We continued our Celebrating 40 Years of Excellence! Fall Webinar Series with a webinar titled Fraud Prevention and Detection: Surprise Fraudsters Before They Surprise You. This webinar was hosted by Sam BowerCraft, Senior Manager and Dave Hammarberg , IT Director with McKonly & Asbury.
Check out our Upcoming Events page for news and updates on our future seminars and webinars at http://www.macpas.com/events/.
View a full recap of this webinar at http://www.macpas.com/fraud-prevention-and-detection-webinar/.
2. FRAUD ENGAGEMENT
FROM A TO Z
S A M U E L
B O W E R C R A F T ,
M S I S ,
C I S A
&
D A V I D
C P A ,
H A M M A R B E R G ,
C F E ,
C I S S P ,
M C S E ,
W X Y Z
7. ABOUT MCKONLY & ASBURY, LLP
• Audit, Tax and Risk Management Firm
• Regional presence in Pennsylvania
• Variety of clients ranging from construction to manufacturing and other
clients
• Special capabilities in the risk management area
• Best Places to Work and Best Accounting Firm
11. FRAUDSTER ACTIVITY
Bad actors are always looking for opportunity
Opportunity occurs when there is:
• No control or oversight (trust without verification).
• Oversight without diligence (inadequate verification).
• Culture issues:
• Excessive trust, or
• Disinterest in supporting a controlled environment.
12. AUDITING 411
Process Auditing Purpose:
• Evaluate and improve the effectiveness of risk management, control, and
governance processes.
• Auditing seeks to determine why activities are performed, and how they
have been performed to meet business objectives.
13. AUDITING 411
Process Auditing Purpose:
• To verify that the right things are being done.
• To evaluate processes for effectiveness and efficiency.
• To provide independent assessment of processes and make
recommendations for improvement.
• To work with management to make things better.
• This is a detection strategy.
14. AUDITING 411
NOT the Process Auditing Purpose:
• To punish the guilty or innocent with a rain of fire, brimstone, and guilt.
• To strike fear into the hearts of men and women.
• To demonstrate a lack of trust in the employees within the company.
15. WHY ARTICULATE THE PURPOSE?
Understanding the purpose of the audit
process helps us to understand how to
wield / use the process effectively.
16. SURPRISE
tr. v.
• To encounter suddenly or unexpectedly; take or catch unawares.
(www.thefreedictionary.com)
• Surprise occurs when what happens does not match our expectations.
• Surprise can be used to shake people out of a complacent state.
(www.changingminds.com)
17. SURPRISE AUDITS
Purpose:
• To evaluate without providing notice of the review/audit so that
preparation cannot be performed by the auditee.
• To confirm the true operational readiness of a process area.
• The audit is a detection strategy…
• The possibility of the audit is a prevention strategy.
18. SURPRISE AUDIT BASICS
• Purpose
• Scope
• Standards and procedures for the audit
• Audit team members
• Schedule
• Final report expectations
20. SURPRISE AUDIT BENEFITS
• No one expects a surprise audit.
• It forces a state of readiness at all times.
• Fraud is more frequently caught via this type of audit.
21. AREAS TO FOCUS ON
High Risk Areas for Fraud
•
•
•
•
Payroll
Accounts Payable
Inventory
Key Internal Control Areas
22. THE MORE THINGS CHANGE…
• Surprise Audits work just like regular audits.
• Risk assessment is still required by management to
identify key areas of risk.
• Randomization of surprise audits is a must to keep
readiness high in all areas.
23. SURPRISE AUDIT CONSIDERATIONS
Culture:
• Set the expectation in the company that surprise audits may occur.
• Normally audits are planned and time is scheduled.
• By their nature, surprise audits create a “we” versus “them”
mentality.
• Communicate this approach early and often to minimize the
cultural impact later.
24. SURPRISE AUDIT CONSIDERATIONS
Culture:
• Setting expectation at all levels to do the right things at the right times.
• Not just to do things prior to an audit.
• If you do your job, a review at any time should reveal few issues.
• Live and Die by the Sword
• If surprise audits are good for one area in the company, they are good for any
area in the company.
• Be wary of creating a culture where only one group is susceptible to this type of
audit; it may create resentment.
25. SURPRISE AUDIT CONSIDERATIONS
Presentation:
• Present and explain the reason and purpose of the surprise audit to the auditees.
• Clarify that the purpose is not to punish but to check on and improve (if needed)
the processes.
• Represent the importance of checking the process given the risk assessment.
26. SURPRISE AUDIT CONSIDERATIONS
Consistency:
• Use the same approach for both standard and surprise audits, except for:
• Surprise, and
• Information collection: gather data, request items, and perform inventories
immediately if there is a high level of risk or concern.
• Be factual about the approach and the process.
27. NEXT STEPS
1. Assess risk in your environment:
• General risks
• Fraud risks
2. Consider areas for surprise audits.
3. Communicate to all that surprise audits are a possibility.
4. Communicate the importance of:
• Doing things right at the right time.
• Verification of activities to provide comfort to management.
5. Maintain a consistent approach for all audits.
28. THANK YOU.
Questions? Please contact us:
• Samuel BowerCraft
• sbower@macpas.com
• David Hammarberg
• dhammarberg@macpas.com
29.
30.
31. FRAUD ENGAGEMENT
FROM A TO Z
S A M U E L
B O W E R C R A F T ,
M S I S ,
C I S A
&
D A V I D
C P A ,
H A M M A R B E R G ,
C F E ,
C I S S P ,
M C S E ,
W X Y Z