1. n Preventing Fraud-Part II n Eliminating opportunities for fraud n Comprehensive Fraud Fighting Model n Not the simplified “Club” diagram n Symptoms of Fraud n Elements of Fraud Today’s Topics FORENSIC ACCOUNTING - BA124 – Spring 2015 5-1

2. n Install good internal controls n Discourage collusion n Alert vendors and contractors n Monitor employees n Provide tip hotlines n Create expectation of punishment n Audit proactively 7 Methods of Risk Reduction FORENSIC ACCOUNTING - BA124 – Spring 2015 5-2

3. n Systems n Segregation of duties n Policies and procedures n Minimize undermining events Install Good Internal Controls FORENSIC ACCOUNTING - BA124 – Spring 2015 5-3

4. n 29% of all fraud is due to collusion n More than one person involvement n Trend is increasing n Complex nature of businesses n Rising supplier alliances n Unmerited or complacent trust factors Discourage Collusion FORENSIC ACCOUNTING - BA124 – Spring 2015 5-4

5. n Communications that set policy n Right to audit clauses Alert Vendors and Contractors FORENSIC ACCOUNTING - BA124 – Spring 2015 5-5

6. n Lifestyle awareness n Detection and deterrent Monitor Employees FORENSIC ACCOUNTING - BA124 – Spring 2015 5-6

7. n 33% of frauds detected through tips n Only 52% of Fortune 500 companies have whistle-blowing programs n Concern for mixed employee messages n i.e. “Do we have a fraud right now?” n Whistle-blower protection policies Provide Tip Hotlines FORENSIC ACCOUNTING - BA124 – Spring 2015 5-7

8. n Causes employees to stop and think n Don’t fall victim to fear of time or bureaucracy associated with prosecution Create Expectation of Punishment FORENSIC ACCOUNTING - BA124 – Spring 2015 5-8

9. n Identify risk exposure n Identify symptoms n Implementing proactive audit initiatives n Investigate symptoms “Audit” Proactively FORENSIC ACCOUNTING - BA124 – Spring 2015 5-9

10. n Traditional or Default Model n Comprehensive Fraud Fighting Model Dealing with Fraud FORENSIC ACCOUNTING - BA124 – Spring 2015 5-10

11. n Fraud takes place n Investigation of the event n Decision regarding action n The file is closed and no further action takes….. n This approach guarantees that fraud will not go away!!! Default Model FORENSIC ACCOUNTING - BA124 – Spring 2015 5-11

12. n Tone is set at the top n Training takes place n Risk assessment and internal controls are set n Reporting and monitoring systems installed n Proactive auditing initiated n Commitment to action & follow-up Comprehensive Fraud Fighting Model (Don’t Confuse with Fraud Savvy Model) FORENSIC ACCOUNTING - BA124 – Spring 2015 5-12

13. n Accounting Anomalies n Internal Control Weaknesses n Analytical Anomalies n Extravagant Lifestyles n Unusual Behavior n Tips and Complaints The Symptoms of Fraud FORENSIC ACCOUNTING - BA124 – Spring 2015 5-13

14. n Theft n Concealment n Conversion Elements of Fraud FORENSIC ACCOUNTING - BA124 – Spring 2015 5-14