occupational fraud (2)
TRANSCRIPT
Presented by
Riley Parker
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CA PI 16105, 26392PO Box 20398, Bakersfield, CA 93390
661.635.0633 Fax: 661.635.0634www.ParkerPI.com
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CALIFORNIA BUSINESS AND
PROFESSIONS CODE , SECTION 7520-7539
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• 25% cost at least $1 million
•Median cost $175,000
•Typical case lasts 2 years
•Most common schemes: 1.Corruption – 27%2.Fraudulent billing - 24%
•Likely detected by a tip, not through audits, controls
Typical Fraud Cases
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Small businesses most vulnerable
Lack of internal controls most common factor
Most often committed by accounting or upper management
Fraudsters are generally first time offenders
Red flags: living beyond their means or experiencing financial difficulties
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1. Corruption: Conflicts of interest, Bribery, Illegal Gratuities
2. Asset Misappropriation: Cash Larceny & Skimming, Fraudulent Disbursements, Noncash Misuse
3. Fraudulent Statements: Financial & Non-financial (employment credentials, internal & external documents.
Occupational Fraud Classifications
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The typical organization loses
7% of its annual revenues to
occupational fraud.
7% OF GNP 7% OF GNP ==$994,000,000 $994,000,000
IN PROJECTED FRAUD IN PROJECTED FRAUD LOSSES LOSSES
Financial Financial Misstatement Misstatement
Aka: Cooking the Books
Median losses - $2 Million per scheme
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MOST COSTLY TYPE OF MOST COSTLY TYPE OF FRAUDFRAUD
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Median Loss BreakoutMedian Loss Breakout
Fraudulent Statements $2 Million
Corruption $375,000
Check Tampering $138,000
Billing $100,000
Non-cash $ 80,000
Cash Larceny $ 75,000
Payroll $ 49,000
Cash on Hand $ 35,000
Expense Reimburse $ 25,000
Register Disburse $ 25,000
Living beyond means
Financial difficulties
Wheeler-dealer attitude
Control issues, unwillingness to share duties
Divorce/family problems
Unusually close association with vendors, customers
Irritability, suspiciousness, or defensiveness
Addiction problems
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BEHAVIORAL RED FLAGSBEHAVIORAL RED FLAGS
Past legal problems
Past employment related problems
Complaints about inadequate pay
Refusal to take vacations
Excessive pressure from within organization
Instability in life circumstances
Excessive family/peer pressure for success
Complaints about lack of authority
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BEHAVIORAL RED BEHAVIORAL RED FLAGS, CONTINUEDFLAGS, CONTINUED