Question

Indirect vs direct methods of employee embezzlement: Management Fraud

1) Also known as ________ ________ fraud
2) Top management deceptively _________ __________ ________

Answer 1

The indirect method of employee embezzlement, also known as management fraud, involves manipulating financial records to embezzle funds. This method is more complex and harder to detect compared to the direct method.

Step-by-step explanation:

The indirect method of employee embezzlement, also known as management fraud, is when top management deceptively manipulates financial records to embezzle funds. This method involves manipulating financial statements, misrepresenting expenses, or creating fictitious transactions to hide the embezzlement. In contrast, the direct method of employee embezzlement involves stealing funds directly without attempting to cover up the act.

For example, in management fraud, top executives might inflate revenues or understate expenses to make the company's financial situation appear better than it actually is. This can be done to earn bonuses or increase stock prices, benefiting the executives at the expense of the company and its shareholders.

The indirect method is often more complex and can be harder to detect as the fraud is concealed within legitimate financial transactions. On the other hand, the direct method leaves a clearer trail of evidence, making it easier for auditors or investigators to identify the embezzlement.