ABSTRACT
This chapter explores the dynamics of management fraud and the mindsets of fraudsters, by standers and their supervisors. Internal controls alone are unlikely to stop fraud and corruption when the organization is complacent and employees unaware of the risks. Fraudsters succeed when they can bypass the internal control system without anybody noticing or reacting. The signs of deception and deviation are symbolically called 'red flags', as red flags are often used as a warning, an indication of danger, for example at a beach when swimming is dangerous. The Institute of Internal Auditors (IIA) define 'control' as 'any action taken by management, the Board, and other parties to manage risk and increase the likelihood that established objectives and goals will be achieved'. Employees who are trained to be aware to the risks of fraud and corruption will also be more aware of other integrity risks. The teleopathic fraudster can rationalize any action.
