As discussed in chapter 5, although the act of fraud itself is seldom observed, symptoms and indicators of fraud are often observable. Your authors point out that these are only symptoms rather than conclusive proof of fraud. To detect fraud, managers, auditors, employees and fraud examiners must recognize these fraud indicators or symptoms (often called red flags) and investigate whether the symptoms resulted from actual fraud or were caused by other factors.

Your authors separate the symptoms of fraud into six groups. What are the 6 groups?

Define and discuss how extravagant lifestyles and unusual behaviors are symptoms (red flags) of fraud.

Brainstorm ideas on how you as an auditor (someone outside of the company knowing no one that works for the company) can secretly examine extravagant lifestyles and unusual behavior red flags. Give specific ways you can find out about extravagant lifestyles and unusual behavior of employees without alerting anyone within the organization that you are looking for fraud.