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Having identi ed the potentially signi cant fraud and corruption risks to which the company is exposed, the next step is to evaluate the extent to which controls already in place mitigate the fraud risk It is really important to bear in mind at this point that mitigating risk means reducing that risk, not making it totally go away If only it were that easy! People often seem to think that if you have enough controls the risk goes away and you don t have to worry In reality, the risk is usually still there, just reduced to a lower level that is desirably within the company s risk tolerance set by management with approval of the board of directors So when it comes to evaluating the controls a company has to mitigate fraud and corruption risk, the key question is to what extent those controls reduce the risk.



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The previous material indicates that capaci tors combi ne like cond uctances, whe reas inductances co mbine like res istances.





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If your fraud and corruption risk assessment identi es a number of risks, then sets out a laundry list of controls and assumes that s enough to deal with the problem, there s a further step to take by making an assessment of the extent to which each risk is mitigated You almost certainly have some fraud or corruption risk remaining, the so-called residual risk, and it is really valuable to see what that is, as we shall see below Another common trap in evaluating the extent to which controls mitigate fraud and corruption risks is grouping all the risks together and then grouping all the controls together and making an overall assessment of whether the group of controls collectively reduces the group of risks to a tolerable level Such bundling may conceal myriad problems.

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As with rewards, coercion can revolve around tangible and concrete outcomes, such as the use or threat of physical force, or instead involve outcomes that are nonmaterial and acquire their valence by virtue of less tangible features The parent concerned with a child s study habits might express disapproval for the child s shortcomings in this regard, for example, and the salesperson might redouble his or her efforts at moving stock for fear of losing his or her job Expert power is accorded those who are perceived to have superior knowledge or skills relevant to the target s goals Deference to such individuals is common when the target lacks direct personal knowledge regarding a topic or course of action In the physician-patient relationship, for example, the patient typically complies with the physician s instructions to take a certain medicine, even when the patient has no.

The assessment would desirably be made separately for each fraud or corruption risk identi ed, linking or mapping it to the controls that will help to reduce that risk This group of controls will typically include both entity-level controls that affect the company s entire control environment and process-level controls that impact a particular process within a company, such as accounts payable In our experience, when each risk is mapped to the speci c controls that mitigate that risk, more fraud and corruption risks may be revealed to be under-controlled Controls may also be listed that would not in practice mitigate the particular risk For example, requiring two authorized signatures on a journal entry before it is permitted to be processed in the accounting system might help to.

column vector with nonnegative elements. The row sums of Q equal zero, i.e., Tl-+T = 0. Notice that T by itself is not a proper generator matrix. The initial probability vector is given as (2, a,+1 ) with &J + a,+1 = 1. Furthermore, the states 1,. es, m are transient, and consequently, state m + 1 is the one and only absorbing state, regardless of the initial probability vector. In Figure 3.10 we visualise distribution F(z) F(x) We now can define a distribution the distribution this. in state m + 1 is then (3.56) The probability given as [217]: = 1 - aeT L, F(z) z > 0. of the time until absorption

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of 323 messages per minute. The peak rate was much higher, approximately 30 times as high as the average rate.

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