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Today’s Topics

Today’s Topics. Organizational Fraud Consumer Fraud. Occupational Fraud. What is it? Fraud against companies other than financial statement fraud Asset misappropriations Corruption Know the graphics on pps. 506, 514 & 516. Occupational Fraud Statistics.

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Today’s Topics

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  1. Today’s Topics • Organizational Fraud • Consumer Fraud FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-1

  2. Occupational Fraud • What is it? • Fraud against companies other than financial statement fraud • Asset misappropriations • Corruption • Know the graphics on pps. 506, 514 & 516 FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-2

  3. Occupational Fraud Statistics • Median loss $159K; 25% > $1.0M; 1% > $1.0B • Organizations with hotlines had 50% less median loss • Small business has higher median loss--$190K; poor pro-active effort • Executive involvement = $1.0M median loss • 30% involved accounting dept.; 20% involved upper and executive management • Only 8% of fraudsters had prior convictions FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-3

  4. Asset Misappropriations • Stealing receipts • Employees, customers, collusion • Stealing assets on hand • Employees • Stealing through disbursements • Employees, vendors, collusion FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-4

  5. Thefts of Cash • Larceny • Skimming • Fraudulent disbursements FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-5

  6. Larceny • Theft of recorded cash w/o consent • Cash “shortages” • 14.2% of all misappropriation frauds • Easy to detect FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-6

  7. Skimming • “Sharing” cash receipts • Sales not recorded • Fraudulent discounts • Customer payments and write-offs • Lapping • Collusion with customers FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-7

  8. Fraudulent Disbursements • 67% of all asset-related frauds • Check tampering • Check modification, check forgery • Register schemes • False refunds, false voids • Inventory problems • Billing schemes • Dummy cos., 2X paying, personal use FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-8

  9. Fraudulent Disbursements, continued • Expense schemes • Cheating on your expense report • Payroll schemes • Only 1.9% of all losses • Ghost employees, false hours & rates, commission scams and false worker compensation claims FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-9

  10. Thefts of Assets • “Borrowing” for personal use • Personal business on company time • Outright theft of assets • Larceny involving inventory • Unauthorized transfer of assets with forged requisitions • Diversion of assets in receiving function FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-10

  11. Corruption • Bribery • Payoffs, kickbacks, bid rigging • Conflicts of interest • Purchase and sales schemes involving “related” parties • Economic extortion • Illegal gratuities FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-11

  12. Consumer Fraud • Fraud against individuals • Number one consumer fraud =Identity Theft FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-12

  13. Identity Theft • Involves over 42% of reported frauds • Use of name, address, SSN, band or credit card PINs to commit fraud • Prevention is the key FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-13

  14. Identity Theft Conversion • Purchase of large-ticket items • False car or real estate loans • Creation of phone or cell accounts • Counterfeit checks or debit cards • Creation of new bank accounts • False filing of bankruptcy • False filing of police information • Creation of new credit card accounts • Change of mailing address FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-14

  15. Identity Theft Cycle • Stage 1: Discovery • Gain information • Verify information • Stage 2: Action • Document accumulation • Action cover-up • Stage 3: Trial • 1st – 3rd dimensions (gas station, store, new account) FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-15

  16. How to Steal Someone’s Identity • Obtaining info falsely • Going through the trash • Skimming credit cards • Hacking • Stealing wallets • Outright theft from the home • Stealing mail • False change of address form • Shoulder surfing • Phishing or Pharming FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-16

  17. How to Protect Yourself • Guard your mail • Do not use pre-approved credit cards • Guard SSN and PINs • Guard all personal information • Guard your trash • Protect your wallet • Protect and change your passwords • Protect your home • Protect your personal computers • Use the Gramm-Leach-Bliley Act to opt out of having your information sold FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-17

  18. Post Event Activity • Report event promptly • Collect evidential matter • Contact FTC regarding identity theft • Homeland security implications FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-18

  19. Other Forms of Consumer Fraud • Foreign Advance-Fee Scams • Work at Home Schemes (Multi-Level Marketing Schemes) • Bogus Mystery Shopping Scams • Telemarketing Scams • Investment Scams (Ponzi Scams) FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-19

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