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Introduction to Fraud Examination

Introduction to Fraud Examination. Discipline of Fraud Examination. Resolving allegations of fraud from tips, complaints or accounting clues Forensic accounting vs. fraud examination. Issue Auditing Fraud Examination. Timing Regular Irregular. Auditing vs. Fraud Examination.

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Introduction to Fraud Examination

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  1. Introduction to Fraud Examination

  2. Discipline of Fraud Examination • Resolving allegations of fraud from tips, complaints or accounting clues • Forensic accounting vs. fraud examination

  3. IssueAuditingFraud Examination Timing Regular Irregular Auditing vs. Fraud Examination Scope General Specific Objective Opinion Affix blame Relationship Nonadversarial Adversarial Methodology Audit Techniques Fraud Examination Techniques Presumption Professional Proof Skepticism

  4. Fraud Theory Approach • Predication • Fraud examinations must be based on predication • Analyze • Create • Test • Refine and amend

  5. Document Analysis Corroborative Witnesses T Target Co-Conspirators Neutral Third-Party Witnesses Tools Used in Fraud Examination Observation

  6. Defining Occupational Fraud and Abuse • The use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets

  7. Elements of Fraud • material • Knowledge • Reliance • Damages

  8. Occupational Fraud and Abuse Research • Edward Sutherland • Donald Cressey • Cressey’s Hypothesis • Albrecht • Hollinger & Clark

  9. Fraud Triangle Opportunity Pressure Rationalization

  10. So who does this??

  11. 2008 Report to the Nation on Occupational Fraud & Abuse • Nationwide surveys • Measuring the costs of occupational fraud • > 5 percent lost to fraud • + $650 Billion • Largest fraud: Perpetrators of fraud, types of fraud === 4 page survey

  12. Findings • Position: • Managers? Employees? Owners? • Gender: • Are women really more trustworthy?

  13. Findings • Age? • Which age is the most likely to commit fraud?

  14. Findings • Education?? • More ethical or more able? • Collusion? • Alone or with others?

  15. Length of employment? • Are the “old-timers” more trustworthy?

  16. Criminal history? • Would a background check have helped?

  17. Type of company? • Public? Private? Nonprofit? Government? • Big? Small?

  18. Recovery? • Do the victim companies get their $$ back??

  19. Method of detection • Auditors? • Accident? • Internal controls? • Internal auditors? • Police? • Tip?

  20. Occupational Management Investment Scams Vendor Customer Victim: Employers Perp: Employee Victim: Stockholders, lenders Perp: Top management Victim: Investors Perp: Con men & women Victim: Organizations that buy goods/services Perp: Vendors Victim: Organizations that sell goods/services Perp: Purchaser Fraud Types & Victims

  21. Purpose: To right a wrong Penalty: Jail/fines Burden of Proof: Beyond a reasonable doubt Jury: must be 12 Organization: Grand jury  indictment Verdict: unanimous Claims: only 1 at a time To obtain a remedy Restitution/damage payments Preponderance of evidence Fewer than 12 Filing of claim by plaintiff Less than unanimous Many claims can be joined @ 1 time. Criminal versus Civil Responses to Fraud

  22. Occupational Fraud and Abuse Fraudulent Statements Corruption Asset Misappropriations Conflicts of Interest Cash Financial Bribery Inventory & All Other Assets Nonfinancial Illegal Gratuities Economic Extortion

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