FRAUD EXAMINATION ALBRECHT, ALBRECHT, & ALBRECHT

1. FRAUD EXAMINATIONALBRECHT, ALBRECHT, & ALBRECHT Fraud Against Organizations Chapter 15

2. Learning Objectives • Recognize the various ways in which employees, vendors and customers can steal assets. • Describe the nature of thefts of cash through larceny, skimming, and fraudulent disbursements. • Explain the nature of thefts of inventory and other assets. • Understand the nature of bribery.

3. Review Some Common Fraud Statistics

4. Asset Misappropriations Stealing Receipts Steal Through Disbursements 1 3 Stealing Assets on Hand 2 Define Asset Misappropriations Employee Alone Customer Alone Collusion Employee Alone 2+ Employees Together Employee Alone Vendor Alone Collusion

5. Match Definitions. Delaying the recording of payments, record tomorrow’s payments as today’s Larceny Skimming Stealing cash before it is recorded Lapping Stealing cash that’s already recorded

6. Define & Describe Check Tampering. • Preparing fraudulent checks or intercepting & changing checks for someone else’s or personal use • Create a false company & submit false invoices for payment • Forging signatures, payee, changing amounts

7. What Are Three Common Cash Register Scams? 1. FALSE VOIDS 2. FALSE REFUNDS 3. OVERSTATE RETURNS

8. Describe How Billing Schemes Work. COMMENT. • Set up Dummy Company – Submit False Bills • Alter or Double Pay Invoices • Make Personal Purchases with Company Funds Common & Expensive Median Loss $250,000

9. Review Expense Schemes. SUBMIT FALSE DOCUMENTATION FOR REIMBURSEMENT • Mischaracterized Expenses • Overstated Expenses • Fictitious Expenses • Submit Same Expenses More Than Once

10. Review & Comment on Payroll Scams. Largest Losses $275,000 • Ghost Employees • Falsified Hours & Salary • Commission Schemes • False Worker Compensation Claims Most Prevalent 55.4% False Injuries Collect Insurance

11. Inventory & Other Asset Frauds Occur What 2 Ways? 1. Misuse of an asset. Asset used for personal use. 2. Theft of inventory and equipment.

12. 9% 1.6% 89.2% .2% Comment on 4 Types of Corruption.

13. Define & Discuss Bribery. Offering or giving something of value to have an official or commercial act performed KICKBACKS – Attacks Purchasing BID RIGGING – Falsifies Competitive Bidding

14. Undisclosedemployee personal interest in the results of a business decision that adversely affects the business What is Conflict of Interest? If disclosed – in the open- can’t be conflict of interest Purchasing or Sales Schemes

15. Define Extortion & Illegal Gratuities. Employee telling a vendor pay me or your company loses Employee receiving Illegal tips or products

16. Terms Match Deceive someone to put money into a fake investment Economic Extortion scheme Disbursement Fraud Fictitious entity created to commit fraud An employee demanding from a vendor in order to influence a decision Dummy or Shell Company Investment Scheme Paying for something or paying too much for something it shouldn’t

17. Terms Match “Paying off” or “bribing” public or company officials in order to get preferential treatment Bribery Stealing cash once it has been recorded in the records Corruption Another name for frauds committed against an organization Larceny Offering, giving, receiving, or soliciting anything of value to influence an official act Misappropriations

18. Terms Match Stealing cash by preparing fraudulent checks or intercepting checks made payable to others Bid-rigging Scheme Employees assisting vendors in winning contracts by providing some kind of unfair advantage Check Tampering Embezzling a portion of the cash receipts of an organization Illegal Gratuities Payments made to reward favorable decisions – payment is made after the deal is approved Skimming