fraud examination
DESCRIPTION
Fraud Examination. [ Mas Sugeng ]. Chapter 1: Introduction. What is Occupational /hub Fraud and Abuse?. Use of occupation / hub For personal enrichment /memperkaya Through deliberate misuse or misapplication / sengaja meneruskan Of employer’s resources/assets. Defining Fraud / penipuan. - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/1.jpg)
Fraud ExaminationFraud Examination
[Mas Sugeng]
![Page 2: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/2.jpg)
Chapter 1: IntroductionChapter 1: Introduction
![Page 3: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/3.jpg)
What is OccupationalWhat is Occupational/hub/hub Fraud and Abuse? Fraud and Abuse?
Use of occupation / hubFor personal enrichment/memperkayaThrough deliberate misuse or
misapplication / sengaja meneruskanOf employer’s resources/assets
![Page 4: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/4.jpg)
Defining FraudDefining Fraud / penipuan / penipuan
Four elements:Material false statementKnowledge that the statement was falseReliance (percaya) on the statement by
victimDamages/perusakan
![Page 5: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/5.jpg)
Defining AbuseDefining Abuse / salah guna / salah guna
A deceitful act / tindakan bohongA corrupt practice or custom / praktek,
kebiasaan korupExamples:
– “Borrow” company equipment– Use sick leave when not sick– Slow or sloppy work / pelan dan lemah kerja– Surf the Net at work / jaringan lbh batas– Work under influence of drugs/alcohol
![Page 6: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/6.jpg)
Research in Occupational Research in Occupational Fraud and AbuseFraud and Abuse
![Page 7: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/7.jpg)
Edwin H. SutherlandEdwin H. Sutherland
First defined “white-collar crime”– Criminal acts of corporations– Individuals in corporate capacity
Theory of differential association– Crime is learned– Not genetic– Learned from intimate personal groups
![Page 8: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/8.jpg)
Donald R. CresseyDonald R. Cressey
Studied embezzlers Why people become “trust violators”Developed the Fraud Triangle
![Page 9: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/9.jpg)
The Fraud TriangleThe Fraud TrianglePRESSURE
PERCEIVEDOPPORTUNITY
RATIONALIZATION
![Page 10: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/10.jpg)
Nonsharable ProblemsNonsharable Problems
Violation/pelangaran of ascribed obligations
Personal failuresBusiness reversals /rugiPhysical isolationStatus gainingEmployer-employee relations
![Page 11: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/11.jpg)
Cressey’s OffenderCressey’s Offender/pelanggar/pelanggar TypesTypes
Independent businessmen – “Borrowing”– Funds really theirs
Long-term violators– “Borrowing”– Protect family– Company cheating them– Company generally dishonest
![Page 12: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/12.jpg)
Cressey’s Offender TypesCressey’s Offender Types
Absconders / menghindarTake the money and runUsually unmarried, lonersBlame “outside influences” or “personal
defects”
![Page 13: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/13.jpg)
W. Steve AlbrechtW. Steve Albrecht
Nine motivators of fraud1. Living beyond means
2. Overwhelming desire for personal gain
3. High personal debt
4. Close association with customers
5. Pay not commensurate with job
![Page 14: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/14.jpg)
W. Steve AlbrechtW. Steve Albrecht
Nine motivators of fraud6. Wheeler-dealer
7. Strong challenge to beat system
8. Excessive gambling
9. Family/peer pressure
![Page 15: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/15.jpg)
The Fraud ScaleThe Fraud Scale
Situational pressures– Immediate problems with environment– Usually debts/losses
Perceived opportunities– Poor controls
Personal integrity– Individual code of behavior
![Page 16: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/16.jpg)
The Fraud ScaleThe Fraud Scale
![Page 17: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/17.jpg)
Richard C. HollingerRichard C. Hollinger
Hollinger-Clark study (1983)Surveyed 10,000 workersTheft caused by job dissatisfactionTrue costs vastly understated
![Page 18: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/18.jpg)
Employee DevianceEmployee Deviance
Two categories:– Acts against property– Production violations (goldbricking)
Strong relationship: theft and concern over financial situation
![Page 19: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/19.jpg)
Age and TheftAge and Theft
Direct correlationYounger employees less committedBut, higher position = bigger theftOpportunity is only a secondary factor
![Page 20: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/20.jpg)
Job Satisfaction and DevianceJob Satisfaction and Deviance
Dissatisfied employees– More likely to break rules– Regardless of age/position– Trying to right perceived inequities
Wages in kind
![Page 21: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/21.jpg)
Organizational ControlsOrganizational Controls
Some impact, but limitedHollinger studied five aspects:
– Company policy– Selection of personnel– Inventory control– Security– Punishment
![Page 22: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/22.jpg)
Hollinger’s ConclusionsHollinger’s Conclusions
Employee perception of controls is important Increased security may hurt, not help Employee-thieves exhibit other deviance
– Sloppy work, sick leave abuses, etc. “Hydraulic effect” Management should be sensitive to
employees Pay special attention to young employees
![Page 23: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/23.jpg)
Hollinger’s ConclusionsHollinger’s Conclusions
Four key aspects of policy development1. Understand theft behavior
2. Spread positive info on company policies
3. Enforce sanctions
4. Publicize sanctions
![Page 24: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/24.jpg)
The Report to the Nation on The Report to the Nation on Occupational Fraud and AbuseOccupational Fraud and AbuseLargest fraud study everStudy of 2,608 fraud casesReported by CFEsTotal: $15 billion in losses$22 to $2.5 billion
![Page 25: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/25.jpg)
CostsCosts
How to measure? Orgs don’t know what they loseOpinions of CFEsSix percent of gross revenues$400 billion per yearTwice the U.S. defense budget
![Page 26: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/26.jpg)
Position in the Organization - Position in the Organization - CasesCases
12%
30%
58%
0% 10% 20% 30% 40% 50% 60%
Owners
Management
Employees
![Page 27: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/27.jpg)
Position in the Organization – Position in the Organization – Median LossMedian Loss
$1,000,000
$250,000
$60,000
$0 $200,000 $400,000 $600,000 $800,000 $1,000,000
Owners
Management
Employees
![Page 28: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/28.jpg)
Median Loss by GenderMedian Loss by Gender
$48,000
$185,000
$0 $50,000 $100,000 $150,000 $200,000
Female
Male
![Page 29: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/29.jpg)
Median Loss by AgeMedian Loss by Age
Direct and linear correlation between age and median loss
Older tend to occupy higher ranking positions
Greater access to revenues, assets, resources
5
![Page 30: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/30.jpg)
Median Loss by AgeMedian Loss by Age
$346,000
$280,000
$196,000
$100,000
$54,000
$50,000
$12,000
$0 $100,000 $200,000 $300,000 $400,000
60+
51-60
41-50
36-40
31-35
26-30
<25
![Page 31: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/31.jpg)
Median Loss by Marital StatusMedian Loss by Marital Status
$50,000
$54,000
$80,000
$150,000
$0 $50,000 $100,000 $150,000
Separated
Single
Divorced
Married
![Page 32: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/32.jpg)
Median Loss by EducationMedian Loss by Education
$275,000
$200,000
$50,000
$0 $100,000 $200,000 $300,000
Post-Graduate(13%)
College (45%)
High School(42%)
![Page 33: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/33.jpg)
Median Loss Per Median Loss Per Number of EmployeesNumber of Employees
$126,000
$80,000
$100,000
$120,000
$0 $40,000 $80,000 $120,000 $160,000
10,000+
1,000-10,000
100-1,000
1-100
![Page 34: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/34.jpg)
Classifying Occupational Classifying Occupational Fraud and AbuseFraud and Abuse
B rib ery
C on flic ts o f In te res t
I lleg a l G ra tu it ies
E xto rt ion
CORRUPTION
Larcen y
Skim m in g
F rau d u len t D isb u rsem en ts
C ash In ven to ry
ASSET M ISAPPROPRIAT ION
F in an c ia l
N on -F in an c ia l
FRAUDULENT STATEM ENTS
OCCUPATIONAL FRAUD AND ABUSE
![Page 35: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/35.jpg)
Number of CasesNumber of Casesby Scheme Typeby Scheme Type
Asset Mis80.4%
Corruption14.6%
Other1.0%
Fraud Stmts4.0%
![Page 36: Fraud Examination](https://reader035.vdocuments.us/reader035/viewer/2022062222/56814f56550346895dbd004d/html5/thumbnails/36.jpg)
*Represents size of misstatement rather than actual cash loss
Median Loss by Scheme TypeMedian Loss by Scheme Type
$107, 230
$4,000,000*
$440,000
$65,000
0 1,000 2,000 3,000 4,000
Thousands
Other
Fraud Stmts
Corruption
Asset Mis