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1. Binary Scam Watch Monitor

2. Auditing vs. Fraud Examination
Issue Auditing Fraud Examination
Timing Recurring Nonrecurring
Presumption Professional Proof
skepticism
Objective Opinion Affix blame
Scope General Specific
Relationship Nonadversarial Adversarial
Methodology Audit techniques Fraud examination
techniques

3. Defining Occupational
Fraud and Abuse
 The use of one’s occupation for
personal enrichment through the
deliberate misuse or misapplication of
the employing organization’s resources
or assets

4. Elements of Fraud
 A material false statement
 Knowledge that the statement was false
when it was uttered
 Reliance on the false statement by the
victim
 Damages resulting from the victim’s
reliance on the false statement

5. Opportunity
Pressure Rationalization
Fraud
Triangle

6.  corruption, which includes conflicts of interest,
bribery (including kickbacks), illegal gifts, and
economic extortion;
 misappropriation of assets, which includes
skimming, larceny, and asset misuse; and
 financial statement fraud, which can include
financial (either asset or revenue over- or
understatements) and non-financial
components

7.  An ounce of prevention is better than a ton off
treatment
 In order to prevent fraud there is a need to
make your organization immune against fraud

8.  The means to reduce risk
 Prevention
 Reduce the opportunity for
 Deterrence (punishment)
 Detection
 Detection of fraud is much more costly

9.  Management has the
responsibility and
means to implement
measures to reduce
the risk of fraud
 Good corporate
governance reduces
the risk

10.  Create and Maintain a culture of honesty and
high ethics
 Evaluate the risk and implement policies,
procedures, and controls to mitigate the risk
and reduce the opportunity
 Develop appropriate oversight processes

11.  Setting the tone at the
top
 Positive work place
environment
 Hiring & promoting
appropriate
employees
 Training
 Conformation
 Discipline

12.  Lead by example (words and actions)
 Management has to
 Behave Ethically
 Communicate it’s intolerance for dishonest and
unethical behavior
 Employees must be treated equally with
disregard to position

13.  Set achievable financial goals (not to create
undue pressure)
 Create a code of ethics and implement it
The code of ethics should be clear,
understandable and developed in a positive
participatory manner .

14.  The code of conduct should reflect the core
values of the entity and guide employees in
 making appropriate decisions during their
workday.
 The code of conduct might include such topics
as
 ethics, confidentiality, conflicts of interest,
intellectual property, sexual harassment, and fraud.

15.  Employees should be given the opportunity to
help in development and updating of code of
conduct to create ownership
 Employees should be encouraged to report
violation of code or wrong doing
 A hotline (anonymous is preferred to avoid fear or
retribution )

16.  wrongdoing occurs less frequently when
employees have positive feelings about an
entity than when they feel abused, threatened,
or ignored
 Without a positive workplace environment,
there are more opportunities for poor
employee morale, which can affect an
employee’s attitude about committing fraud
against an entity

17.  Top management that does not seem to care
about or reward appropriate behavior
 Negative feedback and lack of recognition for
job performance
 Perceived inequities in the organization
 Autocratic rather than participative
management

18.  Low organizational loyalty or feelings of ownership
 Unreasonable budget expectations or other financial
targets
 Fear of delivering “bad news” to supervisors and/or
management
 Less-than-competitive compensation
 Poor training and promotion opportunities
 Lack of clear organizational responsibilities
 Poor communication practices or methods within the
organization

19.  Recognition and reward systems that are in tandem
with goals and
 Equal employment opportunities
 Team-oriented, collaborative decision-making policies
 Professionally administered compensation programs
 Professionally administered training programs at all
organizational levels
 Career development
A good HR Department is instrumental

20.  Hire the best sited
for the job
 with integrity
 Equivalence of effort
to reward
 Promotion biased on
evaluation
When people are under pressure and
there is a perceived opportunity some
people will behave dishonestly rather
than face negative consequences of
honest behavior

21.  Conducting background investigations on individuals being
considered for employment or for promotion to a position of trust
 Thoroughly checking a candidate’s education, employment
history, and personal references
 Periodic training of all employees about the entity’s values and
code of conduct, (training is addressed in the following section)
 Incorporating into regular performance reviews an evaluation of
how each individual has contributed to creating an appropriate
workplace environment in line with the entity’s values and code
of conduct
 Continuous objective evaluation of compliance with the entity’s
values and code of conduct, with violations being addressed
immediately

22.  New employees should be trained at the time
of hiring about the entity’s values and its code
of conduct.
 This training should explicitly cover
expectations of all employees regarding
 Their duty to communicate certain matters;
 A list of the types of matters, including actual or
suspected fraud, to be communicated along with
specific examples;
 Information on how to communicate those matters.

23.  The training should be at the time of hiring as
well as refresher training periodically
 Training should be specific to an employee’s
level within the organization, geographic
location, and assigned responsibilities.

24. Management needs to clearly articulate that all
employees will be held accountable to act
within the entity’s code of conduct. All
employees within senior management and the
finance function, as well as other employees in
areas that might be exposed to unethical
behavior (for example, procurement, sales and
marketing) should be required to sign a code of
conduct statement annually, at a minimum.

25.  The way an entity reacts to incidents of alleged
or suspected fraud will send a strong deterrent
message throughout the entity, helping to
reduce the number of future occurrences.
 The consequences of committing fraud must be
clearly communicated throughout the entity.

26.  A thorough investigation of the incident should
be conducted.
 Appropriate and consistent actions should be
taken against violators.
 Relevant controls should be assessed and
improved.
 Communication and training should occur to
reinforce the entity’s values, code of conduct,
and expectations.

27.  Fraud can not occur without a perceived
opportunity to commit and conceal the act.
 Organizations should be proactive in reducing
fraud opportunities by
(1) Identifying and measuring fraud risks,
(2) Taking steps to mitigate identified risks, and
(3) Implementing and monitoring appropriate
preventive and detective internal controls and other
deterrent measures.

28. Feed forward
Feed back
input
process
outputC
process
input
C
output
C
outputinput
process

29.  Existence of a control
even if non-
operational can be a
deterrent and act as a
real control

30.  Audit Committee or Board of Directors
 Management
 Internal Auditors
 Independent Auditors
 Certified Fraud Examiners

31.  To monitor compliance with laws
 Integrity of financials
 Asses external auditor qualifications &
independence
 Follow up on internal audit