Advanced Forensic Accounting -ACC 465 UNIT 1 Dr. Doug Letsch I am online waiting for the live session to begin. If you have a general question, please.

Advanced Forensic Accounting -ACC 465

UNIT UNIT 11

Dr. Doug Letsch

I am online waiting for the live session to begin. If you have a general question, please ask it in the chat window. The only talking you will here is when I welcome someone who has just signed in. If you don’t hear me welcoming everyone, please adjust your speakers. Let me know if you have problems. Thanks, Dr. Doug

• Contact Inform

ation

• Expectations

• Intro to

Forensic

Accounting

• Questions

CONTACT INFORMATION

I am here to help

CONTACT INFORMATIONCONTACT INFORMATIONCONTACT INFORMATIONCONTACT INFORMATION

I am available at my office hours each Monday from 10am -11am (EST) in AIM Chat at

[email protected]

Most students never use AIM as they just call me!

At other times, please post all course related questions in the Virtual Office under Course Home. I

always respond within 24 hours!

If you have a special individual need, please call me at 903-638-0500 or send me an email.

EXPECTATIONSEXPECTATIONSEXPECTATIONSEXPECTATIONS

1. Discussions must be completed during week assigned –three posts on three different days. Discussions cannot be made up.

2. Assignments must be submitted on time-Tues midnight. Late policy applies to all assignments.

3. Attend seminars and participate, or complete alternative assignment – I use pop questions.

4. Alternative seminar assignments are to listen to the seminar archive, send me a written summary of the seminar. Late papers will not be accepted.

5. If you are unsure of anything, ask!

The most important ingredient in success is YOU

ALTERNATIVE ASSIGNMENT FOR WEEK 1ALTERNATIVE ASSIGNMENT FOR WEEK 1ALTERNATIVE ASSIGNMENT FOR WEEK 1ALTERNATIVE ASSIGNMENT FOR WEEK 1

You are required to write a 2-3 page paper after you have read articles regarding the Bernie Madoff case. Article suggestions that can be found in the KU Library include:Zweig, J. (2008, December 13). How Bernie Madoff made smart folks look dumb. Wall Street Journal.Goldfarb, Z. (2009, January 6). SEC broadens its probe of failures in Madoff case. Washington Post.

Your response should include the following points:In general, would you define Bernie Madoff’s clients as sophisticated or naive? Why?Whether you described Bernie Madoff’s customers as naïve or sophisticated, what trait allowed his clients to become victims?Why wasn’t the Bernie Madoff scheme caught earlier?Your paper should be in APA format and cite all references used. Submit the Unit 1 Alternate Assignment to the Unit 1 Seminar Dropbox.

GRADINGGRADINGGRADINGGRADING

Assessments Number PointsTotal Points

Discussions 9 weeks 20 180

50 point Assignments 2 50 100

20 point Assignments 7 20 140

Quiz 9 20 180

Seminar/Alternate Assignment 9 15 135

Historical Event Project 1 10 10

Journal Entry 3 15 45

Final Exam 1 160 160

Writing Assignment 1 50 50

Total Points     1,000

Fraud

FORENSIC ACCOUNTING

An Introduction!

SURVEY QUESTIONSURVEY QUESTIONSURVEY QUESTIONSURVEY QUESTION

Are you suited for Forensic Accounting?

Anthony and Cleopatra are lying dead on the floor in a villa. Nearby on the floor is a broken bowl. There is no mark on either of their bodies and they were not poisoned. With this information, determine how they died.

Provide your answer in the chat area please.

SURVEY QUESTIONSURVEY QUESTIONSURVEY QUESTIONSURVEY QUESTION

Are you suited for Forensic Accounting?

Of course we know, they are talking about fish!

FRAUDFRAUDFRAUDFRAUD

How would you define

fraud?

FRAUD- DEFINEDFRAUD- DEFINEDFRAUD- DEFINEDFRAUD- DEFINED

Fraud is the most basic sense is the statement of a mistruth for personal gain. Under common law fraud must be material, knowingly made, relied upon, and which creates measurable damages.

Take a few minutes and watch the following video. I will turn off my audio. See if you can tell me how many common law fraudulent statements Andy makes to Barney in the first 4 minutes and 15 seconds. Please type the number of fraudulent statements made in the chat room when you return. See you in about 4 ½ minutes.

http://www.youtube.com/watch?v=SrHvpNloCOU

FRAUD- DEFINEDFRAUD- DEFINEDFRAUD- DEFINEDFRAUD- DEFINED

Mayberry Exposed!! If you counted like I did, you will find 9 basically false statements.

However, as any Mayberry van knowsAndy would never cheat anyone.

Since there was no material misstatement and there were no real damages, there was no common law fraud.

CATEGORIES OF FRAUDCATEGORIES OF FRAUDCATEGORIES OF FRAUDCATEGORIES OF FRAUD

• Asset Misappropriation • Corruption• Financial Statement Fraud

FINANCIAL FORENSICS -DEFINEDFINANCIAL FORENSICS -DEFINEDFINANCIAL FORENSICS -DEFINEDFINANCIAL FORENSICS -DEFINED

•the application of financial principles and theories to facts or hypotheses at issue in a legal dispute. Financial forensics consists of two primary functions:

– Litigation advisory services– Investigative services

HOW BIG IS THE PROBLEM?HOW BIG IS THE PROBLEM?HOW BIG IS THE PROBLEM?HOW BIG IS THE PROBLEM?

After a few stable years, corporate fraud case loads are up about 25% from 2009 to the end of 2011.

Source: http://www.fbi.gov/stats-services/publications/financial-crimes-report-2010-2011

• Think about how many university level courses have you taken –write that number down. Now consider in how many of those courses did you read about or discuss ethics?

a.a. 76-100%76-100%

b. 51 – 75%

c. 26 – 50%

d. Less than 26%

Poll QuestionPoll Question

Select your answer on the poll question box which will appear in a few seconds.

Remember to get credit you must answer all poll questions during a session.

HOW BIG IS THE FRAUD PROBLEM?HOW BIG IS THE FRAUD PROBLEM?HOW BIG IS THE FRAUD PROBLEM?HOW BIG IS THE FRAUD PROBLEM?

Common Fraud Scams- Telemarketing Fraud- Nigerian Letter or “419” Fraud- Identity Theft- Advance Fee Schemes- Health Care Fraud/Health Insurance Fraud- Redemption/Strawman/Bond Fraud

Investment-Related Scams- Letter of Credit Fraud- Prime Bank Note Fraud- Ponzi Schemes- Pyramid Schemes

Internet Scams- Internet Auction Fraud- Non-Delivery of Merchandise- Credit Card Fraud- Investment Fraud- Business Fraud- Nigerian Letter or "419" Fraud

Fraud Target: Senior Citizens- Health Care Fraud/Health Insurance Fraud- Counterfeit Prescription Drugs- Funeral and Cemetery Fraud- Fraudulent "Anti-Aging" Products- Telemarketing Fraud- Internet Fraud- Investment Schemes- Reverse Mortgage Scams

Source: http://www.fbi.gov/scams-safety/fraud

HOW BIG IS THE FRAUD PROBLEM?HOW BIG IS THE FRAUD PROBLEM?HOW BIG IS THE FRAUD PROBLEM?HOW BIG IS THE FRAUD PROBLEM?

• According to the ACFE from 2010-2011:• 1338 cases• 94 countries• median of 18 months before being detected.• Most occupational fraudsters are first-time offenders with clean

employment histories• typical organization loses 5% of its revenues to fraud each year. • a potential projected global fraud loss of more than $3.5 trillion.• The median loss among frauds committed by owner/executives was

$573,000, the median loss caused by managers was $180,000 and the median loss caused by employees was $60,000.

Source: http://www.acfe.com/rttn.aspx

FRAUD TRIANGLE

PerceivedOpportunity

Rationalization

Fraud Triangle

PerceivedPressure

THE RED FLAGS OF FRAUD?THE RED FLAGS OF FRAUD?THE RED FLAGS OF FRAUD?THE RED FLAGS OF FRAUD?

• Unexplained Accounting Anomalies• Exploited Internal Control Weaknesses• Identified Analytical Anomalies –financial/non-financial data different• Observed Extravagant Lifestyles• Observed Unusual Behaviors• Other Tips and Complaints

Here is a short video on an audit that turned into an investigation because the auditor OBSERVED:

Watch and type “done” in the chat window when finished:

http://www.youtube.com/user/tgolden002?feature=results_main

What do you think was happening?

USE HYPOTHESIS-EVIDENCE MATRIXUSE HYPOTHESIS-EVIDENCE MATRIXUSE HYPOTHESIS-EVIDENCE MATRIXUSE HYPOTHESIS-EVIDENCE MATRIX

• Analyze Available Data• Create Hypotheses (Null to Worst-case)• Test Hypotheses• Refine• Draw Conclusions

Are there any

questions?

If you attending the live session tonight, then you do NOT need to complete the alternative seminar assignment.