FORENSIC ACCOUNTING - BA124 - 2010Slide 12-1

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Todays Topics

• Organizational Fraud
• Consumer Fraud

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Occupational Fraud

• What is it?
• Fraud against companies other than financial
  statement fraud
• Asset misappropriations
• Corruption
• Know the graphics on pps. 506, 514 516

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Occupational Fraud Statistics

• Median loss 159K 25 gt 1.0M 1 gt 1.0B
• Organizations with hotlines had 50 less median
  loss
• Small business has higher median loss--190K
  poor pro-active effort
• Executive involvement 1.0M median loss
• 30 involved accounting dept. 20 involved upper
  and executive management
• Only 8 of fraudsters had prior convictions

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Asset Misappropriations

• Stealing receipts
• Employees, customers, collusion
• Stealing assets on hand
• Employees
• Stealing through disbursements
• Employees, vendors, collusion

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Thefts of Cash

• Larceny
• Skimming
• Fraudulent disbursements

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Larceny

• Theft of recorded cash w/o consent
• Cash shortages
• 14.2 of all misappropriation frauds
• Easy to detect

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Skimming

• Sharing cash receipts
• Sales not recorded
• Fraudulent discounts
• Customer payments and write-offs
• Lapping
• Collusion with customers

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Fraudulent Disbursements

• 67 of all asset-related frauds
• Check tampering
• Check modification, check forgery
• Register schemes
• False refunds, false voids
• Inventory problems
• Billing schemes
• Dummy cos., 2X paying, personal use

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Fraudulent Disbursements, continued

• Expense schemes
• Cheating on your expense report
• Payroll schemes
• Only 1.9 of all losses
• Ghost employees, false hours rates, commission
  scams and false worker compensation claims

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Thefts of Assets

• Borrowing for personal use
• Personal business on company time
• Outright theft of assets
• Larceny involving inventory
• Unauthorized transfer of assets with forged
  requisitions
• Diversion of assets in receiving function

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Corruption

• Bribery
• Payoffs, kickbacks, bid rigging
• Conflicts of interest
• Purchase and sales schemes involving related
  parties
• Economic extortion
• Illegal gratuities

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Consumer Fraud

• Fraud against individuals
• Number one consumer fraud Identity Theft

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Identity Theft

• Involves over 42 of reported frauds
• Use of name, address, SSN, band or credit card
  PINs to commit fraud
• Prevention is the key

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Identity Theft Conversion

• Purchase of large-ticket items
• False car or real estate loans
• Creation of phone or cell accounts
• Counterfeit checks or debit cards
• Creation of new bank accounts
• False filing of bankruptcy
• False filing of police information
• Creation of new credit card accounts
• Change of mailing address

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Identity Theft Cycle

• Stage 1 Discovery
• Gain information
• Verify information
• Stage 2 Action
• Document accumulation
• Action cover-up
• Stage 3 Trial
• 1st 3rd dimensions (gas station, store, new
  account)

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How to Steal Someones Identity

• Obtaining info falsely
• Going through the trash
• Skimming credit cards
• Hacking
• Stealing wallets
• Outright theft from the home
• Stealing mail
• False change of address form
• Shoulder surfing
• Phishing or Pharming

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How to Protect Yourself

• Guard your mail
• Do not use pre-approved credit cards
• Guard SSN and PINs
• Guard all personal information
• Guard your trash
• Protect your wallet
• Protect and change your passwords
• Protect your home
• Protect your personal computers
• Use the Gramm-Leach-Bliley Act to opt out of
  having your information sold

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Post Event Activity

• Report event promptly
• Collect evidential matter
• Contact FTC regarding identity theft
• Homeland security implications

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Other Forms of Consumer Fraud

• Foreign Advance-Fee Scams
• Work at Home Schemes (Multi-Level Marketing
  Schemes)
• Bogus Mystery Shopping Scams
• Telemarketing Scams
• Investment Scams (Ponzi Scams)