1. Unit 8 Employee Theft Professor Thomas Genovese

2. Occupational Fraud Corruption Fraudulent Financial Statements Asset Misappropriation

3. Asset Misappropriations Definition: Any scheme that involves the theft or misuse of an organization’s assets.

4. Occupational Fraud ▫Frauds against organizations ▫These type of fraud are most common ▫Nearly every organization experiences occupational fraud

5. Occupational Fraud Statistics (based on ACFE’s 2010 study of 1,843 cases) Heavy costs to an organization:  Median loss is $160,000.  Nearly one-quarter of the cases caused $1 million in losses.  Organizations lose 5 percent of their annual revenues to fraud.

6. Occupational Fraud Statistics: Very difficult to detect ▫Median length of the schemes was 18 months from the time the fraud began until it was detected ▫More likely to be detected by a tip than by other means.

7. Occupational Fraud Statistics: Certain antifraud controls can have a measurable impact on the organization’s exposure to fraud. ▫Victim organizations that had such antifraud controls in place had lower losses compared to organizations without antifraud controls in place. ▫Small businesses continue to suffer disproportionate fraud losses.

8. Occupational Fraud Statistics: (KPMG 2008-2009 Integrity Survey) ▫Nearly 3 out of 4 employees reported to have observed misconduct in the prior 12-month period. ▫Significant reduction in fraud against an organization occurs when proactive antifraud measures (hotlines, ethics training, etc.) were implemented.

9. Asset Misappropriations Opportunities to steal assets: 1. Steal receipts of cash and other assets that come into an organization. 2. Steal cash, inventory, and other assets that are on hand. 3. Commit disbursement fraud by having the organization pay for something it shouldn’t or pay too much for something.

10. Asset Misappropriations Types of Asset Misappropriations:

11. Asset Misappropriations Well’s Division of Asset Misappropriations

12. Asset Misappropriations Skimming Theft of cash before it is recorded in the books and records.

13. Asset Misappropriations Fraudulent Disbursement Schemes  Billing  Expense reimbursements  Check tampering  Payroll  Wire transfers  Cash Register disbursements

14. Asset Misappropriations Billing Schemes: ▫Any scheme where a person causes his or her employer to issue a payment by submitting invoices for fictitious goods or services, inflated invoices, or invoices for personal purchases. ▫Median Loss $130,000

15. Asset Misappropriations Expense Reimbursements ▫Any scheme where an employee makes a claim for reimbursement of fictitious or inflated business expenses. ▫Four common types of expense disbursement schemes are: ▫mischaracterizing expenses, ▫overstating expenses, ▫submitting fictitious expenses, and ▫submitting the same expenses multiple times.

16. Asset Misappropriations Check Tampering: ▫Any scheme in which a person steals his or her employer’s funds by forging or altering a check on one of the organization’s bank accounts, or steals a check the organization has legitimately issued to another payee.

17. Asset Misappropriations Payroll Schemes: ▫Any scheme in which an employee causes his or her employer to issue payment by making false claims for compensation. ▫Overpayment of wages accounts for 55 percent of all payrolls frauds.

18. Asset Misappropriations Wire Transfers ▫Any scheme in which a person steals his or her employer’s funds by fraudulently wire transferring the funds out of the employer’s bank accounts. Register disbursements ▫Any scheme in which an employee makes false entries on a cash register to conceal the fraudulent removal of cash. ▫The least costly of all disbursement schemes.

19. Asset Misappropriations Executive Cash Frauds  Looting cash through disbursement fraud Theft of Inventory and Other Assets Inventory  Any scheme involving the theft or misappropriation of physical, noncash assets such as inventory, equipment, or supplies. Theft of Inventory and Other Assets Securities  Any scheme involving the theft or misappropriation of stocks, bonds, or other securities.

20. Non-cash Frauds Against Organizations

21. Corruption Definition: Any scheme in which a person uses his or her influence in a business transaction to obtain an unauthorized benefit contrary to that person’s duty to his or her employer.

22. Corruption Types of Corruption Schemes

23. Fraudulent Statements Definition Fabrication of an organization’s financial statements to make the company appear more or less profitable.

24. Next Week Unit 9! Final Essay Final Project Discussion Board No Quiz Last Seminar