Into to Fraud Examination

1,579 views
1,339 views

Published on

Published in: Business
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,579
On SlideShare
0
From Embeds
0
Number of Embeds
29
Actions
Shares
0
Downloads
38
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide
  • Who don’t like to watch CSI or play Clue game. In case you haven’t play this game before. The idea of it is collecting many clues about who did the crime, where the crime was done and by which instrument. All of us love to be an investigator from time to time. But as internal auditor, it is really important to understand that our role is to ensure that the internal controls are effective to prevent and detect fraud. And in case we see indictors for fraud, our responsibility is to report our finding to the appropriate authority within the organization. We should not conduct fraud examination or investigation unless we are authorized to do so.
  • In the recent years, we can see that the highest risk that organization has was Fraud risk. Look at Enron, Worldcom, Tycon, All of them collaped because of internal fraud. As such, we as internal auditors much pay more attention to the possibility of fraud within our organization and make sure that the organization has effective fraud risk assessment and controls. Fraud Risk: The probability that fraud will occur and the potential severity or consequences to the organization when it occurs.
  • Let’s start by defining the work Fraud. As you can see this a broad definition of fraud. But it is clear that any illegal act that allow you to gain personally is a kind of fraud.
  • Now that we know the definition of fraud, It is important to understand the legal elements that need to exist to proof the case of fraud.Altering accounting records, falsify a statementThey do it and they know it is wrong (Intentional)Someone use this statement to make decision Damages happened as result of this Provided that the investigator has evidence that the alleged perpetrator committed the act, benefited from that act, and concealed his or her activities,
  • Asset misappropriations involve the theft or misuse of an organization’s assets. (Common examples include skimming revenues, stealing inventory, and payroll fraud.)Corruption entails the unlawful or wrongful misuse of influence in a business transaction to procure personal benefit, contrary to an individual’s duty to his or her employer or the rights of another. (Common examples include accepting kickbacks and engaging in conflicts of interest.)Financial statement fraud and other fraudulent statements involve the intentional misrepresentation of financial or nonfinancial information to mislead others who are relying on it to make economic decisions. (Common examples include overstating revenues, understating liabilities or expenses, or making false promises regarding the safety and prospects of an investment.)
  • Why Does Fraud Occur?Opportunity: Poor or week controls can create an Opportunity for breaking the rule or taking advantage of the system (NO controls over the Purchasing Department)Motive (Incentive Pressure) Greed, Stress, Power (Show off), addition, ProblemRationalization Make sense of their fraud act and justify it (They deserve, They are entitled, They are just borrowing the money)Internal Auditors should examine the internal control to make sure that they don't provide opportunity for fraud
  • Asset misappropriations involve the theft or misuse of an organization’s assets. (Common examples include skimming revenues, stealing inventory, and payroll fraud.)Corruption entails the unlawful or wrongful misuse of influence in a business transaction to procure personal benefit, contrary to an individual’s duty to his or her employer or the rights of another. (Common examples include accepting kickbacks and engaging in conflicts of interest.)Financial statement fraud and other fraudulent statements involve the intentional misrepresentation of financial or nonfinancial information to mislead others who are relying on it to make economic decisions. (Common examples include overstating revenues, understating liabilities or expenses, or making false promises regarding the safety and prospects of an investment.)
  • Fraud Risk Assessment based on ERM:Understand potential fraud in the organization based on the operation and internal controlsEvaluate the controls to prevent or reduce fraud risks based on costs and benefitsFraud Detection:Management's Role is to establish and maintain an effective control system(Hotline, whistleblower protection)
  • - Internal Auditor should have sufficient Knowledge to identify the indicators of fraud Fraud Prevention:Internal Auditors will evaluate the adequacy and effectiveness of internal controls, and fraud risk management of the organization It is not the responsibiltiy of Internal Auditor to do Fraud Examination.
  • Join your local chapter:UAE Chapter
  • $300 to take the exam Academic Requirements: Minimum of a Bachelor's degree Professional Requirements: at least two years of professional experience in a field either directly or indirectly related to the detection or deterrence of fraud.3. Prepare for the CFE:- Study with the CFE Exam Prep Course. Attend the CFE Exam Review Course Study on your own
  • Fraud Prevention and Deterrence — tests your understanding of why people commit fraud and ways to prevent it. Topics covered in this section include crime causation, white-collar crime, occupational fraud, fraud prevention, fraud risk assessment, and the ACFE Code of Professional Ethics. Financial Transactions — tests your comprehension of the types of fraudulent financial transactions incurred in accounting records. To pass Financial Transactions, you will be required to demonstrate knowledge of the following concepts: basic accounting and auditing theory, fraud schemes, internal controls to deter fraud and other auditing and accounting matters.  Fraud Investigation — includes questions about interviewing, taking statements, obtaining information from public records, tracing illicit transactions, evaluating deception and report writing. Legal Elements of Fraud — ensures your familiarity with the many legal ramifications of conducting fraud examinations, including criminal and civil law, rules of evidence, rights of the accused and accuser and expert witness matters.
  • Fraud Prevention and Deterrence — tests your understanding of why people commit fraud and ways to prevent it. Topics covered in this section include crime causation, white-collar crime, occupational fraud, fraud prevention, fraud risk assessment, and the ACFE Code of Professional Ethics. Financial Transactions — tests your comprehension of the types of fraudulent financial transactions incurred in accounting records. To pass Financial Transactions, you will be required to demonstrate knowledge of the following concepts: basic accounting and auditing theory, fraud schemes, internal controls to deter fraud and other auditing and accounting matters.  Fraud Investigation — includes questions about interviewing, taking statements, obtaining information from public records, tracing illicit transactions, evaluating deception and report writing. Legal Elements of Fraud — ensures your familiarity with the many legal ramifications of conducting fraud examinations, including criminal and civil law, rules of evidence, rights of the accused and accuser and expert witness matters.
  • Into to Fraud Examination

    1. 1. LOGO
    2. 2. LOGO Investigation
    3. 3. LOGO Fraud Risk
    4. 4. LOGOThe Institute of Internal Auditors "Any illegal act characterized by deceit, concealment, or violation of trust. These acts are not dependent upon threat of violence or physical force. Frauds are perpetrated by parties and organizations to obtain money, property, or services; to avoid payment or loss of services; or to secure personal or business advantage”
    5. 5. LOGOAssociation of Certified Fraud Examiners "The use of ones occupation for personal enrichment through the deliberate misuse or misapplication of the employing organizations resources or assets.”
    6. 6. LOGO Legal Elements of Fraud1. A material false statement2. Knowledge that the statement was false when it was spoken3. Reliance on the false statement by the victim4. Damages resulting from the victim’s reliance on the false statement
    7. 7. LOGO Major Categories of Fraud- Asset misappropriationsSkimming revenues, stealing inventory, and payroll fraud.- CorruptionAccepting kickbacks and engaging in conflicts of interest.- Financial statement fraud and other fraudulent statementsOverstating revenues, understating liabilities or expenses, ormaking false promises regarding the safety and prospects ofan investment.
    8. 8. LOGO Definition of Fraud
    9. 9. LOGO Financial Statement FraudThe Association of Certified Fraud Examiners “The intentional, deliberate misstatement or omission of material facts or accounting data that is misleading and, when considered with all the information made available, that would cause the reader to change or alter his or her judgment or decision.”
    10. 10. LOGO Financial Statement FraudMajor Areas:1. Fictitious revenue (and related assets)2. Improper timing of revenue and expense recognition3. Concealed liabilities4. Inadequate and misleading disclosures5. Improper asset valuation6. Improper and inappropriate capitalization of expenses
    11. 11. LOGO Financial Statement FraudThe essential characteristics:(1) The misstatement is material and intentional.(2) Users of the financial statements have been misled.
    12. 12. LOGO Managements RoleManaging Fraud Risk: Establishing a Fraud-related policy and procedures. Assessing Fraud Risk Assessment Establishing Preventive Techniques Establishing Detective Techniques Establishing a Reporting Process
    13. 13. LOGO Internal Auditors Role Consider fraud risks Have sufficient knowledge of fraud to identify red flags Be alert to opportunities that could allow fraud Evaluate the indicators of fraud Notify the appropriate authorities
    14. 14. LOGO Internal Auditors Role Proficiency 1210.A2 – Internal auditors must have sufficient knowledge to evaluate the risk of fraud and the manner in which it is managed by the organization, but are not expected to have the expertise of a person whose primary responsibility is detecting and investigating fraud. Due Professional Care1220.A1 – Internal auditors must exercise due professional care by considering the Probability of significant errors, fraud, or noncompliance; Risk Management 2120.A2 – The internal audit activity must evaluate the potential for the occurrence of fraud and how the organization manages fraud risk.
    15. 15. LOGO Internal Auditors Role Engagement Objectives 2210.A2 – Internal auditors must consider the probability of significant errors, fraud, noncompliance, and other exposures when developing the engagement objectives. Reporting to Senior Management and the Board 2060 The chief audit executive must report periodically to senior management and the board on the internal audit activity’s purpose, authority, responsibility, and performance relative to its plan. Reporting must also include significant risk exposures and control issues, including fraud risks, governance issues, and other matters needed or requested by senior management and the board.
    16. 16. LOGO Fraud ExaminationFraud examination is a methodology developed byACFE for resolving fraud allegations from inceptionto disposition, including obtaining evidence,interviewing, writing reports, testifying to findings,and assisting in the detection and prevention offraud.
    17. 17. LOGO Fraud Examiner Lawyer Accountant Criminologist Investigator
    18. 18. LOGO Auditing vs. Fraud Examination
    19. 19. LOGO Auditing vs. Fraud Examination
    20. 20. LOGO Definition of Fraud
    21. 21. LOGO Certified Fraud Examiner (CFE)1. Be an Associate member of the ACFE in good standing.2. Submit the CFE Exam application with proof of education and professional recommendations.3. Prepare for the CFE Exam4. Pass the CFE Exam.5. Gain final approval from the certification committee and become a CFE.
    22. 22. LOGO Certified Fraud Examiner (CFE) 10 hours to complete the CFE Exam. Each section is allocated a maximum of 2.6 hours to complete. Each of the four exam sections has 125 questions. You will have a maximum of 75 seconds to answer each question. You have 30 days to complete all four sections of the CFE Exam. You must complete each section in one sitting.
    23. 23. LOGO Certified Fraud Examiner (CFE)• Fraud Prevention and Deterrence• Financial Transactions• Fraud Investigation• Legal Elements of Fraud
    24. 24. LOGO Certified Fraud Examiner (CFE)Get Certified
    25. 25. Questions LOGO

    ×