...Licensed to: iChapters User Licensed to: iChapters User Fraud Examination, Fourth Edition W. Steve Albrecht Chad O. Albrecht Conan C. Albrecht Mark F. Zimbelman VP/Editorial Director: Jack W. Calhoun Editor-in-Chief: Rob Dewey Sr. Acquisitions Editor: Matt Filimonov Associate Developmental Editor: Julie Warwick Editorial Assistant: Ann Mazzaro Marketing Manager: Natalie Livingston Marketing Coordinator: Nicole Parsons Content Project Management: PreMediaGlobal Sr. Manufacturing Buyer: Doug Wilke Production House/Compositor: PreMediaGlobal © 2012, 2009 South-Western, Cengage Learning ALL RIGHTS RESERVED. No part of this work covered by the copyright herein may be reproduced, transmitted, stored, or used in any form or by any means graphic, electronic, or mechanical, including but not limited to photocopying, recording, scanning, digitizing, taping, Web distribution, information networks, or information storage and retrieval systems, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the publisher. For product information and technology assistance, contact us at Cengage Learning Customer & Sales Support, 1-800-354-9706. For permission to use material from this text or product, submit all requests online at www.cengage.com/permissions Further permissions questions can be e-mailed to permissionrequest@cengage.com Library of Congress Control Number: 2010940986 ISBN-13:...
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...While one may expect that companies and their employees will always seek to do the right thing they should consider the fact that corporate fraud is something that has always and will always exist. However, the level and complexity of fraud has grown and reached a critical level prior to the passage of the Sarbanes Oxley Act in 2002 as a result of several financial accounting scandals that had taken place. Companies and their directors had instituted practices that did not encourage employees to take an ethical approach to accounting or business practices resulting in large companies like Enron failing and their CEOs being held criminally liable for falsifying financial reports. During this time the public had become painfully aware that companies were acting in their own interest at the behest of their investors. As companies started to fold when accounting scandals were uncovered investors, many of who were employees, found their stock worthless as the companies faced bankruptcy and criminal investigations. The result was a public that was afraid to invest and didn’t want to take a chance that their investment dollars would be squandered leaving them with nothing. Congress felt it was time to do something and that culminated with the introduction of the Sarbanes-Oxley Act, which was designed to protect the public from fraudulent corporations. Prior to the introduction of Sarbanes Oxley there were audits in place but in many cases there were conflicts of interest...
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...The Clayton Act, and The Robinson-Patman Act) 111. The Foreign Corrupt Practices Act (FCPA) of 1977 makes it illegal for an American businessperson to give anything of value to any foreign official in order to influence an official decision. A. Applicability of the Act B. Prohibitions under the Act C. Penalties for Violations of the Act 1. Criminal 2. Civil 3. others D. Defense under FCPA 1. Lawful payment 2. Bona fide expenditures E. Fraud/Scandal of the FCPA of 1977 1. Detection method 2. Importance of Early Detection 3. Big problems for small corporations/organizations 4. Types of fraud and who is involved 1V. Sarbanes Oxley Act A. The effects of Sarbanes-Oxley Act on corporate culture (1) Increase in accounting costs (2) Increased records-management requirements (3) Salary increases (4) Increase in audit fees B. Need for Continuous Auditing/ Continuous Monitoring and its benefits C. Role of internal Auditing and Management. D. Identification of Control Deficiencies – What is the Act doing to minimize. E. Fraud/Scandal, Waste,...
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...husband whom the U.S Marshals refer to as the “modern day Bonnie and Clyde” (Department of Justice, U.S. Marshals Task Force, 2013). Ms. Evans created her own opportunity of access to checks by creating her own. She collected individual data for checks and bank accounts in two ways, falsifying social security numbers which she used to obtain false driver’s licenses. She was eventually detected at the Ohio Bureau of Motor Vehicles which finally identified her use of false social securities numbers. Ms. Evans would use her false identification cards to forge documents. She and her husband ran a gang that used fake W-2s to obtain false checks from the state. However, this was only one of the many check tampering frauds she committed. The second such fraud was for her and her gang to produce fake checks and have members of the gang cash the checks around town. She had a history of forging the SSNs and licenses. Although not highlighted in the article, it would be within her to use the falsified identities on the checks to ensure they could be cashed. The use of these identities would also assist her and her group to get around internal controls of banks or stores and help her conceal the theft. Lastly, she is accused of using company bank account information to forge checks (Ferrise, 2013). She established a pattern of forging checks. She caused companies and people to lose money based on stolen or tampered checks. Therefore completing two types of check tampering:...
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...1 1) A 2) D 3) A 4) D 5) A 6) B 7) B 8) C 9) D 10) D 11) D 12) B 13) B 14) C 15) B 16) B 17) C 18) D 19) A 20) D 21) C 22) D 23) A Case 3: 1) Customer Fraud 2) Consumer Fraud/ Investment Scam 3) Employee Embezzlement 4) Management Fraud 5) Vendor Fraud 6) Customer Fraud Case 7: 1) Fraud is being committed against the firm in this case by Bob. Fraud occurs when a person intentionally cheats or tricks others for their own benefit. Regardless of the magnitude of the charges or the fake excuse given to the reason for the charges, he is intentionally charging non-business lunches to his employer. This is also known as employee fraud, or occupational fraud. 2) As a fellow intern at the firm, you have an ethical responsibility to your employer to report Bob’s wrong behavior. In this particular case, the fraudulent act can be easily corrected. Since Bob is justifying his behavior by saying the recent memo pertaining to meal expenses does not apply to him because he is an intern, you should try to help Bob see the error of his logic and encourage him to correct the charges. If Bob is still unwilling to change his behavior after you explain this to him, then the appropriate managers or employers should be notified. Case 8: The additional revenue needed will be the fraud loss divided by the profit margin. The loss here is $50,000 and the profit margin is 7%. If we divide 50,000 by the 7% (.07), we get...
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...firm. Those who knew her would have never guessed she was capable of felony fraud by stealing half a million dollars from the company. After graduating from BYU, Diann made her way to Atlanta where she began her first job at a newly established Human Resources consulting firm. Her incredible work ethic and likeable personality quickly allowed her to move up within the ranks of the company as she was entrusted with more and more responsibilities. The promotions came with additional extravagant benefits such as fine dining at the White House with President Bush, attending parties hosted by US senators, enjoying Braves games next to the team’s general-manager in his own personal box, etc. This came with a great deal of pressure for success for Cattani, knowing that she wanted what they had. Catanni’s fraud began when her plane tickets to Utah were purchased on her corporate card, rather than her personal one and never reimbursed the company the money she owed. She justified her actions by claiming she was still working by dealing with conference calls and other daily tasks, leaving her with little vacation time at all. Her rationalization continued as she used the company card for office furniture, gas, food, and even rewards to herself for favors she did for coworkers. She created fake invoices, reimbursed herself for multiple, fraudulent expenses and adjusted the books to cover it all up. The fraud...
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...Burning Down the House: Mortgage Fraud and the Destruction of Residential Neighborhoods Ann Fulmer March 2010 Burning Down the House: Mortgage Fraud and the Destruction of Residential Neighborhoods Mortgage fraud is bank robbery without a gun. 1 It is a high-yield, 2 low risk enterprise that has been reported in all 50 states, Puerto Rico, Guam, American Samoa, 3 Canada, 4 New Zealand, 5 Australia, 6 and England. 7 In the United States, it is committed by organized international and domestic rings, 8 street gangs, 9 terrorists, 10 drug traffickers, 11 real estate agents, 12 closing attorneys, 13 appraisers, 14 mortgage brokers, 15 The targeted victims distinguish mortgage fraud from predatory lending. In predatory lending cases the borrower is victimized by the illegal practices of the lender or its agents with respect to fees and disclosures relating to the cost of the loan. It is unfortunate that the media, consumer activists, legislators and law enforcement personnel frequently conflate mortgage fraud with predatory lending since it adds unnecessary confusion to an already complex issue and diverts attention and badly needed resources from the fight against true mortgage fraud. 2 The average “take” on a bank robbery is approximately $3,000.00. By contrast, the average straw borrower receives a “cut” of at least $10,000 and the orchestrator’s “take” in a mortgage fraud transaction frequently exceeds $100,000. In a few cases the orchestrator’s take was in excess of $1...
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...decent salary and stock options that make other companies within the industry jealous. How many other middle managers in the industry can claim a net worth of over one million dollars? During WorldCom’s highest point, some of the middle managers could honestly make such a claim because they had so much stock and the price seemed to just keep going up and up. The stock splits, and because of the stock option, instead of a dividend the employees get more stock. Then all of a sudden one March morning all these millionaire managers wake up to discover they are not only now worth just a few hundred bucks, but that their jobs were disappearing. This situation was a reality for many WorldCom workers, because on that March morning America’s largest fraud at the time had been reported. WorldCom was a publicly traded corporation established in 1983 to provide Long Distance Discount Services (LDDS) (Internet Services, 2011). Through the acquisition of other businesses Worldcom became the world’s second largest telecommunication company. LDDS began by leasing a wide-area telecommunications service (WATS) line and resold time to other businesses (Internet Services, 2011). WATS is a form of fixed-rate long distance telecommunication service in which certain area codes, such 800, 888, or 877, are reserved for businesses and when customers call these numbers they are not charged for long-distance but rather the business is charged as a subscriber of the WATS service (Rouse, 2006). Beginning...
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...Review Shawn Detamore January 29, 2012 Payroll fraud schemes happen when an employee generates overcompensation for themselves. There are three types of payroll fraud schemes; ghost employees, bonus and commission schemes and falsified hours and salary (Shields, 2009). This type of fraud accounts for 17% of fraud that is committed in organizations (Shields, 2009). Back in May of 2009, a payroll manager and a retired employee of the Detroit Public School system worked together to steal over $400,000 from the school. They scammed the school by forming a payroll scheme. The payroll manager, Toni Gilbert cut checks to Anthony Carter who had retired back in 2000. When Toni did this, Carter not only received his retirement check, he was also receiving a regular paycheck from the school. This “extra” check that Carter received was split between himself and Mr. Gilbert. Gilbert had worked for the school for over 20 years. In those twenty years, five of them were spent committing fraud. Since the fraud was committed at a school, this constitutes as a federal crime. They were stealing money from the taxpayer dollars. If they are convicted, both employees will face a maximum sentence of 10 years in prison and have to pay a fine of $250,000 (Detroit). Luckily for DPS, the financial Manager and DPS office inspector are the ones that caught the corruption. Since the indictment, DPS is hoping to send out a strong message that fraud will not be tolerated. They have also started doing...
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...THE FRAUD INVESTIGATION PROCESS I. The fraud investigation process involves systematically A. The engagement process B. The evidence process C. The reporting process D. The loss recovery process II. The engagement process A. Analyze data B. Create Hypotheses regarding a possible fraud C. Test hypotheses D. Refine and amend hypotheses E. Fraud theory is supported by the evidence III. The evidence collection process A. Physical evidence, Collect physical and documentary evidence B. Collect documentary evidence C. Collect observational evidence D. Collect interview evidence 1. The initial interviews are conducted with the most remote suspects 2. The investigator then conducts additional interviews that are successively closer to the suspects 3. With the prime suspect being the last person interviewed IV. The fraud investigation engagement process A. Initial report 1. Includes the initial information used to justify the investigation 2. The initial information should be included in a unified case file 3. The incident report can serve as probable cause for law enforcement 4. The incident report can provide proof the suspect is not being singled out because of illegal discrimination or in violation of collective bargaining rights B. Make notifications and evidence 1. Routine incident reports may be routed to a predetermined department ...
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...criminal leaders who may not have been directly involved in a series of criminal acts but whose criminal organization carried out the details. 2. Benford’s Law (1)定义：A fraud indicator that predicts the relative incidence of first digits of numbers in certain types of random data. (2)Benford Analysis Benford analysis presents another interesting approach to fraud detection. Its general use is to determine the likelihood that fraud exists in records. This technique is based on Benford’s law, named after Frank Benford who realized that the likelihood that numbers 1, 2, 3, 4, 5, 6, 7, 8, and 9 will appear as the first digit in numbers occurring in a random data set conforms to a predictable pattern. That is, the number 1 is more likely to appear as the first digit in a number than is the number 2. The pattern of likelihood (Figure 6.6) continues with other digits: The number 2 is more likely to appear as a first digit than 3, 3 is more likely to appear as a first digit than 4, and so on. Note that just because the likelihood is higher that 7 will appear as a first digit than will 8 does not mean that a number that begins with 8 is due to fraud. Benford’s law can be used to determine whether a higher risk than normal exists that a population of numbers—for example, a collection of vendor’s invoices—contain fraud. Specifically, the invoice amounts can be...
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...Discussion "Fraud " Please respond to the following: * From the e-Activity, evaluate the cause(s) of the fraud. Recommend a strategy that could have prevented the fraud. Support your recommendation with examples. ACC 578 Week 2 Discussion 1 "Data Analysis and Fraud Investigation" Please respond to the following: * Imagine that you have been hired as a fraud examiner to review the risk of fraud at a major retailer. Analyze the data analysis tools available to you and propose a plan for which tools you will use. Provide a rationale for your plan. ACC 578 Week 2 Discussion 2 "Audit Objectives and Computer Analysis" Please respond to the following: * You have been tasked by your audit manager to develop an audit plan of a major bank. Propose the key elements of your audit plan and the end result you expect from implementing the audit. Justify the key elements you chose for the plan. * From the e-Activity, analyze the systems the company used and propose a computer analysis plan that would have detected the fraud. Support your analysis with examples. ACC 578 Week 2 Assignment 1 Fraud Prevention and Detection Policy Due Week 2 and worth 160 points You are a senior accountant at a new start-up information technology company known as Dingwow Inc. You have just recently been hired and the company has charged you with recommending a fraud policy. Use the Internet, Strayer databases, or your text, to research the elements of an effective fraud policy. Write...
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...industry. Problems came to light in 2003, when the chief financial officer as well as to other highly ranked financial managers resigned unexpectedly. The fraudulent activity was difficult to figure out because it had many layers of fraudulent loan agreements. These loans created a false perception of a successful company. Characterized as a Ponzi scheme, the fraud was using newly invested money to pay off earlier debt obligations. Le-nature falsified invoices, checks, account statements, and other financial documents to verify business transactions and activity that never actually occurred. This falsely inflated the value of the company to banks and investors, who saw the business as a successful company that needed additional capital to expand its productions. According to one of the lawsuits, Le-Nature falsely reported $135 million in sales in 2002, when actual net sales were less than $2 million. Tammy Andreycak, Le-Nature’s accounting director, cooperated with prosecutors in hopes of getting only probation or house arrest for her involvement in the fraud. In 2008, Tammy pleaded guilty to wire fraud, bank fraud,...
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...Fraud Schemes and Fraud Investigation Acc 571 Instructor: Dr. Ole Ruankaew Diane Phillips November 22, 2015 Fraud Schemes and Fraud Investigations The problem that organization faces today, are employee fraud. Many organizations feel that long term success of any company comes from the quality of their employees and workers loyalty. While during my research, I discovery that Association of Certified Fraud Examiners, Inc. has shown that organization have lost five percent of their annual revenue each year because of employee fraud. Every organization needs to have a plan in places for fraud detention. In preventing fraud in the work place, a good strategy for any organization is to implement internal control. These are plans; programs and procedures put in place to safe guard the company assets, and ensure the integrity of its accounting records. As prevention fraud is much easier than recovering losses after a fraud has been committed. This study will focus on the case of Stanford Financial Group Company fraud in which Robert Allen Stanford, chairman of Stanford International Bank (SIB), was involved in a Ponzi scheme. Stanford was convicted of orchestrating a 20-year investment fraud scheme in which he misappropriated $7 billion form SIB to finance his personal businesses. The Stanford Financial Group claimed to have pulled in retail, wealthy and commercial investors from 136 countries on six continents. Lopez and Kuhrt was aware of what Stanford ...
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...(TNBcard.com, 2008). In addition to offering all the services we need to launch this credit card venture, TNB also offers customer support: Toll-free, 24 x 7 customer service As a value added service to our customers, TNB will take customer calls to answer questions pertaining to card activity through a toll free number available 24/7. This number will also be where customers could report lost/stolen cards and inquire about any aspect of their card. The only limitation is that TNB could not process requests for increases in card limits or new card requests. eZ-Pay, convenient card payments over the telephone Through the same toll free number, customers can make payments and make all inquiries into card activity and availability. Falcon™ Fraud Detection tool This service monitors charges on customers’ cards...
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