Anti-Fraud Risk and Control Workbook

– How to measure your organization's fraud risks – Detecting fraud before it's too late – Little-known frauds that cause major losses – Simple but powerful anti-fraud controls Proven guidance for fraud detection and prevention in a practical workbook format An excellent primer for developing and implementing an anti-fraud program, Anti-Fraud Risk and Control Workbook engages readers in an absorbing self- paced learning experience to develop familiarity with the practical aspects of fraud detection and prevention. Whether you are an internal or external auditor, accountant, senior financial executive, accounts payable professional, credit manager, or financial services manager, this invaluable resource provides you with timely discussion on: Why no organization is immune to fraud The human element of fraud Internal fraud at employee and management levels Conducting a successful fraud risk assessment Basic fraud detection tools and techniques Advanced fraud detection tools and techniques Written by a recognized expert in the field of fraud detection and prevention, this effective workbook is filled with interactive exercises, case studies, and chapter quizzes and shares industry-tested methods for detecting, preventing, and reporting fraud. Discover how to become more effective in protecting your organization against financial fraud with the essential techniques and tools in Anti-Fraud Risk and Control Workbook.

Preface vii A Short History of Fraud viii About This Book x About White-Collar Crime 101 LLC xi Acknowledgments xiii Chapter 1 Why No Organization Is Immune to Fraud 1 What Is Fraud? 2 Myths and Realities about Fraud Myth #1: Ethics and Compliance Training “Has Us Covered” 3 Myth #2: Our Finance Staff Are Qualified to Protect us Against Fraud 4 Myth #3: We Have Very Little Fraud Here 4 Myth #4: Fraud Is a Necessary Cost of Doing Business 5 Myth #5: Implementing Controls and Training Is Costly 6 The Urgency of Detecting and Preventing Fraud 6 Tone at the Top 7 Review Points 8 Chapter Quiz 9 Chapter 2 The Human Element of Fraud 11 Who Commits Internal Fraud? 12 The Fraud Personality: Soft Indicators 12 The Fraud Personality: Hard Indicators 14 Why People Steal 14 The Fraud Triangle 15 Case Study #1: Pain, Pills, and Petty Cash 16 Other Fraud Triangle Factors 18 A Triangle or a Diamond? 18 The Trust Factor 19 Case Study #2: The Trusted Thief 19 People: The Key to Detection and Prevention 20 Case Study #3: Demise by Personal Debt 21 Review Points 21 Chapter Quiz 22 Chapter 3 Internal Fraud: Employee Level 25 How Big a Problem Is Internal Fraud? 25 Overview of Employee-Level Fraud 26 Embezzlement 26 Accounts Payable (AP) Fraud 27 Case Study #4: Shell Game in the Big Apple 28 Case Study #5: Health Care Fraud 31 Accounts Receivable Fraud 32 Case Study #6: Robbing Peter to Pay Paul 33 Kickback Schemes 33 Inventory/Supply Schemes 33 Case Study #7: Kickbacks Fly When Controls Are Weak 34 Check Fraud and Tampering 35 Travel and Entertainment (T&E) Fraud 39 Payroll Schemes 41 Case Study #8: Wining and Dining on Customer Dollars 41 Theft of Confidential Information 42 Case Study #9: The New Employee 42 Case Study #10: Information Is as Good as Gold 43 Insider Abuse of Computer Systems 44 Case Study #11: But She Was Such a Nice Lady! 44 Red Flags of Employee-Level Fraud 45 Preventing Employee-Level Fraud 49 Accounts Payable Fraud-Prevention Checklist 50 Specific Employee-Level AP Fraud Controls Checklist 51 P-Card Fraud-Prevention Checklist 53 Accounts Receivable Fraud-Prevention Checklist 55 Kickback Scheme Prevention Checklist 55 Inventory Theft and Fraud-Prevention Checklist 56 Check Fraud-Prevention Checklist 56 ACH Fraud-Prevention Checklist 57 T&E Fraud-Prevention Checklist 57 Payroll Fraud-Prevention Checklist 58 Confidential Information Theft Prevention Checklist 58 Review Points 59 Chapter Quiz 61 Chapter 4 Internal Fraud: Management Level 67 T&E Fraud and Abuse 67 Bribery 70 The Greatest Corruption Story of All Time 72 Conflicts of Interest 73 Case Study #12: Brenda Belton’s Conflict of Interest Scheme 74 Misuse of Organization-Owned Assets 74 Fraudulent Financial Reporting 75 Case Study #13: The Great Buca Restaurant Fraud 77 Red Flags of Management-Level Fraud 78 Preventing Management-Level Fraud 81 Anti-Embezzlement Controls 82 Bribery and Kickback Schemes 84 Abuse of Organization-Owned Assets 84 Conflicts of Interest 84 Financial Statement Fraud 85 Review Points 89 Chapter Quiz 89 Chapter 5 External Fraud: Protecting Against Dishonest Outsiders 93 Types of External Fraud 93 Vendor and Billing Fraud 93 Social Engineering and Pretexting 95 Case Study #14: The Phoner Toner Scam 97 Bank Employee Collusion with Outsiders 97 Case Study #15: The Frito Fraud 98 Customer-Perpetrated Fraud 98 Theft of Confidential Information 99 The “SCAM” Model 100 Red Flags of External Fraud 101 Preventing External Fraud 103 Review Points 105 Chapter Quiz 106 Chapter 6 Conducting a Successful Fraud Risk Assessment 109 Procedures for Conducting a Fraud Risk Assessment 111 Step 1: Create an FRA Team 111 Step 2: Identify the Organization’s Universe of Potential Risks 111 Step 3: Analyze the Likelihood of Each Scheme or Scenario Occurring 113 Step 4: Assess the Materiality of Risk 113 Step 5: Assess Risks within the Context of Existing Anti-Fraud Controls 113 The Roles of the Board and Management in Fraud Risk Assessments 114 Review Points 115 Chapter Quiz 116 Chapter 7 Basic Fraud Detection Tools and Techniques 119 Basic Fraud Detection 120 Case Study #16: I’m the Boss, and I Can Use Any Vendors I Want 125 Review Points 126 Chapter Quiz 127 Chapter 8 Advanced Fraud Detection Tools and Techniques 129 Internal Audit and the Audit Plan 129 Essentials of Fraud Auditing 131 Auditing for Fraud in Accounts Payable 132 Auditing for Payroll Fraud 133 Essentials of Automated Auditing 135 Review Points 136 Chapter Quiz 137 Appendix A Answers to Chapter Quizzes 139 Appendix B Answer Key for Case Studies 143 Appendix C An Introduction to Cyber Fraud 149 Resources 163 Notes 165 Glossary 171 About the Author 175 Index 177