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Whitinger & Company Fraud Seminar
- 1. Accounting Fraud “What to Look For & How to Help Prevent It”
- 2. What is Fraud? • A Misappropriation of Assets • Corruption • Fraudulent Financial Statements
- 3. Who? Anyone!
- 4. Why? • To live beyond his/her means • Financial difficulties • Family problems • Addiction problems • Legal problems • Not appreciated / Pay not adequate
- 5. Types of Fraud Billing / Accounts Payable
- 6. Types of Fraud Check Tampering
- 10. Types of Fraud Theft of cash & checks before deposit
- 11. Types of Fraud Theft of inventory or fixed assets
- 14. How Fraud is Found • Tips from employees, customers, vendors • Management reviews • Internal audit • Internal controls • External audit
- 15. Responsibilities Auditor • Obtain reasonable assurance financials are free of material misstatement • Test transactions • Review and test internal controls
- 16. Responsibilities Management • Design & implement programs and controls to prevent, deter, and detect fraud • Establish and monitor internal controls
- 17. Anti-Fraud Measures • External audit • Internal audit • Management climate • Code of conduct • Anti-fraud policy
- 18. Anti-Fraud Measures • Fraud training for employees • Mandatory vacation • Job rotation • Surprise audits • Reporting programs • Employee hiring process • Human resource recommendations
- 20. Other ways to reduce risk • IT Security • Separation of duties • Proper authorization • Adequate documents & records • Independent checks
- 21. Accounting Fraud “What to Look For & How to Help Prevent It”
- 23. WARNING Warning Signs An employee works late, on weekends, and refuses vacation time Documents are missing WARNING
- 24. WARNING Warning Signs Bank deposits are delayed Customers are complaining about already paying a bill WARNING
- 25. WARNING Warning Signs Duplicate payments are made Bank reconciliations have too many outstanding checks WARNING
- 26. WARNING Warning Signs Payments are being made to persons with same name or address Bank recs. are late WARNING
- 27. WARNING Warning Signs Receivables & payables detail do not match general ledger WARNING Vendors addresses are the same as employee addresses
- 28. WARNING Warning Signs Check amounts have changed or are being altered WARNING Unusual drop in profits or greater than expected losses
- 29. WARNING Warning Signs Past due accounts rec. are steadily increasing WARNING Bad debt write-offs are unusually high or unauthorized
- 30. WARNING Warning Signs Sudden lifestyle changes (living beyond means) WARNING Employee starts to receive phone calls at work from creditors
- 31. Monthly Reviews • Bank reconciliations • Accounts receivable aging summary • Accounts payable aging summary • Payroll summaries • Utility expense accounts
- 32. Monthly Reviews • Cell phone expense accounts • Expense reimbursement reports • Credit card statements • ACH transactions on bank statements • Credit card payments on bank statements
- 33. Other Deterrents • Avoid the use of a signature stamp • Require double signature for large purchases • Require that all disbursements be accompanied by a receipt • Segregate duties as much as possible
- 34. Other Deterrents • Before hiring a bookkeeper, conduct a background check • Consider doing a yearly inventory of fixed assets if you’re an equipment co. to ensure no assets are missing • For larger companies, institute a whistle blower program • Inspect whatever is being signed
- 35. Other Deterrents • Simply ask questions and be involved in finance matters • Be professionally skeptical • Always be sure you’re examining an original document • Use passwords
- 36. Accounting Fraud “What to Look For & How to Help Prevent It”