Professional Documents
Culture Documents
Joseph Chianese
Ian Haimoff
John McSwain
Melissa Wiseman
Agenda
Conclusion
Misappropriation of
Assets
Fraud
Fraudulent
Financial Reporting
The Fraud Triangle helps encapsulate the events or conditions that influence the
commission of a fraud.
Incentives and pressures:
Management or employees
have an incentive or are under
pressure, real or perceived, Where could the fraud occur?
which may provide a reason to
commit the fraud. What would the fraud look like?
Opportunity: Circumstances What type of fraud is the area
exist that provide an opportunity susceptible to?
for fraud to be perpetrated.
What are the effects on the books
Attitudes and rationalizations: and records?
Those involved in the fraud
are able to rationalize committing When could the fraud occur?
a fraudulent act.
Informational interviews
Third parties
Former employees
Informants
Interviewing Witnesses
Admission seeking
Public records
Media
E-mail
Audit Other Analyze computer images
Research Surveillance
Phone records
Document analysis
Analytical reviews
Trending
Assessment of controls
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Valuable soft skills
Behavioral symptoms
Lifestyle symptoms
Accounting anomalies
Internal control symptoms
Analytical anomalies
Tips and complaints
Source: Internal Auditor Magazine, October 1996, Employee Fraud by W. Steve Albrecht
www.theiia.org
Incompetent?
Beneath the surface:
Lifestyle (house, cars, boats) beyond Corrupt?
known income sources
Drug, gambling, alcohol or other vice
Desperate?
addiction
Behavior indicating displeasure or
dissatisfaction with the organization
Secretiveness towards accounting
documents or policies
Source: ACFEs Report to the Nation on Occupational Fraud and Abuse 2012
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Potential Symptoms and red flags: Accounts
receivable/cash receipts
Customer complaints
Unexplained change in uncollectable accounts and aging
Customer statements are not sent or are not sent timely
Timing differences between collections and posting to
accounts
Staff not taking vacations
Credits to a customer account followed by an identical debit
Changes to customer accounts or new customers with
unusual names/addresses
Shipping to customers without proper credit approval
Unusual ship to address is different from company
address
13 Copyright 2012 Deloitte Development LLC. All rights reserved.
Potential Symptoms and red flags : Accounts
receivable/cash receipts, continued
Inventory discrepancies
Unusual collection agency activity (low recovery/high
utilization)
Changes in sales (increase or decrease) not consistent with
changes in cash receipts
Unusual number of reverse transactions/voids
Unusual number of pricing overrides
Unusual number of credit overrides
Credit level increases not consistent with sales volume
financial markets
8. Unsupportable product
performance statements
10 9. False employee expense
report claims
9
10. Employee embezzlements
Likelihood
Sample fraud & corruption risk heat map only. Ratings will vary by company.
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Proactive fraud risk management strategies:
Advance preparation/ process in place
Allegation system
Allegation triage
Case investigation
Protocols, e.g., privacy/data protection/interviewing methods
Resources, e.g., location/language/financial/computer forensics
Case management
Reporting
Resolution
The worst time to plan for a crisis? When you are in one.
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Conclusion
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Questions
Resources
IIA Resources
www.deloitte.com/forensiccenter
John McSwain
Director
Deloitte Financial Advisory Services LLP
+1 214 840 1715
jmcswain@deloitte.com
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