• Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads


Total Views
On Slideshare
From Embeds
Number of Embeds



Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

    No notes for slide


  • 1. HON 322C Fraud Seminar Prof Bill Dilla Jan. 14, 2003
  • 2. Elements of Fraud
    • A representation
    • About a material point
    • Which is false
    • And intentionally or recklessly so,
    • Which is believed
    • And acted upon by the victim
    • To the victim’s damage
  • 3. Relationship between fraud and illegal / unethical acts Illegal Acts Fraud Unethical Acts
  • 4. Types of fraud: The “big picture”
    • Occupational fraud (Asset theft)
      • Fraud committed against an organization
      • Usually by employees or managers
      • BUT recent cases by executives exist (e.g., Tyco, Adelphia)—called “corporate looting”
    • Management fraud
      • Fraud committed on behalf of an organization
      • Fraudulent financial reporting most common type
      • Generating most of the current concern about fraud
  • 5. A more complete fraud list
    • Employee embezzlement
    • Management fraud
    • Investment scams
    • Vendor fraud
    • Customer fraud
  • 6. Fraud can be of more than one type
    • Employees collude with a vendor to overcharge and take kickbacks
      • Both embezzlement and vendor fraud
    • Stock option backdating
      • “Corporate looting”
      • Fraudulent financial reporting to cover up expense
  • 7. From an audit and control perspective
    • Preventing employee embezzlement and fraudulent financial reporting are most important
    • Controls to prevent embezzlement also help prevent vendor fraud and customer fraud
    • Customer fraud and vendor fraud are of particular importance in an e-commerce environment
  • 8. Some Fraud Facts Source: 2003 KPMG Survey of Public Companies and State and Federal Agencies http://www.kpmg.com/aci/docs/surveys/Fraud%20Survey_040855_R5.pdf
    • Most common type of fraud
      • Theft of assets
    • Most costly frauds
      • Financial reporting fraud
      • Medical / insurance fraud
    • Most common methods for uncovering fraud
      • Internal control
      • Internal audit
      • Notification by employee
    • Least common method for uncovering fraud
      • External audit
  • 9. Fraud Trends (also from KPMG survey—compared to 1998 and 1994)
    • Internal control and internal audit are catching significantly more frauds
    • Collusion between employees and 3 rd parties is increasing as a cause of fraud
    • More companies are taking legal actions or notifying law enforcement
  • 10. Some Other Fraud Trends
    • Sarbanes-Oxley internal control requirements
      • Intended to address fraudulent financial reporting for public companies
      • Has also increased controls over employee fraud in many cases
      • Some non-public companies have adopted
    • Use of “in-house” resources for fraud investigation and prevention
    • “ Proactive” as opposed to “reactive” fraud policies