CAFS flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Fraud Triangle

Three conditions associated with occupational fraud: a perceived pressure or incentive, a perceived opportunity to commit the act, and a rationalization that allows the perpetrator to justify the conduct.

Fraud Risk Assessment

A structured process that identifies fraud schemes facing the organization, rates each risk by likelihood and impact, maps existing controls, and prioritizes treatment of the highest residual exposures.

Segregation of Duties

A preventive control that divides authorization, custody of assets, recordkeeping, and reconciliation among different individuals so no single person can both commit and conceal a fraud.

Fraud Risk Register

A living inventory recording each identified fraud risk, its likelihood and impact rating, the controls in place, the assigned risk owner, and the status of remediation actions.

Benford's Law

In many naturally occurring data sets the leading digit is not uniform: digit one appears about 30.1 percent of the time and digit nine only 4.6 percent. Deviations warrant review.

Red Flag

A warning indicator suggesting possible fraud, such as an employee living beyond apparent means, unexplained journal entries, a vendor with no verifiable address, or documents lacking originals.

Continuous Auditing

Ongoing automated testing of transactions and controls against defined rules or thresholds as activity occurs, producing near-real-time alerts instead of retrospective periodic review.

Exception Report

A listing that isolates transactions falling outside set parameters, such as duplicate payments, weekend postings, or amounts just below approval limits, for reviewer follow-up and disposition.

Data Mining Analytics

Analytical techniques that search large transaction populations for hidden patterns, relationships, and outliers indicating possible fraud, including classification, clustering, and link analysis.

Chain of Custody

An unbroken documented record of who collected, handled, transferred, and stored each item of evidence and when, used to demonstrate integrity and authenticate the evidence in proceedings.

Forensic Image

A bit-for-bit duplicate of a digital storage device created through a write-blocking device so that all analysis occurs on the copy while the original remains unaltered.

Order of Volatility

A collection principle ranking digital evidence by how quickly it disappears, from processor and memory state through disk storage to backups and archival media.

Hash Value

A mathematically derived fingerprint of electronic data. Comparing hashes computed before and after analysis demonstrates that the evidence copy has not been altered.

Documentary Evidence

Evidence in the form of records such as invoices, contracts, ledgers, emails, and bank statements. Originals are preferred and authenticity must be established before reliance.

SOX Section 404

Requires management to assess and report on the effectiveness of internal control over financial reporting, with an independent auditor attestation required for accelerated filers.

Foreign Corrupt Practices Act

United States law prohibiting bribery of foreign officials and requiring issuers to keep accurate books and records and maintain a system of internal accounting controls.

Legal Privilege

Protection against compelled disclosure of confidential attorney-client communications made for legal advice. Work performed at counsel's direction may receive broader work-product protection.

Anti-Retaliation Provision

A legal protection making it unlawful to discharge, demote, suspend, threaten, or otherwise discriminate against an employee for lawfully reporting suspected fraud or securities violations.

Materiality Threshold

The magnitude of an omission or misstatement that would likely influence the judgment of a reasonable financial statement user, used to set escalation and reporting triggers.

COSO Framework

An internal control model built on five components: control environment, risk assessment, control activities, information and communication, and monitoring activities, used to design and evaluate controls.

Three-Way Match

A procurement control comparing purchase order, receiving report, and vendor invoice for quantity, price, and terms before payment is approved and released.

Preventive Control

A control applied before or during a transaction to stop errors or fraud from occurring, such as approval limits, access restrictions, and segregation of incompatible duties.

Detective Control

A control that identifies errors or fraud after the fact, such as account reconciliations, exception reports, physical counts, and independent review of detailed transaction listings.

Journal Entry Testing

Review of manual, top-side, or unusual journal entries for characteristics such as round amounts, off-hours posting, unusual preparers, or absent support to detect manipulation.

Objectivity

A mental attitude of impartiality enabling balanced judgments free from conflicts of interest, bias, or undue influence, applying to the individual rather than the audit function.

Self-Review Threat

An objectivity impairment that arises when an individual evaluates or reports on work, controls, or systems that they previously designed, implemented, or operated.

Confidentiality Principle

The professional duty to protect information obtained during an engagement, disclosing it only when legally required or authorized by the client or employer and only to those with a need to know.

Due Professional Care

The skill and diligence reasonably expected of a competent professional in the same field, applied throughout engagement planning, evidence gathering, analysis, and reporting.

Open-Ended Question

A question beginning with who, what, when, where, or how that invites a narrative answer, used early in interviews to capture uncontaminated recall before tighter questions.

Cognitive Interview

A structured technique using context reinstatement, exhaustive reporting, varied retrieval order, and changed perspective to improve the completeness and accuracy of a witness recollection.

Contemporaneous Notes

Notes made during or immediately after an interview or procedure recording date, time, participants, questions, and answers, supporting later testimony and the accuracy of the report.

Fraud Examination Report

A written document setting out authority and scope, methodology, findings with supporting evidence, quantified loss, conclusion, and recommendations, written for readers who may include counsel and regulators.