Forensics and Fraud: Red Flags and War Stories
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Transcript of Forensics and Fraud: Red Flags and War Stories
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FORENSICS AND FRAUDRED FLAGS AND WAR STORIES
Decosimo Advisory Services
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FORENSICS AND FRAUD
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OCCUPATIONAL FRAUD OVERVIEW
• Financial Statement
• Corruption
• Asset Misappropriation
FORENSICS AND FRAUD
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CASH MISAPPROPRIATIONFORENSICS AND FRAUD
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CASH RECEIPTS MISAPPROPRIATIONFORENSICS AND FRAUD
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CASH DISBURSEMENTS MISAPPROPRIATIONFORENSICS AND FRAUD
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WHAT LESSONS CAN BE LEARNEDFORENSICS AND FRAUD
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COMPANY RED FLAGS
• Rapid growth of the company• Unusual general journal entries or
unusual transactions, especially close to the end of a period
• Significant related party transactions not in the ordinary course of business
• Lack of or inconsistent oversight
FORENSICS AND FRAUD
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• Failure to update controls and accounting systems as technology and business change
• Too much trust in any one individual
FORENSICS AND FRAUD COMPANY RED FLAGS
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INHERENT LIMITATIONS OF INTERNAL CONTROLSFORENSICS AND FRAUD
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INHERENT LIMITATIONS IN INTERNAL CONTROL SYSTEMS
• Judgment• Breakdowns• Management override• Collusion• Materiality• Point-in-time evaluation• Cost/Benefit Considerations
FORENSICS AND FRAUD
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BEHAVIORAL RED FLAGS OF PERPETRATORSFORENSICS AND FRAUD
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BEHAVIORAL RED FLAGS OF PERPETRATORS
81% of Fraudsters exhibited at least one of these red flags:36% living beyond their means27% with financial difficulties19% with unusually close
associations with vendors or customers
18% had excessive control issues with their duties
(ACFE 2012 Report to the Nations)
FORENSICS AND FRAUD
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HOW TO HELP YOUR CLIENT PROTECT HIS COMPANY
FORENSICS AND FRAUD
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HOW TO HELP YOUR CLIENT PROTECT HIS
• Fraud Policy• Fraud training for employees• Tone at the Top• Monitoring and updating internal
controls• Fraud risk assessments
FORENSICS AND FRAUD
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WHAT ABOUT EXTERNAL THREATS
FORENSICS AND FRAUD
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WHAT ABOUT EXTERNAL THREATS
• Adversary – “The Bad Guy”• Terrorist groups• Criminals• Organized crime• Hackers/Crackers• Social engineering techniques
FORENSICS AND FRAUD
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PHISHING EMAILSFORENSICS AND FRAUD
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FORENSICS AND FRAUD
WHEN YOU HAVE SUSPICIONS
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• Investigate on behalf of the board of directors
• Conduct interviews• Perform data analysis, data
mining• Search computer records
FORENSICS AND FRAUD
WHEN YOU HAVE SUSPICIONS
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• Search sources of outside information related to the suspect
– BUT FIRST –
• TALK TO YOUR ATTORNEY!
FORENSICS AND FRAUD
WHEN YOU HAVE SUSPICIONS
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CONTACT US
Mike Costello ~ [email protected] Sharon Hamrick ~ [email protected] Pam Mantone ~ [email protected]
FORENSICS AND FRAUDRED FLAGS AND WAR STORIES