Fraud Prevention and Deterrence Pam Peters, CFE Office of Internal Audit

1. Fraud Prevention and Deterrence Pam Peters, CFE Office of Internal Audit

2. Thanks for Attending! What is Fraud? • A knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment. • Fraud includes any intentional or deliberate act to deprive another of property or money by deception or unfair means. The next BCUG meeting will be held on November 12, 2013 Happy

3. Thanks for Attending! Types of Fraud Internal Fraud External Fraud Fraud Against Individuals The next BCUG meeting will be held on November 12, 2013 Happy

4. Thanks for Attending! Internal Fraud Also referred to as occupational fraud • “The use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the organization’s resources or assets.” The next BCUG meeting will be held on November 12, 2013 Happy

5. Thanks for Attending! Occupational Fraud Three Major types of Occupational Fraud: • Corruption • Asset Misappropriation • Financial Statement Fraud The next BCUG meeting will be held on November 12, 2013 Happy

6. Thanks for Attending! Occupational Fraud • Corruption: • Conflict of Interest • Purchasing Schemes • Sales Schemes • Bribery • Invoice Kickbacks • Bid Rigging • Illegal Gratuities • Economic Extortion The next BCUG meeting will be held on November 12, 2013 Happy

7. Thanks for Attending! Occupational Fraud • Asset Misappropriation: • Cash • Theft of cash • Theft of cash receipts • Fraudulent Disbursements • Billings Schemes • Payroll Schemes • Expense Reimbursement Schemes • Check Tampering • Register Disbursements The next BCUG meeting will be held on November 12, 2013 Happy

8. Thanks for Attending! Occupational Fraud • Asset Misappropriation Cont’d: • Inventory and All Other Assets • Misuse • Larceny The next BCUG meeting will be held on November 12, 2013 Happy

9. Thanks for Attending! Occupational Fraud • Financial Statement Fraud: • Asset/Revenue - Overstatements • Timing Differences • Fictitious Revenues • Concealed Liabilities and Expenses • Improper Asset Valuations • Improper Disclosures The next BCUG meeting will be held on November 12, 2013 Happy

10. Thanks for Attending! Occupational Fraud • Financial Statement Fraud Cont’d: • Asset/Revenue - Understatements • Timing Differences • Understated Revenues • Overstated Liabilities and Expenses • Improper Asset Valuations The next BCUG meeting will be held on November 12, 2013 Happy

11. Thanks for Attending! External Fraud • Dishonest Vendors • Dishonest customers • Security breaches • Hacking • Theft of proprietary information The next BCUG meeting will be held on November 12, 2013 Happy

12. Thanks for Attending! Fraud Against Individuals Identify Theft Ponzi Schemes Phishing Schemes The next BCUG meeting will be held on November 12, 2013 Happy

13. Thanks for Attending! Why Does Fraud Occur? • The Fraud Triangle: • Developed by Dr. Donald Cressey – his research focused on embezzlers, people he called “trust violators” • A model for explaining the factors that cause someone to commit occupational fraud The next BCUG meeting will be held on November 12, 2013 Happy

14. Fraud Triangle

15. Thanks for Attending! What Can We Do? • Detect, Deter, and Prevent fraud before it occurs • Look for early warning signs: • Accounting records that do not balance or cannot be reconciled • Too much control or ownership of records or processes by one individual • Missing or altered documentation • Employee living beyond their means, lifestyle is inconsistent with known income The next BCUG meeting will be held on November 12, 2013 Happy

16. Thanks for Attending! What Can We Do? • Look for early warning signs cont’d: • Long-term or “model” employees, who never take vacation or sick leave • Unexplained changes in an employee’s work behavior • Employees receiving calls at work from creditors or collection agencies • Employees who appear to have unusually close relationships with customers or vendors • These are just a few examples which may indicate potential fraudulent activity. The next BCUG meeting will be held on November 12, 2013 Happy

17. Thanks for Attending! What Can We Do? • Steps to mitigate risks: • Be aware of your surroundings and daily activities • Ensure your area has proper internal controls and segregation of duties • Document what you observed • Report your concerns to your immediate supervisor, Dean/Chair, or the Office of Internal Audit http://audit.unl.edu • DO NOT INVESTIGATE POSSIBLE FRAUD YOURSELF! The next BCUG meeting will be held on November 12, 2013 Happy

18. Thanks for Attending! Questions? • Thank you! Pam Peters, CFE Senior Auditor Office of Internal Audit ppeters2@unl.edu The next BCUG meeting will be held on November 12, 2013 Happy Source: ACFE