FORENSIC ACCOUNTING - BA Slide 12-1 Today’s Topics n Organizational Fraud n Consumer Fraud

FORENSIC ACCOUNTING - BA Slide 12-2 Occupational Fraud n What is it? n Fraud against companies other than financial statement fraud n Asset misappropriations n Corruption n Know the graphics on pps. 506, 514 & 516

FORENSIC ACCOUNTING - BA Slide 12-3 Occupational Fraud Statistics n Median loss $159K; 25% > $1.0M; 1% > $1.0B n Organizations with hotlines had 50% less median loss n Small business has higher median loss--$190K; poor pro-active effort n Executive involvement = $1.0M median loss n 30% involved accounting dept.; 20% involved upper and executive management n Only 8% of fraudsters had prior convictions

FORENSIC ACCOUNTING - BA Slide 12-4 Asset Misappropriations n Stealing receipts n Employees, customers, collusion n Stealing assets on hand n Employees n Stealing through disbursements n Employees, vendors, collusion

FORENSIC ACCOUNTING - BA Slide 12-5 Thefts of Cash n Larceny n Skimming n Fraudulent disbursements

FORENSIC ACCOUNTING - BA Slide 12-6 Larceny n Theft of recorded cash w/o consent n Cash “shortages” n 14.2% of all misappropriation frauds n Easy to detect

FORENSIC ACCOUNTING - BA Slide 12-7 Skimming n “Sharing” cash receipts n Sales not recorded n Fraudulent discounts n Customer payments and write-offs n Lapping n Collusion with customers

FORENSIC ACCOUNTING - BA Slide 12-8 Fraudulent Disbursements n 67% of all asset-related frauds n Check tampering n Check modification, check forgery n Register schemes n False refunds, false voids n Inventory problems n Billing schemes n Dummy cos., 2X paying, personal use

FORENSIC ACCOUNTING - BA Slide 12-9 Fraudulent Disbursements, continued n Expense schemes n Cheating on your expense report n Payroll schemes n Only 1.9% of all losses n Ghost employees, false hours & rates, commission scams and false worker compensation claims

FORENSIC ACCOUNTING - BA Slide Thefts of Assets n “Borrowing” for personal use n Personal business on company time n Outright theft of assets n Larceny involving inventory n Unauthorized transfer of assets with forged requisitions n Diversion of assets in receiving function

FORENSIC ACCOUNTING - BA Slide Corruption n Bribery n Payoffs, kickbacks, bid rigging n Conflicts of interest n Purchase and sales schemes involving “related” parties n Economic extortion n Illegal gratuities

FORENSIC ACCOUNTING - BA Slide Consumer Fraud n Fraud against individuals n Number one consumer fraud = Identity Theft

FORENSIC ACCOUNTING - BA Slide Identity Theft n Involves over 42% of reported frauds n Use of name, address, SSN, band or credit card PINs to commit fraud n Prevention is the key

FORENSIC ACCOUNTING - BA Slide Identity Theft Conversion n Purchase of large-ticket items n False car or real estate loans n Creation of phone or cell accounts n Counterfeit checks or debit cards n Creation of new bank accounts n False filing of bankruptcy n False filing of police information n Creation of new credit card accounts n Change of mailing address

FORENSIC ACCOUNTING - BA Slide Identity Theft Cycle n Stage 1: Discovery n Gain information n Verify information n Stage 2: Action n Document accumulation n Action cover-up n Stage 3: Trial n 1 st – 3 rd dimensions (gas station, store, new account)

FORENSIC ACCOUNTING - BA Slide How to Steal Someone’s Identity n Obtaining info falsely n Going through the trash n Skimming credit cards n Hacking n Stealing wallets n Outright theft from the home n Stealing mail n False change of address form n Shoulder surfing n Phishing or Pharming

FORENSIC ACCOUNTING - BA Slide How to Protect Yourself n Guard your mail n Do not use pre-approved credit cards n Guard SSN and PINs n Guard all personal information n Guard your trash n Protect your wallet n Protect and change your passwords n Protect your home n Protect your personal computers n Use the Gramm-Leach-Bliley Act to opt out of having your information sold

FORENSIC ACCOUNTING - BA Slide Post Event Activity n Report event promptly n Collect evidential matter n Contact FTC regarding identity theft n Homeland security implications

FORENSIC ACCOUNTING - BA Slide Other Forms of Consumer Fraud n Foreign Advance-Fee Scams n Work at Home Schemes (Multi-Level Marketing Schemes) n Bogus Mystery Shopping Scams n Telemarketing Scams n Investment Scams (Ponzi Scams)