Presented By: Donna Denker, CPA Donna Denker & Associates

 Per SAS 99 – (2002) – “An intentional act that results in material misstatement to the financial statements that are subject to an audit.”

 Financial Reporting Fraud  Misappropriation of Assets  External Fraud

 Diverting cash receipts  Lapping  Stealing or forging checks  Altering bank deposits  Stealing petty cash

 Creating fictitious vendors or overstating vendor accounts  Stealing inventory or equipment  Taking kickbacks  Abusing travel and entertainment reimbursements  Creating ghost employees or overstating hours worked

Opportunity Fraudster’s Need Rationalization

 Defines internal controls  Describes the components of effective internal controls  Provides evaluation criteria for internal controls  Guidance on management’s reporting of internal controls over financial reporting

 A process, effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objections in any of the following categories:

 Efficiency and effectiveness of operations  Reliability of financial reporting  Compliance with applicable laws and regulations

 Integrity  Ethical Values  Competency

 Entity must be aware of and deal with risks it faces  Entity must set objectives integrated with other activities so that the organization works together  Entity must establish mechanisms to identify, analyze and manage the related risk

 Establishment of policies to ensure that risks are addressed  Execution of policies to ensure they are carried out correctly and completely

 Systems to capture and exchange information

 Monitoring all of the processes  Allow modifications as necessary  System should react dynamically by changing as conditions warrant

 Existence or Occurrence  Completeness  Rights and Obligations  Valuation and Allocation  Presentation and Disclosure

 Establish organization control environment  Risk identification and analysis  Communications  Monitoring

 Human judgment  Breakdowns  Management overrides  Collusion

 Message from the board and management  Ethics policy and repercussions for violations  Conflict of Interest policies  Recognizing temptations

 Hiring policies  In-house or external training  Outside consultants to supplement if needed  Performance and skills evaluated periodically  Board does performance and skills evaluations for management

 Understand your fraud risks  Set the tone at the top – zero tolerance policy  Oversee internal controls  Retain outside experts when in doubt  Ask questions and exercise skepticism  Whistleblower program

 Commitment to excellence  All journal entries are authorized, supported and reviewed

 Organizational chart  Job descriptions  Roles are supportive of financial reporting objectives

 Considerations of segregation of responsibility  Responsibilities are commiserate with authority  Empowers employees

 HR policies  Job descriptions  Pre-employment investigation  Ensure appropriate training  Regular performance evaluations  Competency is considered  Exit interview with staff

 Funding agents and regulatory bodies  Vendors  Tribal Council  Creditors  Access to assets  News media  Changes

 Employees  Technology  Personnel practices  Access to assets  Changes

 Previously identified failures  Complexity of activities

 Brainstorming sessions  Regular management meetings to discuss issues  Reacting to changes in a timely manner  Education or training programs  Supervision  Personnel evaluations  Segregation of duties  Early identification of changes

 Physical Controls  Segregation of Duties  IT Controls  Management activities  Budget monitoring  Policy and procedures Policies establish what should be done Procedures establish how it should be done

 Staff to Staff  Management to Staff  Upward communication to Board

 Vendors  Funding Agents  Independent Auditors

 Policies and procedures  Management meetings  Departmental meetings  Financial Statements and Budget Reports  External financial reporting  Reports from External Auditors or Regulators

 Supervision of staff performance  Budget to Actual expenditure comparisons  Reconciliations and comparisons to physical assets  Enforcement of policies

 Bank and investment statements  Vendors monthly statements  Federal agencies communicating concerns  External or internal auditors