occupational fraud (2)
TRANSCRIPT
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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
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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
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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
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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