1 Fraud Prevention and Deterrence Pam Peters, CFE Office of Internal Audit
Feb 23, 2016
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Fraud Prevention
and Deterrence
Pam Peters, CFEOffice of Internal Audit
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held on November 12, 2013
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What is Fraud?A knowing misrepresentation of the truth or
concealment of a material fact to induce another to act to his or her detriment.
Fraud includes any intentional or deliberate act to deprive another of property or money by deception or unfair means.
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Types of Fraud
Internal Fraud
External Fraud
Fraud Against Individuals
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Internal Fraud
Also referred to as occupational fraud
“The use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the organization’s resources or assets.”
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Occupational Fraud
Three Major types of Occupational Fraud:
Corruption Asset Misappropriation Financial Statement Fraud
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Occupational Fraud
Corruption: Conflict of Interest
• Purchasing Schemes• Sales Schemes
Bribery• Invoice Kickbacks• Bid Rigging
Illegal Gratuities Economic Extortion
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Occupational Fraud
Asset Misappropriation: Cash
• Theft of cash• Theft of cash receipts• Fraudulent Disbursements
o Billings Schemeso Payroll Schemeso Expense Reimbursement Schemeso Check Tamperingo Register Disbursements
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Occupational Fraud
Asset Misappropriation Cont’d: Inventory and All Other Assets
• Misuse• Larceny
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Occupational Fraud
Financial Statement Fraud: Asset/Revenue - Overstatements
• Timing Differences• Fictitious Revenues• Concealed Liabilities and Expenses• Improper Asset Valuations• Improper Disclosures
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Occupational Fraud
Financial Statement Fraud Cont’d: Asset/Revenue - Understatements
• Timing Differences• Understated Revenues• Overstated Liabilities and Expenses• Improper Asset Valuations
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Dishonest VendorsDishonest customersSecurity breachesHackingTheft of proprietary information
External Fraud
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Fraud Against Individuals
Identify Theft
Ponzi Schemes
Phishing Schemes
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Why Does Fraud Occur?
The Fraud Triangle: Developed by Dr. Donald Cressey – his
research focused on embezzlers, people he called “trust violators”
A model for explaining the factors that cause someone to commit occupational fraud
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Fraud Triangle
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What Can We Do? Detect, Deter, and Prevent fraud before it occurs Look for early warning signs:
Accounting records that do not balance or cannot be reconciled
Too much control or ownership of records or processes by one individual
Missing or altered documentation Employee living beyond their means, lifestyle is
inconsistent with known income
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What Can We Do? Look for early warning signs cont’d:
Long-term or “model” employees, who never take vacation or sick leave
Unexplained changes in an employee’s work behavior
Employees receiving calls at work from creditors or collection agencies
Employees who appear to have unusually close relationships with customers or vendors
These are just a few examples which may indicate potential fraudulent activity.
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What Can We Do? Steps to mitigate risks:
Be aware of your surroundings and daily activities Ensure your area has proper internal controls and
segregation of duties Document what you observed Report your concerns to your immediate supervisor,
Dean/Chair, or the Office of Internal Audit http://audit.unl.edu
DO NOT INVESTIGATE POSSIBLE FRAUD YOURSELF!
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held on November 12, 2013
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Questions?
Thank you!
Pam Peters, CFESenior Auditor
Office of Internal [email protected]: ACFE
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