Presented by

Riley Parker

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CA PI 16105, 26392PO Box 20398, Bakersfield, CA 93390

661.635.0633 Fax: 661.635.0634www.ParkerPI.com

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CALIFORNIA BUSINESS AND

PROFESSIONS CODE , SECTION 7520-7539

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• 25% cost at least $1 million

•Median cost $175,000

•Typical case lasts 2 years

•Most common schemes: 1.Corruption – 27%2.Fraudulent billing - 24%

•Likely detected by a tip, not through audits, controls

Typical Fraud Cases

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Small businesses most vulnerable

Lack of internal controls most common factor

Most often committed by accounting or upper management

Fraudsters are generally first time offenders

Red flags: living beyond their means or experiencing financial difficulties

 

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1. Corruption: Conflicts of interest, Bribery, Illegal Gratuities

2. Asset Misappropriation: Cash Larceny & Skimming, Fraudulent Disbursements, Noncash Misuse

3. Fraudulent Statements: Financial & Non-financial (employment credentials, internal & external documents.

Occupational Fraud Classifications

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The typical organization loses

7% of its annual revenues to

occupational fraud.

7% OF GNP 7% OF GNP ==$994,000,000 $994,000,000

IN PROJECTED FRAUD IN PROJECTED FRAUD LOSSES LOSSES

Financial Financial Misstatement Misstatement

Aka: Cooking the Books

Median losses - $2 Million per scheme

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MOST COSTLY TYPE OF MOST COSTLY TYPE OF FRAUDFRAUD

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Median Loss BreakoutMedian Loss Breakout

Fraudulent Statements $2 Million

Corruption $375,000

Check Tampering $138,000

Billing $100,000

Non-cash $ 80,000

Cash Larceny $ 75,000

Payroll $ 49,000

Cash on Hand $ 35,000

Expense Reimburse $ 25,000

Register Disburse $ 25,000

Living beyond means

Financial difficulties

Wheeler-dealer attitude

Control issues, unwillingness to share duties

Divorce/family problems

Unusually close association with vendors, customers

Irritability, suspiciousness, or defensiveness

Addiction problems

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BEHAVIORAL RED FLAGSBEHAVIORAL RED FLAGS

Past legal problems

Past employment related problems

Complaints about inadequate pay

Refusal to take vacations

Excessive pressure from within organization

Instability in life circumstances

Excessive family/peer pressure for success

Complaints about lack of authority

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BEHAVIORAL RED BEHAVIORAL RED FLAGS, CONTINUEDFLAGS, CONTINUED