Current Trends in - Chapters Site · The Fraud Triangle Three conditions generally exist when fraud...

Current Trends in Investigations

Omid YazdiForensic Partner

September 11, 2013

Agenda

• Overview of Fraud and MisconductThe Investigation: Items to Consider• The Investigation: Items to Consider

• Role of Internal AuditorR di ti• Remediation

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Agenda

• Overview of Fraud and Misconduct• The Investigation: Items to Consider• Role of Internal Auditor• Remediation

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The Fraud Triangle

Three conditions generally exist when fraud or other misconduct occurs.

Incentive / Pressure

misconduct occurs.

O t it R ti li ti

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Opportunity Rationalization

Major Categories of Fraud and Misconduct

MisappropriationMisappropriationOfOf

AssetsAssets

CorruptionCorruption Fraudulent Fraudulent Financial Financial ReportingReporting

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Fraud Occurrences

4.8%Percentage of Fraud Occurrences

32.8%

4.8%

86.3%

Asset Misappropriation Corruption Financial Statement Fraud

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Source: ACFE 2010 Report to the Nations on Occupational Fraud

Asset Misappropriation Corruption Financial Statement Fraud

Fraud Cost

Percentage of Total Dollars Lost

20.8%

11.3%

68.0%

Asset Misappropriation Corruption Financial Statement Fraud

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Source: ACFE 2010 Report to the Nations on Occupational Fraud

Asset Misappropriation Corruption Financial Statement Fraud

Agenda

• Overview of Fraud and Misconduct

Th I ti ti It t C id• The Investigation: Items to Consider• Role of Internal Auditor• Remediation

© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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Project Management

• Agreement on scope and mandateAttorney client privilege• Attorney-client privilege

• Pre-fieldwork planning and analysisC di ti f• Coordination of resources

• Cost management

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e-Discovery Considerations

• New methods that reduce e-Discovery review costs• Grouping document sets into common themes of documentsGrouping document sets into common themes of documents

• Clustering and removal near duplicates

• Predictive coding

• Timely preservation• Privacy and data protection• Trade secret and government secret issues

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Forensic Analysis Considerations

• Access to informationTimeliness• Timeliness

• Dollar value thresholdsSt t d t t d d t• Structured vs. unstructured data

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Interview Considerations

• Access to peopleCultural issues• Cultural issues

• Conducting the interviewsD t ti t l• Documentation protocols

• Attorney-client privilege issues

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Project Reporting Considerations

• Who receives the report?Format• Format

• ConclusionsManage expectations upfront• Manage expectations upfront

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Agenda

• Overview of Fraud and MisconductThe Investigation: Items to Consider• The Investigation: Items to Consider

• Remediation• Role of Internal Auditor

© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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The Compliance Continuum

Policies, Procedures & Practices

I ti ti Policies developed under the direction of the

Compliance Officer and Compliance Committee Officer is focal point for compliance and

has authority to review documents.

Investigation compliance officer and committee.

Policies provided to all affected employees and business partners.

Develop and implement a response plan and policies to investigate alleged non-compliance.

Education & TrainingEnforcement

Require affected employees to participate in appropriate

i i Develop and enforce policies

d d t dd training programs.

Retain records of training programs including attendance.

and procedures to address compliance breaches including sanctions.

Communication Hotline or other reporting process so employees can

make complaints or ask questions.

Monitoring & Auditing Risk evaluation to monitor compliance, identify

problem areas and reduce identified problems.

Compliance officer to document the monitoring d d b h i

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Procedures to protect the identity of complainants and to protect them from retaliation.

and report suspected breaches to senior management and the compliance committee.

Agenda

• Overview of Fraud and MisconductThe Investigation: Items to Consider• The Investigation: Items to Consider

• Remediation

R l f I t l A dit• Role of Internal Auditor

© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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Planning

• Audit ownership

I t f li i• Inventory of policies

• Interview legal counsel and compliance

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Data Analytics

• Obtain transactional download

E l t (AP t t )• Evaluate scope (AP, expense reports, etc.)

• Perform initial analysis

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Fieldwork

• Interview process

I t ti ith t• Interactions with customers

• Third-party agents

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Spectrum of Transactions

Category Description

Complete DocumentationComplete Disclosure

Proper documentation provided to IA. Including specific details of the pre-approved facilitation payment, parties involved, amount spent, purpose of the payment and results obtained.

Some Documentation Some Disclosure

Partially completed documentation provided to IA. Includes incomplete transaction details and incomplete supporting documentation.

Some Documentation No disclosure of transaction made to IA. Incomplete documentation was No Disclosure kept in relation to a facilitation payment. Assess whether there was an

attempt to hide information from the auditor.

No Documentation N Di l

No documentation nor disclosure provided to IA. Assess whether there tt t t hid i f ti f th ditNo Disclosure was an attempt to hide information from the auditor.

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Thank youOmid Yazdi Partner KPMG LLP (213) 430-2119oyazdi@kpmg.comThe information contained herein is of a general

nature and is not intended to address thecircumstances of any particular individual orentity Although we endeavor to provideentity. Although we endeavor to provideaccurate and timely information, there can beno guarantee that such information is accurateas of the date it is received or that it willcontinue to be accurate in the future. No oneshould act on such information withoutappropriate professional advice after a thoroughappropriate professional advice after a thoroughexamination of the particular situation.

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