Forensic Accounting BA 124

1. Forensic AccountingBA 124 Professor Bill O’Brien FORENSIC ACCOUNTING – BA 124 - Spring 2014

2. Today’s Topics • Seriousness of fraud • Definition of fraud • Types of fraud • Criminal versus civil statutes • Fraud-related careers FORENSIC ACCOUNTING – BA 124 - Spring 2014

3. Remember the “P” in CPA • The public trust is essential • You have only one reputation FORENSIC ACCOUNTING – BA 124 - Spring 2014

4. Cost of Fraud • Association of Certified Fraud Examiners (ACFE) • Close to $1.0 trillion annually in U.S.; close to $3.0 trillion worldwide • Over 7% of revenue…straight to the bottom line FORENSIC ACCOUNTING – BA 124 - Spring 2014

5. How Does Fraud Impact You? • Financially • Reputation of your firm • Opportunity cost FORENSIC ACCOUNTING – BA 124 - Spring 2014

6. Here’s What Happens... • It is a dollar for dollar impact on net income • Dollars that have a multiplier effect on revenue in order to generate new profits FORENSIC ACCOUNTING – BA 124 - Spring 2014

7. Defining Fraud • A statement • Which is a lie, • And intentionally or recklessly so, • About a material point, • Which is believed • And acted upon by the victim • To the victim’s damage • Let examine each highlighted term SLIMBAD FORENSIC ACCOUNTING – BA 124 - Spring 2014

8. What Drives Fraud • Consider the Ponzi Fraud of the early 20th Century • See www.mark-knutson.com • Primary age of fraudsters--36-45 yrs. • Key drivers • Confidence earned • Pressures • Greed FORENSIC ACCOUNTING – BA 124 - Spring 2014

9. Classifications of Fraud • Fraud versus an organization • Occupational fraud • Fraud on behalf of an organization FORENSIC ACCOUNTING – BA 124 - Spring 2014

10. Occupational Fraud • Clandestine • Violates fiduciary interest • Direct or indirect financial benefit • Damages the organization FORENSIC ACCOUNTING – BA 124 - Spring 2014

11. Fraud on Behalf of an Organization • Most common…fraudulent financial reporting FORENSIC ACCOUNTING – BA 124 - Spring 2014

12. A More Detailed Classification List • Occupational fraud…embezzlement • Management fraud • Investment scams • Vendor fraud • Customer fraud • Know the table on WSA pg. 10 FORENSIC ACCOUNTING – BA 124 - Spring 2014

13. Examples... • Embezzlement: CVC • Management: World-com • Investment: see scams • Vendor: Halliburton; • Customer: Florida State football player and department store; bank case FORENSIC ACCOUNTING – BA 124 - Spring 2014

14. Prosecution • Criminal law for public offenses • Bribery laws • Anti Kickback Act of 1986 • Mail Fraud statutes • Bank Fraud statutes • RICO and FCPA • IRS and tax evasion • Civil law for violations of private rights • Note the comparative table on p. 15 FORENSIC ACCOUNTING – BA 124 - Spring 2014

15. Fraud Related Careers • ACFE and CFE requirements • Government • FBI, Postal Inspectors, IRS • Public accounting • Forensic accountants • Corporation • Internal auditors • Consulting • Lawyers • Expert witnesses FORENSIC ACCOUNTING – BA 124 - Spring 2014

16. Critical Skills • Analytical • Communication • Technological • Accounting and law • Language • Behavioral • Common sense FORENSIC ACCOUNTING – BA 124 - Spring 2014