2. Fraud is a crime that is seldom observed.
John J . Hall (1996)
“Fraud symptoms—the specific, observable
signs that fraud might be present—may he of
the actual fraud or of the cover-up attempt.”
(p.85)
8. Internal control fraud symptoms include :
Lack of segregation of duties
Lack of physical safeguards
Lack of independent checks
Lack of proper authorization
Lack of proper documents and records
Overriding of existing controls (most common)
Inadequate accounting system
9. CFO and treasure stolen more than $6 millions
in less than 5 years.
False tractions frequently but in small amount
11. Three simple procedures to prevent small business
fraud
1. Owners should open and reconcile bank statements
2. Pay everything by check so there is a record
3. Owners should sign every check themselves
12. Ernst and Young was not been negligent in performing the audit
13. ?
Year end 2004/G corporation
Book: more than
$40M
Bank: around $400
Bank officer
Lent to other Stock Market
FM
conspire
PWC
Send
confirmation
14. Sarbanes-Oxley Act of 2002
imposes potentially serious penalties on firm
executives with fines of up to $5 million
and/or imprisonment up to 20 years
At the same time, this legislation requires that
these firms tighten their internal controls over
financial reporting.
15. Strange financial statement relationships
Cash shortages or overages
Excessive late charges
Unreasonable expenses or reimbursements
Excessive turnover of executives
Physical abnormalities
16. How to calculate the stone pour into river?
Sufficient paper documents
18. Case in 2013
Expense padding by Kevin Richard Halligen
Former CEO of a security consulting and crisis
management firm-RDI
2.1 millions with 1.7 millions buying a house for
herself
20. Elements of fraud
Theft act
Concealment
Conversion
Company employees
are in the best position
to detect fraud
21. Symptoms rather than evidence
People hesitant to come forward:
Not Sure about the fact
Fear reprisal for being a whistle-blower
Intimidated by the perpetrator
May regard squealing is wrong
Not easy within organization
22. Law protect Whistle-Blowers and Promote
Fraud Detections
Whistleblower Representation of SEC
23. Barra, R. A. (2010). The impact of internal controls and penalties on fraud.
Journal of information Systems, 24(1), 1-21.
Ge. C.(2005). Audit as a leader. China: Jixie Industry.
Former CEO of London based company pleads guilty to federal charge in
2.1 million fraud scheme, (2013). Press releases of FBI Retrieved from
http://www.fbi.gov/washingtondc/press-releases/2013/former-ceo-of-
london-based-company-pleads-guilty-to-federal-charge-in-2.1-million-
fraud-scheme
Whistleblower Representation of SEC
Retrieved from
http://www.youtube.com/watch?v=8fsIKSXM1gk&list=PL97A225800A
DE733F
Hall, J. J. (1996). How To Spot Fraud: Many managers consider some
level of" shrinkage" as normal. Journal of Accountancy, 182, 85-85.
Hongtao.Hou (2007). The analysis of legal responsibility of CPA: G-
Waigaoqiao Corporation VS PWC .Journal of Accounting and Finance
,2010(4),49-59