PowerPoint Presentation

FORENSIC AUDITPREPARED BY - AMEER SHAFIQ BIN KAMALULLAIL1FORENSIC AUDITPREVENTIONDETECTIONINVESTIGATIONCulture of honesty, openness and assistanceKnow how to eliminate opportunities of fraudUnderstand how to create effective organization to minimize fraudUnderstand the proactive of fraud auditingUnderstand the importance of creating a comprehensive approach of fighting fraudIdentify and understand how accounting and behavioral symptoms help in detection of fraudDescribe internal control to detect fraudUnderstand various types of fraud investigationUnderstand how to coordinate in an investigationExplain how to obtain evidence by using different forensic tools and kitsPRESENTATION OUTLINEUnderstanding the termsForensic accountingForensic auditing123CASE STUDY22UNDERSTANDING THE TERMSTO : Differentiate between forensic audit, forensic accounting and forensic auditors3

UNDERSTANDING THE TERM Prevention 4Preventing fraud is generally the most cost effective way to reduce losses from fraud.3 fundamental activities:Eliminate the opportunities for fraudTaking steps to create and maintain a culture of honesty and high ethicsPreventionCureAssessing the risks for fraud and developing concrete responses to mitigate the risksis better thanCREATING A CULTURE OF HONESTY AND HIGH ETHICSTO : Understand how to create a culture of honesty, openness and assistance. Tone at the top (proper modelling)Honesty can be reinforced when a proper example is setHiring the right kind of employeesVerify all information on the applicants resume and applicationRequire all applicants to affirm the truth of the matters set forth in their application and resumeTrain management to conduct thorough and skilful interviews.Provide an employee assistance program (EAP)Implement and EAP that helps employees deal with personal and non-shareable pressures in their lives.Create a positive work environmentCreate expectations about honesty by having a good corporate code of conduct and conveying those expectations throughout the organization.Have open-door or easy policies.Have positive personnel and operating procedures.Ethical Maturity Model that explains why people make unethical decisions.Ethical LeadershipHelping others to be EthicalEthical CourageWillingness to Pay the Price for EthicsApplication of Ethics to Business SituationsFraudulent Practices, Misleading Advertising, UnfairnessPersonal Ethical UnderstandingRight/Wrong, Fairness, Honesty, Personal Integrity, Respect for Others12345Those who will almost always be honestThose who are situational-ly honest Those who will always be dishonestHonesty5ASSESSING AND MITIGATING THE RISK OF FRAUDTO : Know how to eliminate opportunities for fraudAccurately identifying sources and measuring risks6

Implementing appropriate preventive and detective controls to mitigate those risksCreating widespread monitoring by employeesHaving internal and external auditors who provide independent checks on performanceIdentify, sourcing, measuring risksELIMINATING OPPORTUNITIES OF FRAUDTO : Know how to eliminate opportunities for fraud

Having good internal controlsDiscouraging collusion between employees and customer vendors and clearly informing vendors and other outside controls at the companys policies against fraudMonitoring employees and providing a hotline for anonymous tips (whistle-blowing system)Creating an expectation of punishmentProactive auditing7CREATING AN EFFECTIVE ORGANIZATION TO MINIMIZE FRAUDTO : Understand how to create effective organization to minimize fraud8Fraud occurInvestigationActionResolution1234CURRENT MODEL

Tone at the top

Education and Training

Integrity risk and control

Reporting and monitoringSOUND ORGANIZATION MINIMAL FRAUDVS

Proactive fraud detection

Investigation and follow upGOOD FRAUD AUDITING INVOLVES:TO : Understand the proactive of fraud auditing9Investigating fraud symptoms identifies

Very few organizations actively audit for fraud. Rather, their auditors are content to conduct financial, operational, and compliance audits and to investigate fraud only when symptoms are so egregious that fraud is suspected.

Organizations that proactively audit for fraud create awareness among employees that their actions are subject to review at any time. By increasing the fear of getting caught, proactive auditing reduces fraudulent behavior.

UNDERSTANDING THE TERM Detection10Steps or action taken to discover a fraud that has been or is being committed.Ways fraud are usually detected3Identifying symptomsIndicatorsRed flagsPrimary ways to detect fraud3By chanceBy providing ways for people to report suspicion of fraudBy examining transaction records and documents to determine if there are anomalies that could represent fraudCommon proactive fraud detection whistle blowing systemsAnalyze dataTransaction to look for suspicious trends, numbers and other anomalies2nd proactive fraud detection:DETECTION THROUGH ACCOUNTING & BEHAVIORAL SYMPTOMSTO : Identify and understand how accounting & behavioral symptoms help in detection of fraud11Analytical symptoms

Accounting or documentary symptomLifestyle symptoms231Control symptoms4Behavioural and verbal symptoms5Tips and complainants6UNDERSTANDING THE TERM Investigation 12

Investigation processThe art of interviewingPre DuringPostTYPES OF FRAUD INVESTIGATIONTO : Understand various type of investigation Explain how to obtain evidence using different forensic tools and kits13Know what are the information required Identify the difficultiesDeveloping the questionsChoosing the interview settingsEmotional, hostile or resistant witnessIrrelevanciesGetting of the trackDisruptionUnexpected answer but relevant directionPre ControlFree from distractionsFace to face most preferred, instead of telephone interview and written responsesRecording oral evidenceOral evidenceTeam based approach for investigationForensic examinationHonesty TestingData analysis - miningDURINGTestimonial evidenceDocumentary evidencePhysical evidencePersonal observationPOSTTHE ART OF INTERVIEWINGTO :Understand how to coordinate in an investigation14

Minimize the possibility of people subsequently denying, changing or contradicting the information they has given.To ensures that the IO is properly prepared for the interview.Be seen to be impartial throughout the investigation.At the outset of every interview it is important that the IO clearly inform the interviewee of the reason for the interview, although it is not necessary to mention all he factors relevant to the subjects under discussion at this stage.The IO must avoid making any statements that cause a witness to believe that they will obtain any privilege, concession or immunity from official action.CASE STUDY ATM SKIMMINGFraudster places skimming device at the ATMCustomer performs withdrawal at the affected ATMFraudster obtains ATM card information and produce clone cardFraudster perform withdrawals at overseas ATMsConversion to chip-based ATM cardIntroduction of Overseas Withdrawal Flag facilitiesDaily-frequent inspection at ATMs by various parties Installation of anti-skimming devices at the ATMReview placement of ATMsDetection through reported casesSetting of parameters to identify anomalies transactionPost detection escalation procedure by various stakeholders

Engagement with Customer to gauge informationEstablishing the existence of 2nd ATM cardReviewing the pattern of disputed withdrawalEstablishing the most possible point of compromiseReviewing the gaps and recommending controlsPREVENTIONDETECTIONINVESTIGATIONSkimming is any scheme in which cash is stolen from an organization before it is recorded on the organizations books and records. 1516