Zimbelman, Albrecht, Albrecht, Albrecht © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Forensic Accounting Chapter 11 Preventing Fraud

Zimbelman, Albrecht, Albrecht, Albrecht © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. To the Student  Chapter 11 is the first chapter that deals with fighting fraud, in this case, preventing fraud. The chapter identifies two major ways that organizations can work to prevent fraud: (1) create a culture of honesty, openness, and assistance; and (2) eliminate opportunities for fraud.  There are several ways to do each of these which are covered in this chapter. You should realize, however, that no matter how good an organization's fraud prevention efforts are, an organization will never prevent all fraud using cost-effective techniques.

Zimbelman, Albrecht, Albrecht, Albrecht © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Learning Objectives  Understand how to create a culture of honesty, openness, and assistance.  Know how to eliminate opportunities for fraud.  Understand how to create an effective organization to effectively minimize fraud.  Understand the importance of proactive fraud auditing.  Understand the importance of creating a comprehensive approach to fighting fraud.

Zimbelman, Albrecht, Albrecht, Albrecht © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Organizational Culture  Three major factors in fraud prevention relate to creating a culture of honesty, openness, and assistance. 1.Hire honest people 2.Create a positive work environment 3.Provide an employee assistance program

Zimbelman, Albrecht, Albrecht, Albrecht © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Eliminate Opportunities for Fraud Five ways to eliminate fraud opportunities: 1.Have good internal controls 2.Discourage collusion 3.Monitor employees and provide a whistle-blowing system 4.Create an expectation of punishment and 5.Conduct proactive auditing

Zimbelman, Albrecht, Albrecht, Albrecht © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Internal Controls

Zimbelman, Albrecht, Albrecht, Albrecht © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Whistle-blower System Effective systems have the following:  Anonymity  Independence  Accessibility  Follow-up

Zimbelman, Albrecht, Albrecht, Albrecht © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Proactive Fraud Auditing Good fraud auditing involves four steps: 1.Identify fraud risk exposures 2.Identify the fraud symptoms of each exposure 3.Build audit programs to proactively look for symptoms and exposures 4.Investigate fraud symptoms identified

Zimbelman, Albrecht, Albrecht, Albrecht © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Preventing Fraud – A Summary

Zimbelman, Albrecht, Albrecht, Albrecht © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Preventing Fraud – Current Model This model is characterized by four stages.

Zimbelman, Albrecht, Albrecht, Albrecht © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Preventing Fraud – Suggested Model