Today’s TopicsOccupational FraudOccupational Fraud StatisticsAsset MisappropriationsThefts of CashLarcenySkimmingFraudulent DisbursementsFraudulent Disbursements, continuedThefts of AssetsCorruptionConsumer FraudIdentity TheftIdentity Theft ConversionIdentity Theft CycleHow to Steal Someone’s IdentityHow to Protect YourselfPost Event ActivityOther Forms of Consumer FraudFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-1Today’s TopicsOrganizational FraudConsumer FraudFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-2Occupational FraudWhat is it?Fraud against companies other than financial statement fraudAsset misappropriationsCorruptionKnow the graphics on pps. 506, 514 & 516FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-3Occupational Fraud StatisticsMedian loss $159K; 25% > $1.0M; 1% > $1.0BOrganizations with hotlines had 50% less median lossSmall business has higher median loss--$190K; poor pro-active effortExecutive involvement = $1.0M median loss30% involved accounting dept.; 20% involved upper and executive managementOnly 8% of fraudsters had prior convictionsFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-4Asset MisappropriationsStealing receiptsEmployees, customers, collusionStealing assets on handEmployeesStealing through disbursementsEmployees, vendors, collusionFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-5Thefts of CashLarcenySkimmingFraudulent disbursementsFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-6LarcenyTheft of recorded cash w/o consentCash “shortages”14.2% of all misappropriation fraudsEasy to detectFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-7Skimming“Sharing” cash receiptsSales not recordedFraudulent discountsCustomer payments and write-offsLappingCollusion with customersFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-8Fraudulent Disbursements67% of all asset-related fraudsCheck tamperingCheck modification, check forgeryRegister schemesFalse refunds, false voidsInventory problemsBilling schemesDummy cos., 2X paying, personal useFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-9 Fraudulent Disbursements, continuedExpense schemesCheating on your expense reportPayroll schemesOnly 1.9% of all lossesGhost employees, false hours & rates, commission scams and false worker compensation claimsFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-10Thefts of Assets“Borrowing” for personal usePersonal business on company timeOutright theft of assetsLarceny involving inventoryUnauthorized transfer of assets with forged requisitionsDiversion of assets in receiving functionFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-11CorruptionBribery Payoffs, kickbacks, bid riggingConflicts of interestPurchase and sales schemes involving “related” partiesEconomic extortionIllegal gratuitiesFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-12Consumer FraudFraud against individualsNumber one consumer fraud =Identity TheftFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-13Identity TheftInvolves over 42% of reported fraudsUse of name, address, SSN, band or credit card PINs to commit fraudPrevention is the keyFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-14Identity Theft ConversionPurchase of large-ticket itemsFalse car or real estate loansCreation of phone or cell accountsCounterfeit checks or debit cardsCreation of new bank accountsFalse filing of bankruptcyFalse filing of police informationCreation of new credit card accountsChange of mailing addressFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-15Identity Theft CycleStage 1: DiscoveryGain informationVerify informationStage 2: ActionDocument accumulationAction cover-upStage 3: Trial1st – 3rd dimensions (gas station, store, new account)FORENSIC ACCOUNTING - BA124 - 2010 Slide 12-16How to Steal Someone’s IdentityObtaining info falselyGoing through the trashSkimming credit cardsHackingStealing walletsOutright theft from the homeStealing mailFalse change of address formShoulder surfingPhishing or PharmingFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-17How to Protect YourselfGuard your mailDo not use pre-approved credit cardsGuard SSN and PINsGuard all personal informationGuard your trashProtect your walletProtect and change your passwordsProtect your homeProtect your personal computersUse the Gramm-Leach-Bliley Act to opt out of having your information soldFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-18 Post Event ActivityReport event promptlyCollect evidential matterContact FTC regarding identity theftHomeland security implicationsFORENSIC ACCOUNTING - BA124 - 2010 Slide 12-19Other Forms of Consumer FraudForeign Advance-Fee ScamsWork at Home Schemes (Multi-Level Marketing Schemes)Bogus Mystery Shopping ScamsTelemarketing ScamsInvestment Scams (Ponzi