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Principal Mike Costello, CPA•ABV•CFF, ASA, CFE, Director of Litigation Support Sharon P. Hamrick, CPA•CFF, CFE and Senior Manager Pamela S. Mantone, CPA•CFF, CFE, FCPA, CITP, CGMA co-presented the topic "Forensics and Fraud: Red Flags and War Stories" at the 2013 TSCPA FSV Conference, during which they shared from their experiences the details of various fraud schemes and methods used to detect and investigate them. - See more at: http://decosimo.com/www/announcements/540.8136/forensic-accounting-fraud-specialists-share-expertise-tscpa#sthash.eEdR6hfE.dpuf
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FORENSICS AND FRAUDRED FLAGS AND WAR STORIES
Decosimo Advisory Services
FORENSICS AND FRAUD
OCCUPATIONAL FRAUD OVERVIEW
• Financial Statement
• Corruption
• Asset Misappropriation
FORENSICS AND FRAUD
CASH MISAPPROPRIATIONFORENSICS AND FRAUD
CASH RECEIPTS MISAPPROPRIATIONFORENSICS AND FRAUD
CASH DISBURSEMENTS MISAPPROPRIATIONFORENSICS AND FRAUD
WHAT LESSONS CAN BE LEARNEDFORENSICS AND FRAUD
COMPANY RED FLAGS
• Rapid growth of the company• Unusual general journal entries or
unusual transactions, especially close to the end of a period
• Significant related party transactions not in the ordinary course of business
• Lack of or inconsistent oversight
FORENSICS AND FRAUD
• Failure to update controls and accounting systems as technology and business change
• Too much trust in any one individual
FORENSICS AND FRAUD COMPANY RED FLAGS
INHERENT LIMITATIONS OF INTERNAL CONTROLSFORENSICS AND FRAUD
INHERENT LIMITATIONS IN INTERNAL CONTROL SYSTEMS
• Judgment• Breakdowns• Management override• Collusion• Materiality• Point-in-time evaluation• Cost/Benefit Considerations
FORENSICS AND FRAUD
BEHAVIORAL RED FLAGS OF PERPETRATORSFORENSICS AND FRAUD
BEHAVIORAL RED FLAGS OF PERPETRATORS
81% of Fraudsters exhibited at least one of these red flags:36% living beyond their means27% with financial difficulties19% with unusually close
associations with vendors or customers
18% had excessive control issues with their duties
(ACFE 2012 Report to the Nations)
FORENSICS AND FRAUD
HOW TO HELP YOUR CLIENT PROTECT HIS COMPANY
FORENSICS AND FRAUD
HOW TO HELP YOUR CLIENT PROTECT HIS
• Fraud Policy• Fraud training for employees• Tone at the Top• Monitoring and updating internal
controls• Fraud risk assessments
FORENSICS AND FRAUD
WHAT ABOUT EXTERNAL THREATS
FORENSICS AND FRAUD
WHAT ABOUT EXTERNAL THREATS
• Adversary – “The Bad Guy”• Terrorist groups• Criminals• Organized crime• Hackers/Crackers• Social engineering techniques
FORENSICS AND FRAUD
PHISHING EMAILSFORENSICS AND FRAUD
FORENSICS AND FRAUD
WHEN YOU HAVE SUSPICIONS
• Investigate on behalf of the board of directors
• Conduct interviews• Perform data analysis, data
mining• Search computer records
FORENSICS AND FRAUD
WHEN YOU HAVE SUSPICIONS
• Search sources of outside information related to the suspect
– BUT FIRST –
• TALK TO YOUR ATTORNEY!
FORENSICS AND FRAUD
WHEN YOU HAVE SUSPICIONS
CONTACT US
Mike Costello ~ [email protected] Sharon Hamrick ~ [email protected] Pam Mantone ~ [email protected]
FORENSICS AND FRAUDRED FLAGS AND WAR STORIES
