FRAUD EXAMINATION ALBRECHT, ALBRECHT, & ALBRECHT Fraud Against Organizations Chapter 15

Learning Objectives 1.Recognize the various ways in which employees, vendors and customers can steal assets. 2.Describe the nature of thefts of cash through larceny, skimming, and fraudulent disbursements. 3.Explain the nature of thefts of inventory and other assets. 4.Understand the nature of bribery.

Review Some Common Fraud Statistics

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

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

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

What Are Three Common Cash Register Scams?

Describe How Billing Schemes Work. COMMENT. 1.Set up Dummy Company – Submit False Bills 2.Alter or Double Pay Invoices 3.Make Personal Purchases with Company Funds Common & Expensive Median Loss $250,000

Review Expense Schemes. SUBMIT FALSE DOCUMENTATION FOR REIMBURSEMENT 1.Mischaracterized Expenses 2.Overstated Expenses 3.Fictitious Expenses 4.Submit Same Expenses More Than Once

Review & Comment on Payroll Scams. 1.Ghost Employees 2.Falsified Hours & Salary 3.Commission Schemes 4.False Worker Compensation Claims Largest Losses $275,000 Most Prevalent 55.4% False Injuries Collect Insurance

Inventory & Other Asset Frauds Occur What 2 Ways?

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

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

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

Define Extortion & Illegal Gratuities.

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

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

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