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Today’s Topics

Today’s Topics. Preventing Fraud-Part II Eliminating opportunities for fraud Dealing with Fraud . 7 Methods of Risk Reduction. Install good internal controls Discourage collusion Alert vendors and contractors Monitor employees Provide tip hotlines Create expectation of punishment

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Today’s Topics

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  1. Today’s Topics • Preventing Fraud-Part II • Eliminating opportunities for fraud • Dealing with Fraud FORENSIC ACCOUNTING - BA124 – Spring 2010 Slide 5-1

  2. 7 Methods of Risk Reduction • Install good internal controls • Discourage collusion • Alert vendors and contractors • Monitor employees • Provide tip hotlines • Create expectation of punishment • Audit proactively FORENSIC ACCOUNTING - BA124 – Spring 2010 Slide 5-2

  3. Install Good Internal Controls • Systems • Segregation of duties • Policies and procedures • Minimize undermining events FORENSIC ACCOUNTING - BA124 – Spring 2010 Slide 5-3

  4. Discourage Collusion • 29% of all fraud is due to collusion • More than one person involvement • Trend is increasing • Complex nature of businesses • Rising supplier alliances • Unmerited or complacent trust factors FORENSIC ACCOUNTING - BA124 – Spring 2010 Slide 5-4

  5. Alert Vendors and Contractors • Communications that set policy • Right to audit clauses FORENSIC ACCOUNTING - BA124 – Spring 2010 Slide 5-5

  6. Monitor Employees • Lifestyle awareness • Detection and deterrent FORENSIC ACCOUNTING - BA124 – Spring 2010 Slide 5-6

  7. Provide Tip Hotlines • 33% of frauds detected through tips • Only 52% of Fortune 500 companies have whistle-blowing programs • Concern for mixed employee messages • i.e. “Do we have a fraud right now?” • Whistle-blower protection policies FORENSIC ACCOUNTING - BA124 – Spring 2010 Slide 5-7

  8. Create Expectation of Punishment • Causes employees to stop and think • Don’t fall victim to fear of time or bureaucracy associated with prosecution FORENSIC ACCOUNTING - BA124 – Spring 2010 Slide 5-8

  9. Audit Proactivity • Identify risk exposure • Identify symptoms • Implementing proactive audit initiatives • Investigate symptoms FORENSIC ACCOUNTING - BA124 – Spring 2010 Slide 5-9

  10. Dealing with Fraud • Traditional or Default Model • Fraud-Savvy Model FORENSIC ACCOUNTING - BA124 – Spring 2010 Slide 5-10

  11. Default Model • Fraud takes place • Investigation of the event • Decision regarding action • The file is closed and no further action takes….. • This approach guarantees that fraud will not go away!!! FORENSIC ACCOUNTING - BA124 – Spring 2010 Slide 5-11

  12. Fraud-Savvy Model(Do not confuse with the comprehensive fraud fighting model) • Tone is set at the top • Training takes place • Risk assessment and internal controls are set • Reporting and monitoring systems installed • Proactive auditing initiated • Commitment to action & follow-up FORENSIC ACCOUNTING - BA124 – Spring 2010 Slide 5-12

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