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ACT430 Fraud Triangle Assignment

This document contains information about fraudsters who exhibited characteristics of the fraud triangle: pressure, opportunity, and rationalization. It discusses Nirav Modi who defrauded Punjab National Bank of $2 billion due to pressure to succeed. It discusses Tyrese Haspil who murdered his boss Fahim Saleh after getting the opportunity as his financial assistant to steal tens of thousands of dollars. It discusses Richard Scrushy who rationalized inflating HealthSouth's earnings by billions by claiming auditors would not detect fraudulent transactions under $5,000.

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163 views4 pages

ACT430 Fraud Triangle Assignment

This document contains information about fraudsters who exhibited characteristics of the fraud triangle: pressure, opportunity, and rationalization. It discusses Nirav Modi who defrauded Punjab National Bank of $2 billion due to pressure to succeed. It discusses Tyrese Haspil who murdered his boss Fahim Saleh after getting the opportunity as his financial assistant to steal tens of thousands of dollars. It discusses Richard Scrushy who rationalized inflating HealthSouth's earnings by billions by claiming auditors would not detect fraudulent transactions under $5,000.

Uploaded by

Antor Podder 1721325
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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North South University

School of Business and Economics


Department of Accounting & Finance

Course Title: Accounting Information Systems


Course Code: ACT430
Section: 1

Assignment on:
“Fraud Triangle”

Submitted To:
Mr. Muin Uddin Ahmed
Initial: AHU

Submitted By:

Name ID
Antor Podder 1721325030

Date of Submission: 19th Nov, 2020

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Pressure:
Fraudster: Nirav Modi
Nirav Modi was referred to as “jeweler to the stars,” with his pieces worn by many movie stars.
Modi’s seemingly charmed life came to a crashing halt early in the year when the 2nd largest
Indian state bank, Punjab National Bank or PNB, filed a police complaint against Modi alleging
the man had conspired with two of its staff to defraud the bank of nearly $43MM.
After the Central Bureau of Investigation (CBI) started an investigation, PNB got the total
amount was almost $2 billion in the fraud. Eventually, regulators found out that Modi conspired
with bank employees to fraudulently obtain Letters of Undertaking or LoU from PNB. LoU act
as a guarantee by the issuing bank, similar to LC, and are often used in international banking
transactions. The LoUs were issued from PNB via the Society for Worldwide Interbank
Financial Telecommunication network and were issued without proper authorization and
identification. The letters also were not recorded in PNB’s record-keeping book, allowing Modi
to avoid detection while obtaining loans in other countries.
Nirav Modi was motivated to commit fraud because he thought he had been given unreasonable
expectations for success. He didn’t believe that he can solve his problems legally, or that he
could speak to anyone who can support him. (Fraud Magazine)

Opportunity:
Fraudster & Murderer: Tyrese Haspil
Pathao Co-founder Fahim Saleh brutally Murdered for tens of thousands of dollars. The 33-year-
old was the son of Bangladeshi immigrants and created his first company while still in high
school. He went on to co-found the ride company Pathao, which is popular in Bangladesh and
Nepal, in 2015.
His 21-year-old executive assistant Tyrese Haspil has been arrested and charged with second-
degree murder. The fraudster typically started by stealing a small amount of money and if he
didn’t get caught, he would probably steal even bigger amounts. Tyrese Haspil handled Saleh's
finances and personal matters. It is also believed that he owed the victim a significant amount of
money. Tyrese Haspil was very trusted by Saleh. The criminal is alleged to have owed Saleh tens
of thousands of dollars. (BBC)

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Rationalization:
Fraudster: Richard Scrushy
HealthSouth is one of the United States’ largest public healthcare companies. It is specialized in
medical rehabilitation and outpatient surgery services. It is operated in approximately 1,900
locations in the United States, the United Kingdom, Australia, Puerto Rico, Canada, and Saudi
Arabia. It grew tremendously during the 1990s. It went public in 1996 and had a massive market
value of over $12 billion. HealthSouth’s growth, market value, and financial statement values
were not nearly what they actually appeared to be.
In 2003 HealthSouth was found guilty because their financial reports were manipulated. They
falsely inflated its profit margins to meet Wall Street’s expectation. However, the scandal did not
start until 1999. Only in 2003, the company was caught for the fraud.
Their techniques were:
• Improperly capitalizing expenses
• Overestimating insurance reimbursements
• Overvaluing fixed assets
• Using faulty reserve accountings

Richard Scrushy who founded HealthSouth was the mastermind for financial fraud. He allegedly
instructed accountants and senior officers to fix the shortfall by recording it falsely. He also
made an obscene amount of money from the scheme. HealthSouth accountants and executives
urged Scrushy more than once to stop inflating earnings, but he ordered them to continue. The
senior accountants created meetings called “Family meetings”, to discuss what false accounting
entries could be made. The main way in which they manage to fraud the company was by
making financial transactions between the values 500 to 5000 pounds. They did so because
auditors were not able to check every transaction within the company as this would become
time-consuming. This enabled the company to make countless fraud transactions without them
being detected by the auditors.
There are two rationalizing facets in rationalization fraud. the fraudster determines that more
important than the risk that he may get caught was what he could gain from his fraudulent
operation. Richard Scrushy tried to justify that fraud. He thought the auditors could not identify
the fraudulent money. (CFO)

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References
BBC. 2020. <https://www.bbc.com/news/world-us-canada-53452034>.
CFO. 2017. <https://www.cfo.com/fraud/2017/03/two-cfos-tell-tale-fraud-healthsouth/>.
Fraud Magazine. 2018. <https://www.fraud-magazine.com/2018Top5Frauds/>.

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