1. FORENSIC ACCOUNTING - BA124 - Spring 2005Slide 3-1 Today’s Topics n Preventing Fraud-Part I n Creating the culture n Shenanigans n Introduction-real world focus n The 7 Shenanigans

2. FORENSIC ACCOUNTING - BA124 - Spring 2005Slide 3-2 Creating the Culture n Not everyone is honest n Desperate people do desperate things! n Four ways to establish the culture n Hire honest people and train them n Cultivate a positive work environment n Spread a respected code of ethics n Provide employee assistance programs

3. FORENSIC ACCOUNTING - BA124 - Spring 2005Slide 3-3 Hire and Train Honest People n 30-30-40! n Privacy laws create problems n Resume fraud n Reinforce company policy n If it is to be “no tolerance”; make it no tolerance

4. FORENSIC ACCOUNTING - BA124 - Spring 2005Slide 3-4 Positive Work Environment n Happy employees usually won’t rip you off! n “I don’t get mad, I get even” mentality n List on page 88

5. FORENSIC ACCOUNTING - BA124 - Spring 2005Slide 3-5 Code of Ethics n Make it relevant and real n Emphasize who gets hurt n Promote open discussion

6. FORENSIC ACCOUNTING - BA124 - Spring 2005Slide 3-6 Employee Assistance Programs n We are all human n We can all use help n 6:1 return ratio for EAPs n Combine with your Management by Objectives (MBO) program n Private MBOs

7. FORENSIC ACCOUNTING - BA124 - Spring 2005Slide 3-7 Shenanigans n Updated in 2002 n Focus on concepts; don’t feel that you have to memorize every example n Emphasis will be identified in class n Whoppers I - IV n Cendant n Informix n Waste Management n Lucent

8. FORENSIC ACCOUNTING - BA124 - Spring 2005Slide 3-8 The 7 Shenanigans n Premature recording of revenue n Bogus revenue n One time “recurring” gains n Shifting current expenses n Unrecorded liabilities n Revenue shifting n Shifting future expenses