Small business fraud presentation
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This document discusses common employee fraud schemes like embezzlement, provides examples of fraud cases, and outlines the fraud triangle of opportunity, pressure, and rationalization that can lead employees to commit fraud. It then details specific fraud methods like skimming cash receipts, payroll and billing schemes, check tampering, and expense reimbursement fraud. The document recommends internal controls, accounting software controls, reconciliation practices, and analytical procedures to help prevent and detect occupational fraud. It also discusses investigating potential fraud and the services of fraud prevention expert Dennis Thompson.
Small business fraud presentation
- 1. The Detection and Prevention of Fraud ( Or The Company You Save May Be Your Own) Dennis L. Thompson, CPA,CFE www.dlthompsoncpa.com
- 3. Windish RV - Colorado 40 Year Old Billing Clerk Embezzled $951k Fraud Lasted Three Years Created a Shell Company Wrote duplicate checks Deposited into Shell Business Account Plead guilty to felony theft Sentenced to 5 years
- 5. Payless Hardware-California 36 Year Accounts Receivable Clerk Worked from 2002 to 2009 Embezzled $1.43 Million Skimmed Receivables Handled bank deposits Laundered money Convicted on 58 Felony Counts 1 count of grand theft 3 counts of filing fraudulent tax returns Sentenced to 10 years Husband sentenced to 1 year for money laundering
- 7. IP Koki Printing, Oregon 48 Year Old Bookkeeper Worked from 1992 to 2008 Embezzled $1.5 Million Forged Checks Printing Company Closed 74 lost jobs Convicted on 58 Felony Counts Aggravated 1st degree theft 18 Counts Identity Theft Received 23.5 years
- 8. Fraud Triangle Donald Cressey Opportunity Pressure Rationalization
- 9. Opportunity Trusted Employee Necessary Skills Weak Internal Controls
- 10. Pressure Non-sharable Problems Living beyond Means Gambling Losses Medical Expenses
- 11. Rationalizations Just Borrowing Employer is Unfair Unique Circumstances
- 12. Asset Misappropriations Most Common Cash Inventory/Other Assets
- 13. Cash Receipts On Book Larceny Off Book Skimming
- 14. Fraudulent Cash Disbursements Billing Schemes Payroll Schemes Expense Reimbursements Check Tampering
- 15. Billing Schemes Shell Company Employee sets up fictitious Vendor Service companies are harder to detect Money deposited in Employees account Starbucks Example How to Detect Review Vendor lists, esp those with P.O. Box Compare Vendor address with Employee address
- 16. Payroll Schemes Falsified Hours Forge Supervisors Signature Ghost Employees Employees that have quit or fictitious Detecting Require Supervisor to monitor Supervisor hands out paychecks H/R monitor employee records
- 17. Expense Reimbursements Personal Expenses Multiple Reimbursements Fictitious Reimbursements Dectecting & Preventing Supervisor Review Only Original Documents Expense Reimbursments
- 18. Check Tampering Forged Maker Fraudster forges check signature Use of check signing machine Forged Endorsement Fraudster steals third party check Altered Payee Authorized Maker Signs checks for personal expenses
- 19. Deterrence & Detection Review Returned check from Bank Restrict access to check signature machine Look for signs of tampering on original check Restrict access to blank checks Check Tampering
- 20. Detection of Fraud Schemes Initial Detection of Occupational Frauds
- 21. Prevention & Detection of Fraud Internal Control Reconcile All GL Accounts Accounting Software Controls Ratio Analysis Digital Analysis Tip Lines Other Considerations
- 22. Internal Control Segregation of Duties Do Not Allow One Person To Have Recorded Keeping Responsibility And Physical Custody of Asset
- 23. Account Reconciliation Bank Segregation of Duties Timely Bank Statement Mailed to Owner Credit Card Review for Charges
- 24. Accounting Software Controls Roles and Passwords to Limit Access Review Audit Log Lock Prior Periods
- 25. Ratio Analysis Look For Unreasonable Relationships Income going up Expenses going down
- 26. Digital Analysis Benfords Law
- 27. Tip Lines Most Effective Confidential No Penalty For Good Faith Reporting
- 28. Other Considerations Be Suspicious of Employees First to Arrive, Last to Leave Never Want to Take a Vacation Changes in Lifestyle Not Supported by Salary Takes Work Home
- 29. I Think I am Being Ripped Off Now What? Proceed with Caution Review Employee Policies Talk to Your Attorney Do you have a Fraud Policy in place? Open Confidential Investigation Investigation/Development Document, Document, Document Dont try to detain employee-False Imprisonment Avoid Defamation & Slander
- 30. I Think I am Being Ripped Off Now What? Invasion of Privacy by Employer Ways to Reduce Liability Employee Handbook Written Company Policy Should Company Prosecute? Does Fraudster have Resources? Time, Money & Energy to Build Case Convincing Law Enforcement
- 31. My Fraud Prevention Services Review of Company Internal Controls Audit My Books Software that tests for Accounts Payable Errors & Fraud Analytical Procedures Digital Analysis Benfords Law Bill.com Paperless Accounts Payable
- 32. Summary Fraud Increasing, Especially In This Economy Adversely Impacts Companys Survival & Employee Jobs No Stereotypical Fraudster Sometimes Someone You Would Never Suspect Much More Economical to Prevent Fraud
- 33. Dennis L. Thompson, CPA, CFE 206-390-9432 www.dlthompsoncpa.com
- 34. Resources AuditMyBooks Blog http://auditmybooks.com/blog Fraud Info Blog /http://fraudinfo.com Fraud Talk http://fraudtalk.blogspot.com/ White Collar Fraud http://whitecollarfraud.blogspot.com/