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Perceived
pressure
facing
individual
Exacerbated in
economic downturn
Persons rationalization
or integrity
Victim Organizations
2008 by the Association of Certified Fraud Examiners, Inc.
Victim Organizations
Occupational Fraud Schemes in Government
and Public Administration (106 cases)12
The sum of percentages in this chart exceeds 100 percent because several cases involved multiple schemes from more than one category.
12
Profile of Fraud
Perpetrator
Male or female
No prior criminal history (<8%)
Well liked by co-workers
Likes to give gifts/compulsive shopper
Gambling problems not unusual
Long-term employee
Rationalizes: Starts small or borrows
Lifestyle clues
Cash Schemes
Stealing cash funds
processed or on hand
Not recording &
stealing the cash
receipts
Under ringing &
stealing the
difference in cash
receipts
Altering bank
deposits
Accounts Receivable
Schemes
Lapping
Forging checks received
Altering credit card
receipts
Granting bogus credits
Bogus bad debt writeoffs or account
adjustments
Payroll Schemes
Ghost employees
Manipulated time
records
Unclaimed payroll
checks
Writing extra payroll or
bonus checks
Leave time
manipulation
Withholding fraud
W-2 fraud
Top
Process mentality
Just doing the steps in the process
Not thinking about what one is doing
Blind trust
Failure to acknowledge warning signals
Positional immunity
Rationalizing that controls dont apply to me
because I am in upper management.
Often referred to as management override.
Situational incompetence
New employee not in a position to question why
Workload overload
Not enough time to perform control
procedures
Conflict avoidance
Responsible employees not comfortable in
confronting other employees
Informational restraint
Responsible employees lack the information
they need to identify an improper transaction
Behavioral ignorance
Responsible employees ignore behavioral
signs or indicators of possible fraud
Informational ignorance
Officials ignore fraud warning signs in
reports because they dont understand the
reports
Ethically challenged
Employees responsible for controls are just
not ethical and morally responsible
individuals
Protection Mechanisms
Fraud risk assessment
Internal controls
Proper environment
External review
Reporting mechanism
Hire right
Fidelity bonding
Establish Perception of Detection
Forensic data mining
Protection Mechanisms
Segregation of duties
Effective bidding processes
Vendor approval controls
Policies
The sum of percentages in this chart exceeds 100 percent because in some cases respondents identified more than one detection method.
Resources
Managing the Business Risk of Fraud: A
Practical Guide (AICPA & IIA) REQUIRED
READING
Management Anti-Fraud Programs &
Controls (exhibit to SAS 99)
ACFE Fraud Prevention Check-Up
ACFE Best Practices in Ethics Hotlines
ACFE Sample Code of Conduct
ACFE Sample Ethics Policy
Management Antifraud
Programs and Controls
Creating a
Culture of
Honesty & High
Ethics
Developing an
Appropriate
Oversight
Process
Evaluating
Antifraud
Processes &
Controls
Ethics refer to the standards that tell us how we ought to act in situations we
find ourselves in as parents, children, family members, friends, citizens,
elected officials, professionals, employees, teachers, etc.
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Unethical Behavior
Triangle
Motive/Pressure
Potential for
Unethical
Behavior
Opportunity
Rationalization
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An Individuals Ethics
Evolution
Stage 1 Educational Level
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Educational Level
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Societal Level
Family
Friends
Peers
Community
Nation
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Values
Beliefs
The Circle
of Morality
Consequences
Actions
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Effective Consequences
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Independent Level
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Ethical Orientation
Question
You are driving on a highway (with a normal speed
limit of 70 mph) with no other vehicles around.
The highway has recently been repaved.
Construction is now complete and all
construction barriers have been removed.
However, the temporary speed limit signs of 55
mph are still posted. You are driving 70 mph.
Are you doing anything wrong?
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An Individuals Ethics
Orientation
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What is my Ethical
Orientation?
1.
Which is worse?
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What is my Ethical
Orientation?
2. Which is the worse mistake?
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What is my Ethical
Orientation?
3. Which is it worse to be?
a. unmerciful
or
b. unfair
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What is my Ethical
Orientation?
4. Which is worse?
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What is my Ethical
Orientation?
5. Which is it better to be?
a. Just and fair
or
b. Sympathetic and feeling
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What is my Ethical
Orientation?
6. Which is worse?
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What is my Ethical
Orientation?
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What is my Ethical
Orientation?
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What is my Ethical
Orientation?
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What is my Ethical
Orientation?
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Contemporary Ethics
Theories
Another perspective:
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What is an Ethical
Dilemma?
A situation where there are compelling
reasons for taking an action and
competing compelling reasons for not
taking the action
Ethical dilemmas exist because of these
conflicting or competing compelling
reasons
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An Ethical Dilemma
3.
4.
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6.
7.
8.
9.
10.
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QUESTIONS???