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Forensic Accounting BA 124

Forensic Accounting BA 124. Professor Bill O’Brien. Today’s Topics. Seriousness of fraud Definition of fraud Types of fraud Criminal versus civil statutes Fraud-related careers. Remember the “P” in CPA. The public trust is essential You have only one reputation. Cost of Fraud.

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Forensic Accounting BA 124

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  1. Forensic AccountingBA 124 Professor Bill O’Brien FORENSIC ACCOUNTING – BA 124 - Spring 2010

  2. Today’s Topics • Seriousness of fraud • Definition of fraud • Types of fraud • Criminal versus civil statutes • Fraud-related careers FORENSIC ACCOUNTING - BA124 - Spring 2010 Slide 1-2

  3. Remember the “P” in CPA • The public trust is essential • You have only one reputation FORENSIC ACCOUNTING - BA124 - Spring 2010 Slide 1-3

  4. Cost of Fraud • Association of Certified Fraud Examiners (ACFE) • Close to $1.3 trillion annually • Over $13 per employee per day • Over 6% of revenue…straight to the bottom line FORENSIC ACCOUNTING - BA124 - Spring 2010 Slide 1-4

  5. How Does Fraud Impact You? • Financially • Reputation of your firm • Opportunity cost FORENSIC ACCOUNTING - BA124 - Spring 2010 Slide 1-5

  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 - BA124 - Spring 2010 Slide 1-6

  7. Defining Fraud • A representation • About a material point, • Which is false, • And intentionally or recklessly so, • Which is believed • And acted upon by the victim • To the victim’s damage • Let examine each highlighted term SLIMBAD FORENSIC ACCOUNTING - BA124 - Spring 2010 Slide 1-7

  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 - BA124 - Spring 2010 Slide 1-8

  9. Classifications of Fraud • Fraud versus an organization • Occupational fraud • Fraud on behalf of an organization FORENSIC ACCOUNTING - BA124 - Spring 2010 Slide 1-9

  10. Occupational Fraud • Clandestine • Violates fiduciary interest • Direct or indirect financial benefit • Damages the organization FORENSIC ACCOUNTING - BA124 - Spring 2010 Slide 1-10

  11. Fraud on Behalf of an Organization • Most common…fraudulent financial reporting FORENSIC ACCOUNTING - BA124 - Spring 2010 Slide 1-11

  12. A More Detailed Classification List • Occupational fraud…embezzlement • Management fraud • Investment scams • Vendor fraud • Customer fraud • Know the table on WSA pg. 11 FORENSIC ACCOUNTING - BA124 - Spring 2010 Slide 1-12

  13. Examples... • Embezzlement: Liahona Construction • Management: World-com • Investment: Ponzi • Vendor: Halliburton; USF athlete in the 1980s • Customer: Florida State football player and department store FORENSIC ACCOUNTING - BA124 - Spring 2010 Slide 1-13

  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 - BA124 - Spring 2010 Slide 1-14

  15. Fraud Related Careers • Government • FBI, Postal Inspectors, IRS • Public accounting • Forensic accountants • Corporation • Internal auditors • Consulting • Lawyers • Expert witnesses FORENSIC ACCOUNTING - BA124 - Spring 2010 Slide 1-15

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