Spotting Fraud
0 likes368 views
This document discusses how to spot and prevent fraud in organizations. It outlines the fraud triangle of motivation, opportunity, and rationalization. Common motivations for fraud include job dissatisfaction, personal debts, and substance abuse issues. Organizations that are susceptible to fraud often have poor controls, little emphasis on rewards, and a general sense of malaise. The largest risk areas for fraud are billing and payroll. Financial clues that could indicate fraud include unusual ratios in sales, costs, inventory, expenses, cash, receivables, payables, and documentation. Steps for examining fraud include becoming aware, gathering evidence, determining scope, and evaluating options.
![Spotting Fraud: How to Find It, How to Stop It By Mike Morley, CPA [email_address]](https://image.slidesharecdn.com/spottingfraud-100805181027-phpapp02/85/Spotting-Fraud-1-320.jpg)
![Spotting Fraud: How to Find It, How to Stop It By Mike Morley, CPA [email_address]](https://image.slidesharecdn.com/spottingfraud-100805181027-phpapp02/85/Spotting-Fraud-35-320.jpg)
Spotting Fraud
- 1. Spotting Fraud: How to Find It, How to Stop It By Mike Morley, CPA [email_address]
- 2. A crime of opportunity Statistics ACFE FBI
- 3. Lack of reporting Wrongful dismissal suits Looking bad to investors
- 4. Management inertia Not on their watch Reluctance Pervasiveness
- 5. Concerns Effective frauds Only errors Fiduciary duty
- 6. Human nature The good, the bad, and the rest of us Background checks Fear of bad publicity Setting the example
- 7. Fraud triangle – Donald R. Cressey
- 8. Motivation Job dissatisfaction Gambling & personal debts Substance abuse
- 9. Motivation cont. Personal gain coupled with dissatisfaction about compensation Chumminess with customers Desire to “beat the system”
- 10. Motivation cont. Lax attitude toward rules Real or imagined grievances Revenge
- 11. Visible symptoms/indicators Short vacations Unusual working hours Appearance of stress Lifestyle changes
- 12. Susceptible organizations Poor controls Little emphasis on employee rewards General sense of malaise
- 13. Controls issues Lack of controls Controls not being followed Star performers “controls don’t apply to me”
- 14. Controls issues cont. Inexperience Laziness Ego
- 15. Controls issues cont. Impatience Inadequate staffing Sloppiness
- 16. Categories of fraud Corruption Asset misappropriation Fraudulent statements
- 17. Largest risk areas Billing 45.5% Payroll 17.7%
- 18. Information flow Someone always knows, so why don’t they tell? Nobody wants to be the bearer of bad news Internal auditors and forensic accountants
- 19. Group behaviour Unspoken messages in organizations When something is too good to be true… Long-term employees
- 20. Conditioned behaviours Cyclists on the sidewalk Buildings that don’t move
- 21. Whistle blowers The dilemma The scapegoat Reality: Statistics Walking the line Is it worth the fight?
- 22. Choice of strategies Good, quick, cheap, ------ pick two Broken window theory Segregation of duties
- 23. Steps for the fraud examiner Become aware of the fraud Gather the evidence Determine scope of problem Evaluate options Present to a trusted authority
- 24. Steps for the company Stop the bleeding Decide on course of action Evaluate controls – what went wrong? Preventative measures
- 25. HR implications Avoid emotional decisions Sometimes easier to buy out the thief, might be cheaper than pursuing and proving a criminal case
- 26. Specific concerns Bidding process Purchasing Cash application Write-offs
- 27. Financial clues Ratios as guidelines Sales Cost of sales
- 28. Financial clues cont. Inventory Expenses Cash
- 29. Financial clues cont. Receivables Payables Documentation
- 30. Financial clues cont. Estimates Purchasing Valuation
- 31. Other clues Related party transactions Inter-company Conflicts of interest
- 32. Other clues cont. Audit committee Equity based compensation plans Incentives
- 33. Other clues cont. Dividend policy Special purpose entities
- 34. Other clues cont. Stock Analysts/Credit rating agencies Chapter 11 Common directorship
- 35. Spotting Fraud: How to Find It, How to Stop It By Mike Morley, CPA [email_address]