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No More Street No More Street Crimes Crimes
How Occupational Fraud is How Occupational Fraud is CommittedCommitted
©2012 Association of Certified Fraud ©2012 Association of Certified Fraud Examiners, Inc.Examiners, Inc.
44
Occupational Frauds by Category — FrequencyOccupational Frauds by Category — Frequency
How Occupational Fraud is How Occupational Fraud is CommittedCommitted
©2012 Association of Certified Fraud ©2012 Association of Certified Fraud Examiners, Inc.Examiners, Inc.
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Occupational Frauds by Category — Median LossOccupational Frauds by Category — Median Loss
©2012 Association of Certified Fraud ©2012 Association of Certified Fraud Examiners, Inc.Examiners, Inc.
66
Initial Detection of Occupational FraudsInitial Detection of Occupational Frauds
Victim OrganizationsVictim Organizations
©2012 Association of Certified Fraud ©2012 Association of Certified Fraud Examiners, Inc.Examiners, Inc.
77
Asian CasesAsian Cases
Victim OrganizationsVictim Organizations
©2012 Association of Certified Fraud ©2012 Association of Certified Fraud Examiners, Inc.Examiners, Inc.
88
Frequency of Anti-Fraud ControlsFrequency of Anti-Fraud Controls88
PerpetratorsPerpetrators
©2012 Association of Certified Fraud ©2012 Association of Certified Fraud Examiners, Inc.Examiners, Inc.
99
Position of Perpetrator — FrequencyPosition of Perpetrator — Frequency
PerpetratorsPerpetrators
©2012 Association of Certified Fraud ©2012 Association of Certified Fraud Examiners, Inc.Examiners, Inc.
1100
Position of Perpetrator — Median LossPosition of Perpetrator — Median Loss
PerpetratorsPerpetrators
©2012 Association of Certified Fraud ©2012 Association of Certified Fraud Examiners, Inc.Examiners, Inc.
1111
Position of Perpetrator in Asia — 196 CasesPosition of Perpetrator in Asia — 196 Cases
PerpetratorsPerpetrators
©2012 Association of Certified Fraud ©2012 Association of Certified Fraud Examiners, Inc.Examiners, Inc.
1122
Age of Perpetrator — FrequencyAge of Perpetrator — Frequency
PerpetratorsPerpetrators
©2012 Association of Certified Fraud ©2012 Association of Certified Fraud Examiners, Inc.Examiners, Inc.
1133
Age of Perpetrator — Median LossAge of Perpetrator — Median Loss
PerpetratorsPerpetrators
©2012 Association of Certified Fraud ©2012 Association of Certified Fraud Examiners, Inc.Examiners, Inc.
1144
Department of Perpetrator — FrequencyDepartment of Perpetrator — Frequency
PerpetratorsPerpetrators
©2012 Association of Certified Fraud ©2012 Association of Certified Fraud Examiners, Inc.Examiners, Inc.
1155
Behavioral Red Flags of PerpetratorsBehavioral Red Flags of Perpetrators
Income StatementIncome Statement
Profit is an Estimate
Cooking the Financial Books
Assumptions (What ingredients to include)
Estimates (How much to include)
You may assume that they’re accurate down to the last dollar. Not true! The balance in the cash account is exact, but virtually every other number you see in a financial report is based on an estimate.
Increase Revenue(Revenue Recognition)
Round Trip Recipe Round Trip Recipe
CompanCompanyy
VenderVender
Pre-Paid Services 4 Million Pre-Paid Services 4 Million
Current Revenue 1 Million Current Revenue 1 Million
Reporting more revenue Reporting more revenue
Deferral of Revenue Recipe Deferral of Revenue Recipe
CustomCustomerer
Balance SheetBalance SheetUmearned Umearned Revenue Revenue
2 Million2 Million
1
1
Million
Million
Manipulating revenue Manipulating revenue
Current Current Revenue Revenue
- Sold equipment on four-year leases, including service and maintenance. - Booked all the revenues up front.
- Xerox mis-stated four years' worth of profits, resulting in an overstatement of close to $6bn.
Channel Stuffing
Company inflates sales figures by forcing more products through a distribution channel than the channel is capable of selling to the world at large.
Reduce ExpensesReduce Expenses(Matching Principle) (Matching Principle)
Capitalize Expenses Recipe Capitalize Expenses Recipe
ExpensExpenseses
Balance Balance SheetSheet
CapitalCapital
8 Million8 Million
8 Million8 Million Income Income
Satement Satement ExpensesExpenses
- Took a pretax charge -a one-time write off- of 3.54 billion against its earnings
- Grow rapidly by buying other garbage companies. But didn't know to run them.
- Changed the depreciation of their 20,000 tracks from 8-10 years to 12-15 years and did the same for their 1.5 million dumpsters
By the end of 2003, it was estimated that the company's total assets had been inflated by around $11 billion
In June 2002, the company admitted it had inflated its profits by $3.8bn between January 2001 and March 2002.
Underreporting ‘line costs’ (interconnection expenses with other telecommunication companies) by capitalizing these costs on the balance sheet rather than properly expensing them.
Questions:
Who controls your organization?
Are the accountants making the right judgment decisions?
Balance SheetBalance Sheet