occupationfraud
the use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization's resources
overstatement
fictitious revenues
overstatement
conceal liabilities/expenses
overstatement and understatement
timing differences
overstatement and understatement
improper asset valuations
overstatement and understatement
improper disclosures
corruption
conflicts of interest (purchasing schemes or sales schemes)
corruption
bribery
corruption
invoice kickbacks
corruption
bid rigging
corruption
illegal gratuities
corruption
economic extortion
Asset misappropriation
fraudulent disbursements
Asset misappropriation
theft of cash receipts (skimming or larceny)
Asset misappropriation
theft of cash on hand (billing, payroll, expense reimbursement, check tampering, check tampering, register disbursements)
Financial statement fraud
biggest mean loss/biggest dollar impact
Asset Misappropriation
most frequent / percent of cases
TRUE
T/T Most frauds are caught within 1 year or less
5%
percent of revenues lost due to fraud annually
40%
won't steal
30%
might steal
30%
will steal
Control Environment
tone at the top
Risk Assessment
What is risk?
How do we begin to assess risk?
Are you comfortable pointing out flaws?
Mitigation, management
control activities
preventative and/or detective controls
What are they?
What the pros and cons of each?
Preventive Controls
no access
keys (logical and physical)
detective controls
reconcilitations
information and communication
What kind of information?
Who's part of communication
What can we talk about?
Monitoring
Constant vigilance!
Purposely evaluating
Review, recommend
Calculating criminals
predators
Calculating criminals
repeat offenders
Calculating criminals
higher-than-average intelligence
Calculating criminals
well-educated
Calculating criminals
usually begin their careers in crime later in life than other criminals
Calculating criminals
generally inclined to risk taking
Calculating criminals
lack feelings of anxiety and empathy
Calculating criminals
lack of inner direction, self-confidence and self-esteem
Calculating criminals
motivated by their desires to fit in and be accepted
Calculating criminals
define success by other standards
situation-dependent criminals
vast majority of corporate criminals
situation-dependent criminals
seemingly ordinary people who commit crimes without the intent to harm others
situation-dependent criminals
typical white collar criminal
Investigation - internal - by whom
human resources
Investigation - internal - by whom
internal audit
Investigation - internal - by whom
department
Investigation - external - by whom
auditors
Investigation - external - by whom
attorney
Investigation - external - by whom
authorities
predication
a reasonable, professionally trained individual believes a fraud occurred or is occuring
predication
responding to regulatory action
predication
difficulties in financial reporting/information/disclosure
predication
issues involving customer or vendor
predication
matters relating to Foreign Corrupt Practices Act
predication
lifestyle
predication
anonymous tips
predication
conflicts of interest
Early administrative matters
relationship review
Early administrative matters
conflict check (important for litigation)
Early administrative matters
engagement letter
Early administrative matters
billings/fees
External Auditor of F/S
Finding Out There is Fraud 1
Tip
Initial Detection of Occupational Frauds 1
Employee
Source of Tip 1
Direct Supervisor
Party to Whom Whistle-blower goes to 1
employee
most frequent perpetrator of fraud
owner/executive
highest dollar loss of perpetrator
Personal fraud
phones scams
Personal fraud
email phishing, spear phishing
Personal fraud
social egineering
Personal fraud
Social media
Code of conduct
Finding Out There is Fraud 2
Internal audit
Finding Out There is Fraud 3
Management certification of F/S
Finding Out There is Fraud 4
Internal Audi
Initial Detection of Occupational Frauds 2
Management Review
Initial Detection of Occupational Frauds 3
By Accident
Initial Detection of Occupational Frauds 4
Customer
Source of Tips 2
Ananymous
Source of Tips 3
Other
Source of Tips 4
Other
Party to Whom Whistle blower goes to 2
Executive
Party to Whom Whistle blower goes to 3
Fraud Investigative Team
Party to Whom Whistle blower goes to 4
Red Flag
Living beyond Means
Red Flag
Financial Difficulties
Red Flag
Unusually Close Association with Vendor/Customer
Red Flag
Wheeler - Dealer Attitude
Red Flag
Control Issues
Red Flag
Divorce/Family Problems
Red Flag
irritability, suspicious, defensiveness
Red Flag
Addiction Problems
Red Flag
Complained about Inadequate Pay
Red Flag
Refusal to Take Vacations
Red Flag
Pressures from within organization
Red Flag
Past employment prblems
Red Flag
social isolation
Red Flag
Past legal problem
Red Flag
pressure for success
Red Flag
Complained about lack of authority
Red Flag
Instability in life circumstances
Desired outcomes
prosecution
Desired outcomes
restitution
Desired outcomes
Insurance claim
Document Review
ask for what we need
Document Review
assess control weaknesses
Document Review
consider collusion
Document Review
use electronic tools where available
Document Review
sampling - unlikely
Document Review
chain of custody
Document Review
originals vs. copies
Document Review
determine what isn't available (and should be)
Areas fraud examiners focus
transactions that appear unusual
Areas fraud examiners focus
internal controls that are unenforced or often compromised by higher authorities
Areas fraud examiners focus
employee motivation, morale, and job satisfaction levels that are chronically low
Areas fraud examiners focus
a corporate culture and reward system that tends to support unethical behavior toward employees, customers, competitors, lenders, or shareholders
occupationfraud
the use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization's resources
overstatement
fictitious revenues
overstatement
conceal liabilities/expenses
overstatement and understatement
timing differences
overstatement and understatement
improper asset valuations
overstatement and understatement
improper disclosures
corruption
conflicts of interest (purchasing schemes or sales schemes)
corruption
bribery
corruption
invoice kickbacks
corruption
bid rigging
corruption
illegal gratuities
corruption
economic extortion
Asset misappropriation
fraudulent disbursements
Asset misappropriation
theft of cash receipts (skimming or larceny)
Asset misappropriation
theft of cash on hand (billing, payroll, expense reimbursement, check tampering, check tampering, register disbursements)
Financial statement fraud
biggest mean loss/biggest dollar impact
Asset Misappropriation
most frequent / percent of cases
TRUE
T/T Most frauds are caught within 1 year or less
5%
percent of revenues lost due to fraud annually
40%
won't steal
30%
might steal
30%
will steal
Control Environment
tone at the top
Risk Assessment
What is risk?
How do we begin to assess risk?
Are you comfortable pointing out flaws?
Mitigation, management
control activities
preventative and/or detective controls
What are they?
What the pros and cons of each?
Preventive Controls
no access
keys (logical and physical)
detective controls
reconcilitations
information and communication
What kind of information?
Who's part of communication
What can we talk about?
Monitoring
Constant vigilance!
Purposely evaluating
Review, recommend
Calculating criminals
predators
Calculating criminals
repeat offenders
Calculating criminals
higher-than-average intelligence
Calculating criminals
well-educated
Calculating criminals
usually begin their careers in crime later in life than other criminals
Calculating criminals
generally inclined to risk taking
Calculating criminals
lack feelings of anxiety and empathy
Calculating criminals
lack of inner direction, self-confidence and self-esteem
Calculating criminals
motivated by their desires to fit in and be accepted
Calculating criminals
define success by other standards
situation-dependent criminals
vast majority of corporate criminals
situation-dependent criminals
seemingly ordinary people who commit crimes without the intent to harm others
situation-dependent criminals
typical white collar criminal
Investigation - internal - by whom
human resources
Investigation - internal - by whom
internal audit
Investigation - internal - by whom
department
Investigation - external - by whom
auditors
Investigation - external - by whom
attorney
Investigation - external - by whom
authorities
predication
a reasonable, professionally trained individual believes a fraud occurred or is occuring
predication
responding to regulatory action
predication
difficulties in financial reporting/information/disclosure
predication
issues involving customer or vendor
predication
matters relating to Foreign Corrupt Practices Act
predication
lifestyle
predication
anonymous tips
predication
conflicts of interest
Early administrative matters
relationship review
Early administrative matters
conflict check (important for litigation)
Early administrative matters
engagement letter
Early administrative matters
billings/fees
External Auditor of F/S
Finding Out There is Fraud 1
Tip
Initial Detection of Occupational Frauds 1
Employee
Source of Tip 1
Direct Supervisor
Party to Whom Whistle-blower goes to 1
employee
most frequent perpetrator of fraud
owner/executive
highest dollar loss of perpetrator
Personal fraud
phones scams
Personal fraud
email phishing, spear phishing
Personal fraud
social egineering
Personal fraud
Social media
Code of conduct
Finding Out There is Fraud 2
Internal audit
Finding Out There is Fraud 3
Management certification of F/S
Finding Out There is Fraud 4
Internal Audi
Initial Detection of Occupational Frauds 2
Management Review
Initial Detection of Occupational Frauds 3
By Accident
Initial Detection of Occupational Frauds 4
Customer
Source of Tips 2
Ananymous
Source of Tips 3
Other
Source of Tips 4
Other
Party to Whom Whistle blower goes to 2
Executive
Party to Whom Whistle blower goes to 3
Fraud Investigative Team
Party to Whom Whistle blower goes to 4
Red Flag
Living beyond Means
Red Flag
Financial Difficulties
Red Flag
Unusually Close Association with Vendor/Customer
Red Flag
Wheeler - Dealer Attitude
Red Flag
Control Issues
Red Flag
Divorce/Family Problems
Red Flag
irritability, suspicious, defensiveness
Red Flag
Addiction Problems
Red Flag
Complained about Inadequate Pay
Red Flag
Refusal to Take Vacations
Red Flag
Pressures from within organization
Red Flag
Past employment prblems
Red Flag
social isolation
Red Flag
Past legal problem
Red Flag
pressure for success
Red Flag
Complained about lack of authority
Red Flag
Instability in life circumstances
Desired outcomes
prosecution
Desired outcomes
restitution
Desired outcomes
Insurance claim
Document Review
ask for what we need
Document Review
assess control weaknesses
Document Review
consider collusion
Document Review
use electronic tools where available
Document Review
sampling - unlikely
Document Review
chain of custody
Document Review
originals vs. copies
Document Review
determine what isn't available (and should be)
Areas fraud examiners focus
transactions that appear unusual
Areas fraud examiners focus
internal controls that are unenforced or often compromised by higher authorities
Areas fraud examiners focus
employee motivation, morale, and job satisfaction levels that are chronically low
Areas fraud examiners focus
a corporate culture and reward system that tends to support unethical behavior toward employees, customers, competitors, lenders, or shareholders