1. Carol Zhang

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)

3. 1. Accounting anomalies
2. Internal control weaknesses
3. Analytical anomalies
4. Unusual behavior
5. Extravagant lifestyle
6. Tips and complaints

4. Common anomaly
frauds involve:
 Irregularities in source
documents
 Faulty journal entries
 Inaccuracies in ledgers

5.  Irregularities in source documents
 Normal
 Fraud

6.  Faulty journal entries

7.  Inaccuracies in ledgers

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

10. Relatives of
CFO-A
Relatives of
CFO-A
Relatives of
treasure-A
Relatives of
Treasure-B
CFO
Company A
treasure
Company B Company DCompany C
Billing Payment
Authorization
Symptoms ?

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

17. RM not enough
Shipping in bad
weather
Ships were not
enough
Fraud

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