Anti–Fraud Risk and Control Workbook

<p>Preface vii</p>
<p>A Short History of Fraud viii</p>
<p>About This Book x</p>
<p>About White–Collar Crime 101 LLC xi</p>
<p>Acknowledgments xiii</p>
<p>Chapter 1 Why No Organization Is Immune to Fraud 1</p>
<p>What Is Fraud? 2</p>
<p>Myths and Realities about Fraud</p>
<p>Myth #1: Ethics and Compliance Training Has Us Covered 3</p>
<p>Myth #2: Our Finance Staff Are Qualified to Protect</p>
<p>Us Against Fraud 4</p>
<p>Myth #3: We Have Very Little Fraud Here 4</p>
<p>Myth #4: Fraud Is a Necessary Cost of Doing Business 5</p>
<p>Myth #5: Implementing Controls and Training Is Costly 6</p>
<p>The Urgency of Detecting and Preventing Fraud 6</p>
<p>Tone at the Top 7</p>
<p>Review Points 8</p>
<p>Chapter Quiz 9</p>
<p>Chapter 2 The Human Element of Fraud 11</p>
<p>Who Commits Internal Fraud? 12</p>
<p>The Fraud Personality: Soft Indicators 12</p>
<p>The Fraud Personality: Hard Indicators 14</p>
<p>Why People Steal 14</p>
<p>The Fraud Triangle 15</p>
<p>Case Study #1: Pain, Pills, and Petty Cash 16</p>
<p>Other Fraud Triangle Factors 18</p>
<p>A Triangle or a Diamond? 18</p>
<p>The Trust Factor 19</p>
<p>Case Study #2: The Trusted Thief 19</p>
<p>People: The Key to Detection and Prevention 20</p>
<p>Case Study #3: Demise by Personal Debt 21</p>
<p>Review Points 21</p>
<p>Chapter Quiz 22</p>
<p>Chapter 3 Internal Fraud: Employee Level 25</p>
<p>How Big a Problem Is Internal Fraud? 25</p>
<p>Overview of Employee–Level Fraud 26</p>
<p>Embezzlement 26</p>
<p>Accounts Payable (AP) Fraud 27</p>
<p>Case Study #4: Shell Game in the Big Apple 28</p>
<p>Case Study #5: Health Care Fraud 31</p>
<p>Accounts Receivable Fraud 32</p>
<p>Case Study #6: Robbing Peter to Pay Paul 33</p>
<p>Kickback Schemes 33</p>
<p>Inventory/Supply Schemes 33</p>
<p>Case Study #7: Kickbacks Fly When Controls Are Weak 34</p>
<p>Check Fraud and Tampering 35</p>
<p>Travel and Entertainment (T&amp;E) Fraud 39</p>
<p>Payroll Schemes 41</p>
<p>Case Study #8: Wining and Dining on Customer Dollars 41</p>
<p>Theft of Confidential Information 42</p>
<p>Case Study #9: The New Employee 42</p>
<p>Case Study #10: Information Is as Good as Gold 43</p>
<p>Insider Abuse of Computer Systems 44</p>
<p>Case Study #11: But She Was Such a Nice Lady! 44</p>
<p>Red Flags of Employee–Level Fraud 45</p>
<p>Preventing Employee–Level Fraud 49</p>
<p>Accounts Payable Fraud–Prevention Checklist 50</p>
<p>Specific Employee–Level AP Fraud Controls Checklist 51</p>
<p>P–Card Fraud–Prevention Checklist 53</p>
<p>Accounts Receivable Fraud–Prevention Checklist 55</p>
<p>Kickback Scheme Prevention Checklist 55</p>
<p>Inventory Theft and Fraud–Prevention Checklist 56</p>
<p>Check Fraud–Prevention Checklist 56</p>
<p>ACH Fraud–Prevention Checklist 57</p>
<p>T&amp;E Fraud–Prevention Checklist 57</p>
<p>Payroll Fraud–Prevention Checklist 58</p>
<p>Confidential Information Theft Prevention Checklist 58</p>
<p>Review Points 59</p>
<p>Chapter Quiz 61</p>
<p>Chapter 4 Internal Fraud: Management Level 67</p>
<p>T&amp;E Fraud and Abuse 67</p>
<p>Bribery 70</p>
<p>The Greatest Corruption Story of All Time 72</p>
<p>Conflicts of Interest 73</p>
<p>Case Study #12: Brenda Belton s Conflict of Interest Scheme 74</p>
<p>Misuse of Organization–Owned Assets 74</p>
<p>Fraudulent Financial Reporting 75</p>
<p>Case Study #13: The Great Buca Restaurant Fraud 77</p>
<p>Red Flags of Management–Level Fraud 78</p>
<p>Preventing Management–Level Fraud 81</p>
<p>Anti–Embezzlement Controls 82</p>
<p>Bribery and Kickback Schemes 84</p>
<p>Abuse of Organization–Owned Assets 84</p>
<p>Conflicts of Interest 84</p>
<p>Financial Statement Fraud 85</p>
<p>Review Points 89</p>
<p>Chapter Quiz 89</p>
<p>Chapter 5 External Fraud: Protecting Against Dishonest Outsiders 93</p>
<p>Types of External Fraud 93</p>
<p>Vendor and Billing Fraud 93</p>
<p>Social Engineering and Pretexting 95</p>
<p>Case Study #14: The Phoner Toner Scam 97</p>
<p>Bank Employee Collusion with Outsiders 97</p>
<p>Case Study #15: The Frito Fraud 98</p>
<p>Customer–Perpetrated Fraud 98</p>
<p>Theft of Confidential Information 99</p>
<p>The SCAM Model 100</p>
<p>Red Flags of External Fraud 101</p>
<p>Preventing External Fraud 103</p>
<p>Review Points 105</p>
<p>Chapter Quiz 106</p>
<p>Chapter 6 Conducting a Successful Fraud Risk Assessment 109</p>
<p>Procedures for Conducting a Fraud Risk Assessment 111</p>
<p>Step 1: Create an FRA Team 111</p>
<p>Step 2: Identify the Organization s Universe of Potential Risks 111</p>
<p>Step 3: Analyze the Likelihood of Each Scheme or Scenario Occurring 113</p>
<p>Step 4: Assess the Materiality of Risk 113</p>
<p>Step 5: Assess Risks within the Context of Existing Anti–Fraud Controls 113</p>
<p>The Roles of the Board and Management in Fraud Risk</p>
<p>Assessments 114</p>
<p>Review Points 115</p>
<p>Chapter Quiz 116</p>
<p>Chapter 7 Basic Fraud Detection Tools and Techniques 119</p>
<p>Basic Fraud Detection 120</p>
<p>Case Study #16: I m the Boss, and I Can Use Any Vendors I Want 125</p>
<p>Review Points 126</p>
<p>Chapter Quiz 127</p>
<p>Chapter 8 Advanced Fraud Detection Tools and Techniques 129</p>
<p>Internal Audit and the Audit Plan 129</p>
<p>Essentials of Fraud Auditing 131</p>
<p>Auditing for Fraud in Accounts Payable 132</p>
<p>Auditing for Payroll Fraud 133</p>
<p>Essentials of Automated Auditing 135</p>
<p>Review Points 136</p>
<p>Chapter Quiz 137</p>
<p>Appendix A Answers to Chapter Quizzes 139</p>
<p>Appendix B Answer Key for Case Studies 143</p>
<p>Appendix C An Introduction to Cyber Fraud 149</p>
<p>Resources 163</p>
<p>Notes 165</p>
<p>Glossary 171</p>
<p>About the Author 175</p>
<p>Index 177</p>