Abstract
Case law relating to an auditor's detection of fraud has identified three fraud categories: “ingenious”, those that arouse or ought to arouse the auditor's suspicions, and “well‐known frauds”. This paper argues that the extensive publicity given to Bond Corporation's use of back‐to‐back loans in 1988‐89 to siphon $1.2 billion from Bell Resources resulted in this fraud being transfomed from ingenious to well‐known. Detection processes have been developed for well‐known frauds and this paper identifies certain “red flags'” associated with the back‐to‐back loan fraud that should facilitate its detection.
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