employer to cover-up the false act or wrong accounting entries.

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