albrecht, albrecht, albrecht, zimbelman chapter 14: fraud against organizations © 2011 cengage...

Albrecht, Albrecht, Albrecht, ZimbelmanAlbrecht, Albrecht, Albrecht, Zimbelman

Chapter 14: Fraud Against Organizations

© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Fraud Examination, 4E

Albrecht, Albrecht, Albrecht, Zimbelman


Learning Objectives

Understand the extent to which employees and others commit occupational fraud.

Describe the nature and various types of asset misappropriations.

Discuss the nature and various types of corruption.



Occupational Fraud

Occupational Fraud Frauds against

organizations

These type of fraud are most common

Nearly every organization experiences occupational fraud



Occupational Fraud

Statistics

(based on ACFE’s 2010 study of 1,843 cases)

Heavy costs to an organization

Median loss is $160,000.

Nearly one-quarter of the cases caused $1 million in losses.

Organizations lose 5 percent of their annual revenues to fraud.



Occupational Fraud

Statistics

Very difficult to detect

Median length of the schemes was 18 months from the time the fraud began until it was detected

More likely to be detect by a tip than by other means.



Occupational Fraud

Statistics Certain antifraud controls can have a measurable impact on the organization’s exposure to fraud. Victim organizations that had such antifraud controls in

place had lower losses compared to organizations without antifraud controls in place.

Small businesses continue to suffer disproportionate fraud losses. The most common occupational frauds in small businesses involve employees fraudulently writing company checks, skimming revenues, and processing fraudulent invoices.



Occupational Fraud

Statistics

(KPMG 2008-2009 Integrity Survey)

Nearly 3 out of 4 employees reported to have observed misconduct in the prior 12-month period.

Significant reduction in fraud against an organization occurs when proactive antifraud measures (hotlines, ethics training, etc.) were implemented.



Asset Misappropriations

Definition

Any scheme that involves the theft or misuse of an organization’s assets.




Opportunities to steal assets:

1. Steal receipts of cash and other assets that come into an organization.

2. Steal cash, inventory, and other assets that are on hand.

3. Commit disbursement fraud by having the organization pay for something it shouldn’t or pay too much for something.



Well’s Division of Asset Misappropriations




Skimming

Theft of cash before it is recorded in the books and records.




Fraudulent Disbursement Schemes Billing

Expense reimbursements

Check tampering

Payroll

Wire transfers

Cash Register disbursements




Billing

Any scheme where a person causes his or her employer to issue a payment by submitting invoices for fictitious goods or services, inflated invoices, or invoices for personal purchases.

Employees who utilize billing schemes are just going where the money is.

Median Loss $130,000




Expense Reimbursements

Any scheme where an employee makes a claim for reimbursement of fictitious or inflated business expenses.

Similar to billing schemes.

Four common types of expense disbursement schemes are: mischaracterizing expenses, overstating expenses, submitting fictitious expenses, and submitting the same expenses multiple times.




Check Tampering

Any scheme in which a person steals his or her employer’s funds by forging or altering a check on one of the organization’s bank accounts, or steals a check the organization has legitimately issued to another payee.




Payroll

Any scheme in which an employee causes his or her employer to issue payment by making false claims for compensation.

An example of a payroll fraud is the placing of a ghost employee on the payroll.

Overpayment of wages accounts for 55.4 percent of all payrolls frauds.




Wire Transfers

Any scheme in which a person steals his or her employer’s funds by fraudulently wire transferring the funds out of the employer’s bank accounts.

Register disbursements

Any scheme in which an employee makes false entries on a cash register to conceal the fraudulent removal of cash.

The least costly of all disbursement schemes.




Theft of Inventory and Other Assets

Inventory

Any scheme involving the theft or misappropriation of physical, noncash assets such as inventory, equipment, or supplies.

Theft of Inventory and Other Assets

Securities Any scheme involving the theft or

misappropriation of stocks, bonds, or other securities.



Non-cash Frauds Against Organizations



Corruption

Definition

Any scheme in which a person uses his or her influence in a business transaction to obtain an unauthorized benefit contrary to that person’s duty to his or her employer.



Corruption- Types of Fraud Schemes



Fraudulent Statements

Definition Fabrication of an organization’s financial statements to

make the company appear more or less profitable.

albrecht, albrecht, albrecht, zimbelman chapter 14: fraud against organizations © 2011 cengage...

Documents

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