2015 In the midst of fraud HFTP Annual Convention & …• Know what the fraudster wants •...
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ETHICAL BEHAVIOR In the midst of fraud 2015 HFTP Annual Convention & Tradeshow
Transcript of 2015 In the midst of fraud HFTP Annual Convention & …• Know what the fraudster wants •...
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ETHICAL BEHAVIORIn the midst of fraud2015
HFTPAnnualConvention&Tradeshow
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Thematerialappearinginthispresentationisforinformationalpurposesonlyandisnotlegaloraccountingadvice.Communicationofthisinformationisnotintendedtocreate,andreceiptdoesnotconstitute,alegalrelationship,including,butnotlimitedto,anaccountant‐clientrelationship.Althoughthesematerialsmayhavebeenpreparedbyprofessionals,theyshouldnotbeusedasasubstituteforprofessionalservices.Iflegal,accounting,orotherprofessionaladviceisrequired,theservicesofaprofessionalshouldbesought.
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SPEAKERS
RoyCupler,CPA,CFEMossAdamsHospitalityandGamingGroup30yearsofexperienceinpublicaccounting
• Provideauditandconsultingservicestohotelandgamingoperations,foodandbeverageoperations,golfandcountryclubs,andresortproperties
• Engagementpartneronnumerousgamingaudits,hotels,restaurantchains,andresorts
• Conductfraudinvestigations• Internalcontrolreviews,internalauditsandriskassessments
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SPEAKERS
GinaSt.George,CPA,CFEMossAdamsHospitalityandGamingGroupMorethan20yearsofexperienceinoperationsmanagement,assuranceservices,training,andconsulting.
• OutsourcedInternalAudit• ExternalFinancialStatementAudits• FraudRiskAssessments• ForensicAccounting/FraudInvestigations• StaffTraining
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ABOUT THE ACFE
• TheACFEistheworld’slargestanti‐fraudorganization.
• Togetherwithmorethan75,000members,themissionistoreducetheincidenceoffraudandwhite‐collarcrime.
• Premierproviderofanti‐fraudtrainingandeducation.
©2015 Association of Certified Fraud Examiners, Inc.
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WHY FRAUD AND ETHICS?
Securityexpertsestimatethatasmanyas30percentofallemployeesdosteal,andthatanother60percentwillsteal ifgivensufficientmotiveandopportunity.
o Accordingtotheseestimates,onlytenpercentofemployeeswillnotstealunderanycircumstances.
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WHY FRAUD AND ETHICS?
• HFTPEthicsPolicy
o Exerciseduediligence,objectivityandhonestlyinyourprofessionalactivities,and
o beawareofyourresponsibilityo todiscloseimproprietiesthatcometoyourattention
o totheappropriateparties.
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WHY FRAUD AND ETHICS?
• HFTPEthicsPolicy
o ProfessionalCompetence:FraudEducation
o Objectivity:Fairandunbiased
o Confidentiality: Knowthedo’sanddon’ts
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FRAUD COACH IN ACTION
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FRAUD PREVENTION
Themostcost‐effectivewaytolimitfraudlossesistopreventfraudfromoccurring.
• Knowwhatthefraudsterwants• Understandtheaccesspoints• Putcontrolsinplace• Makesurecontrolsareworking
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BOOKS AND RECORDS DON'T COMMIT FRAUD -PEOPLE DO.
JOSEPH T WELLS.
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NON-FRAUD-RELATED MISCONDUCT
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• Bullyingorintimidation• Excessiveabsenteeism• Excessivetardiness• Excessiveinternetbrowsing• Visitinginappropriateinternetsites• Sexualharassment
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RED FLAGS OF FRAUD
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• Livingbeyondmeans• Complainingaboutmoney• Stopscomplainingaboutmoney• Keepstoomuchcontrolconsideringposition• Unreconciledaccounts• Frequentdelayswhenrequestinginformation
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‘Fraudsarecrimesthatdependupontheirvictims’trustfor
success.’ACFE
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CASH IN THE SAFE
Cash Dropped to Employee
Safe
Cash Removed from
Employee Safe
Cash verified and stored in Accounting
Safe
Deposit Prepared
Loomis Picked up Deposit
Exchange bigger bills for smaller bills
So how did he do it?
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CASH IN A SAFE
• Nodailylogforcurrencyversuscashinsafe• Nocomparisonofexpectedcash todepositedcash
• Nocomparisonofexpectedcheckstodepositedchecks
• Nobalancesheetreconciliationofallaccounts
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METHOD OF DETECTION OF FRAUD42.2%
16.0%
14.1%
6.8%
6.6%
4.2%
3.0%
2.6%
2.2%
1.1%
0.8%
0.5%
Tip
Management Review
Internal Audit
By Accident
Account Reconciliation
Document Examination
External Audit
Surveillance/Monitoring
Notified by Law Enforcement
IT Controls
Confessions
Other
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WHAT TO DO WHEN….
FraudIsSuspectedorDiscovered
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WHERE IS THE INVESTIGATION HEADED?
• Employeetermination(HR)• Quantificationoflosses(Insurance)• Civiland/orcriminalcases(Attorney)• Recommendationsforinternalcontrolimprovements(Management)
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BURDEN OF PROOF
CRIMINAL:Beyondareasonabledoubt isdefinedasnootherlogicalexplanationcanbederivedfromthefacts exceptthatthedefendantcommittedthecrime.
CIVIL:Preponderanceoftheevidenceisdefinedasonesidehasmoreevidence initsfavorthantheother,evenbythesmallestdegree.
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FRAUD ETHICS
Wheredowestart?
ExecutiveManagementFoundationforafraudpreventionculture
Personalaccountabilityandresponsibility– walkthetalkPushanti‐fraudmessagedowntolowestlevelemployeeMaintainemployeemorale“Workerswhoarewelltreated,respectedandadequatelycompensatedaremuchlesslikelytocommitfraud.”
HollingerandClark,ResearchStudy
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ETHICS POLICY
• Tailoredtoyourbusiness/industry• Writteninclear,plainlanguage• Accessibletoemployeesatalllevels• Reinforcedfrequently• Reallifeexamplesofunacceptablebehavior• Confidentialandobjectiveresponsetoallegations
• Outlineforconsistentenforcementforviolations
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FRAUD ETHICS
Whatshouldwedotopreventfraud?
PoliciesandProceduresCommunicateunacceptablebehaviortoemployeesEstablish preventiveanddetectiveinternalcontrolsDeveloppolicyandproceduremanualTrain employeesonthepoliciesandproceduresAssign detectiveinternalcontrolmonitoring
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FRAUD ETHICS
HowdoImakesurethatcontrolsareinplace?
Managers&SupervisorsEmployeetrainingoncompanypoliciesOversight overday‐to‐dayemployeeproceduresRegularlycommunicateissuesandcompanypoliciesDetect earlywarningsignsoffraud:RedFlagsReport suspectedfraudtolossprevention
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FRAUD ETHICS
Howdoweidentifyredflagsoffraud?
ConductafraudriskassessmenttoidentifyfraudrisksBrainstormonredfragsoffraud forspecificfraudrisksConductinternalauditsdesignedtoidentifyredflagsoffraud
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FRAUD ETHICS
WhoshouldbeinvestigatingtheRedFlags?
LossPreventionTeamRecognize&investigateunusualfinancialrelationshipsRecognize&investigateunusualemployeebehaviorTrustbutverifyplausibleexplanationsCommunicate astronganti‐fraudmessageAlertmanagementtocontrolweaknesses
