Introduction to Fraud Examination

2 Discipline of Fraud Examination Resolving allegations of fraud from tips, complaints or accounting clues Forensic accounting vs. fraud examination

3 Auditing vs. Fraud Examination IssueAuditingFraud Examination Timing Presumption Objective Scope Relationship Methodology

4 Fraud Theory Approach Predication –Fraud examinations must be based on predication Analyze Create Test Refine and amend

5 Tools Used in Fraud Examination T Observation

6 Defining Occupational Fraud and Abuse The use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets

7 Elements of Fraud material Knowledge Reliance Damages

8 Occupational Fraud and Abuse Research Edward Sutherland Donald Cressey –Cressey’s Hypothesis Albrecht Hollinger & Clark

9 Opportunity PressureRationalization Fraud Triangle

10 So who does this??

Report to the Nation on Occupational Fraud & Abuse Nationwide surveys Measuring the costs of occupational fraud –6 percent lost to fraud –$800 billion annually in the U.S. Perpetrators of fraud

12 Findings Position: –Managers? Employees? Owners? Gender: –Are women really more trustworthy?

13 Findings Age? –Which age is the most likely to commit fraud?

14 Findings Education?? – More ethical or more able? Collusion? –Alone or with others?

15 Length of employment? Are the “old-timers” more trustworthy?

16 Criminal history? Would a background check have helped?

17 Type of company? Public? Private? Nonprofit? Government? Big? Small?

18 Recovery? Do the victim companies get their $$ back??

19 Method of detection Auditors? Accident? Internal controls? Internal auditors? Police? Tip?

20 Fraud Types & Victims What types of frauds are there? Who are the typical perpetrators? Who are the typical victims?

21 Criminal versus Civil Responses to Fraud Purpose? Penalty? Burden of Proof? Jury? Organization? Verdict? Claims?

22 Occupational Fraud and Abuse Asset Misappropriations Corruption Fraudulent Statements Conflicts of Interest Bribery Illegal Gratuities Economic Extortion Inventory & All Other Assets Cash Nonfinancial Financial