Principal Mike Costello, CPA•ABV•CFF, ASA, CFE, Director of Litigation Support Sharon P. Hamrick, CPA•CFF, CFE and Senior Manager Pamela S. Mantone, CPA•CFF, CFE, FCPA, CITP, CGMA co-presented the topic "Forensics and Fraud: Red Flags and War Stories" at the 2013 TSCPA FSV Conference, during which they shared from their experiences the details of various fraud schemes and methods used to detect and investigate them. - See more at: http://decosimo.com/www/announcements/540.8136/forensic-accounting-fraud-specialists-share-expertise-tscpa#sthash.eEdR6hfE.dpuf

1. FORENSICS AND FRAUD
RED FLAGS AND WAR STORIES
Decosimo Advisory Services

2. FORENSICS AND FRAUD

3. FORENSICS AND FRAUD
OCCUPATIONAL
FRAUD OVERVIEW
• Financial Statement
• Corruption
• Asset Misappropriation

4. FORENSICS AND FRAUD
CASH
MISAPPROPRIATION

5. FORENSICS AND FRAUD
CASH RECEIPTS
MISAPPROPRIATION

6. FORENSICS AND FRAUD
CASH DISBURSEMENTS
MISAPPROPRIATION

7. FORENSICS AND FRAUD
WHAT LESSONS CAN
BE LEARNED

8. FORENSICS AND FRAUD
COMPANY RED FLAGS
• Rapid growth of the company
• Unusual general journal entries or
unusual transactions, especially
close to the end of a period
• Significant related party
transactions not in the ordinary
course of business
• Lack of or inconsistent oversight

9. FORENSICS AND FRAUD
COMPANY RED FLAGS
• Failure to update controls and
accounting systems as technology
and business change
• Too much trust in any one
individual

10. FORENSICS AND FRAUD
INHERENT LIMITATIONS OF
INTERNAL CONTROLS

11. INHERENT LIMITATIONS IN
INTERNAL CONTROL SYSTEMS
FORENSICS AND FRAUD
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Judgment
Breakdowns
Management override
Collusion
Materiality
Point-in-time evaluation
Cost/Benefit Considerations

12. FORENSICS AND FRAUD
BEHAVIORAL RED FLAGS OF
PERPETRATORS

13. FORENSICS AND
FRAUD
BEHAVIORAL RED FLAGS OF
PERPETRATORS
81% of Fraudsters exhibited at
least one of these red flags:
36% living beyond their means
27% with financial difficulties
19% with unusually close
associations with vendors or
customers
18% had excessive control issues
with their duties
(ACFE 2012 Report to the Nations)

14. FORENSICS AND
FRAUD
HOW TO HELP YOUR CLIENT
PROTECT HIS COMPANY

15. FORENSICS AND
FRAUD
HOW TO HELP YOUR
CLIENT PROTECT HIS
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Fraud Policy
Fraud training for employees
Tone at the Top
Monitoring and updating internal
controls
• Fraud risk assessments

16. FORENSICS AND
FRAUD
WHAT ABOUT EXTERNAL
THREATS

17. FORENSICS AND
FRAUD
WHAT ABOUT EXTERNAL
THREATS
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Adversary – “The Bad Guy”
Terrorist groups
Criminals
Organized crime
Hackers/Crackers
Social engineering techniques

18. FORENSICS AND
FRAUD
PHISHING EMAILS

19. FORENSICS AND
FRAUD
WHEN YOU HAVE
SUSPICIONS

20. FORENSICS AND
FRAUD
WHEN YOU HAVE
SUSPICIONS
• Investigate on behalf of the board
of directors
• Conduct interviews
• Perform data analysis, data
mining
• Search computer records

21. FORENSICS AND
FRAUD
WHEN YOU HAVE
SUSPICIONS
• Search sources of outside
information related to the suspect
– BUT FIRST –
• TALK TO YOUR
ATTORNEY!

22. FORENSICS AND FRAUD
RED FLAGS AND WAR STORIES
CONTACT US
Mike Costello
~ mikecostello@decosimo.com
Sharon Hamrick ~ sharonhamrick@decosimo.com
Pam Mantone
~ pammantone@decosimo.com