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TRANSCRIPT
WHO IS STEALING FROM YOU
Fraud is an intentional misrepresentation of a material fact that is relied upon by an individual or entity to their detriment.
Pressure ◦ Inability to pay bills
◦ Addiction to gambling or drugs
◦ Desire for material possessions (newer car, bigger house)
Opportunity ◦ Must see some way they can use their position of
trust to solve their financial problem with a low perceived risk of getting caught.
Rationalization ◦ “I’m not treated fairly”
◦ “They’ll never miss the funds”
◦ “I was only borrowing the money”
◦ “I was entitled to the money”
◦ “I had to steal to provide for my family”
◦ “I was underpaid; my employer cheated me”
◦ “My employer is dishonest to others and deserved to be fleeced”
Per the 2016 Association of Certified Fraud Examiners Report on 1400 Cases of Fraud: ◦ 42% of fraud is committed by employees.
◦ 36% of fraud is committed by management.
◦ 19% by those in charge.
Average fraud per age of employee: o52% of fraudsters between the ages of 31 and 45.
o<26 $35,000
o26-30 57,000
o31-35 $90,000
o36-40 $168,000
o41-45 $153,000
o46-50 $190,000
o51-55 $200,000
o56-60 $238,000
o>60 $450,000
Median loss by tenure: ◦ <1 year $51,000
◦ 1-5 years $100,000
◦ 6-10 years $200,000
◦ >10 years $220,000
◦ 7% of fraud committed during the first year of employment.
◦ 53% of fraud committed by those employed more than five years.
Median loss by gender: ◦ Males $185,000
◦ Females $83,000
Stealing daily deposits
“Less cash” schemes
Credit card fraud
Electronic payments & wire transfers
Kickbacks from vendors
False of inflated vendor invoices
Stealing checks
Ghost employees
Overpayment schemes
Company credit card fraud
Expense report fraud
Keeping former employees on the payroll
Risk
Assessment
Control
Activities
Monitoring
Information &
Communication
Control Environment
Those charged with governance and management should demonstrate the following: ◦ Commitment to integrity and ethical values
◦ Oversight over the internal control system
◦ Create an environment to obtain the entities objectives related to fraud
◦ Hire and develop a competent workforce
◦ Hold individuals accountable for their internal control responsibilities
Risks are internal and external events that can threaten the accomplishment of objectives.
Risks of fraud should be identified and controls put in place to mitigate the risk.
These risks can change as an entity changes the way it does business.
Management should design internal controls to relate to risk
Management should develop fiscal policies to implement the internal controls
Policies are the things that are put in place by an organization for all financial areas
Procedures are how you process financial transactions
Controls are procedures that are put in place to make sure that policies are being followed
Management should develop and distribute policy and procedure manuals; and fiscal policies.
Communication information can be both internal and external.
It can include budget to actual reports and detail general ledgers.
Management should monitor the internal control system and evaluate the results. ◦ Are controls in place and effective
Management should improve any controls that are found to be ineffective.
Revenue Recognition
Cash Receipts
Purchasing
Cash Disbursements
Bank Reconciliations
Payroll
Employee Reimbursements (Mileage and Other Expenses)
Financial Statement Preparation
Controls should be in place to detect fraud in a timely manner
Independent auditors cannot be the only source of fraud detection
Elected officials have a fiduciary responsibility to ensure that assets are safeguarded
Taxpayer sensitivity to fraud has a much lower dollar threshold than your auditor
Collusion among those involved in the process makes fraud tougher to detect
Thurman, Shinn & Company
315 North Washington St.
Farmington, MO 63640
Greg Shinn, CPA 573-760-9400
John Boyd, CPA 573-760-9400