Transcript 2/ 5

Today’s Topics

Preventing Fraud-Part II


Comprehensive Fraud Fighting Model



Eliminating opportunities for fraud
Not the simplified “Club” diagram
Symptoms of Fraud
Elements of Fraud
FORENSIC ACCOUNTING - BA124 – Spring 2015
5-1
7 Methods of Risk
Reduction







Install good internal controls
Discourage collusion
Alert vendors and contractors
Monitor employees
Provide tip hotlines
Create expectation of punishment
Audit proactively
FORENSIC ACCOUNTING - BA124 – Spring 2015
5-2
Install Good Internal
Controls




Systems
Segregation of duties
Policies and procedures
Minimize undermining events
FORENSIC ACCOUNTING - BA124 – Spring 2015
5-3
Discourage Collusion

29% of all fraud is due to collusion


Trend is increasing



More than one person involvement
Complex nature of businesses
Rising supplier alliances
Unmerited or complacent trust
factors
FORENSIC ACCOUNTING - BA124 – Spring 2015
5-4
Alert Vendors and
Contractors


Communications that set policy
Right to audit clauses
FORENSIC ACCOUNTING - BA124 – Spring 2015
5-5
Monitor Employees


Lifestyle awareness
Detection and deterrent
FORENSIC ACCOUNTING - BA124 – Spring 2015
5-6
Provide Tip Hotlines



33% of frauds detected through tips
Only 52% of Fortune 500 companies
have whistle-blowing programs
Concern for mixed employee
messages


i.e. “Do we have a fraud right now?”
Whistle-blower protection policies
FORENSIC ACCOUNTING - BA124 – Spring 2015
5-7
Create Expectation of
Punishment


Causes employees to stop and think
Don’t fall victim to fear of time or
bureaucracy associated with
prosecution
FORENSIC ACCOUNTING - BA124 – Spring 2015
5-8
“Audit” Proactively




Identify risk exposure
Identify symptoms
Implementing proactive audit
initiatives
Investigate symptoms
FORENSIC ACCOUNTING - BA124 – Spring 2015
5-9
Dealing with Fraud


Traditional or Default Model
Comprehensive Fraud Fighting Model
FORENSIC ACCOUNTING - BA124 – Spring 2015
5-10
Default Model




Fraud takes place
Investigation of the event
Decision regarding action
The file is closed and no further
action takes…..
This approach guarantees that fraud
will not go away!!!
FORENSIC ACCOUNTING - BA124 – Spring 2015
5-11

Comprehensive Fraud
Fighting Model
(Don’t Confuse with Fraud Savvy Model)
Tone is set at the top
 Training takes place
 Risk assessment and internal controls
are set
 Reporting and monitoring systems
installed
 Proactive auditing initiated
 Commitment to action & follow-up
FORENSIC ACCOUNTING - BA124 – Spring 2015
5-12

The Symptoms of Fraud






Accounting Anomalies
Internal Control Weaknesses
Analytical Anomalies
Extravagant Lifestyles
Unusual Behavior
Tips and Complaints
FORENSIC ACCOUNTING - BA124 – Spring 2015
5-13
Elements of Fraud

Theft

Concealment

Conversion
FORENSIC ACCOUNTING - BA124 – Spring 2015
5-14