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Occupational Fraud (2)

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Occupational Fraud (2)

  1. 1. Presented by Riley Parker CA PI 16105, 26392 PO Box 20398, Bakersfield, CA 93390 661.635.0633 Fax: 661.635.0634 www.ParkerPI.com
  2. 2. CALIFORNIA BUSINESS AND PROFESSIONS CODE , SECTION 7520-7539
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  5. 5. <ul><li>25% cost at least $1 million </li></ul><ul><li>Median cost $175,000 </li></ul><ul><li>Typical case lasts 2 years </li></ul><ul><li>Most common schemes: </li></ul><ul><ul><li>Corruption – 27% </li></ul></ul><ul><ul><li>Fraudulent billing - 24% </li></ul></ul><ul><li>Likely detected by a tip, not through audits, controls </li></ul>Typical Fraud Cases
  6. 6. <ul><li>Small businesses most vulnerable </li></ul><ul><li>Lack of internal controls most common factor </li></ul><ul><li>Most often committed by accounting or upper management </li></ul><ul><li>Fraudsters are generally first time offenders </li></ul><ul><li>Red flags: living beyond their means or experiencing financial difficulties </li></ul><ul><li>  </li></ul>
  7. 7. 1. Corruption : Conflicts of interest, Bribery, Illegal Gratuities 2. Asset Misappropriation : Cash Larceny & Skimming, Fraudulent Disbursements, Noncash Misuse 3. Fraudulent Statements : Financial & Non-financial (employment credentials, internal & external documents . Occupational Fraud Classifications
  8. 8. The typical organization loses 7% of its annual revenues to occupational fraud. 7% OF GNP = $994,000,000 IN PROJECTED FRAUD LOSSES
  9. 9. <ul><li>Financial Misstatement </li></ul><ul><li>Aka: Cooking the Books </li></ul><ul><li>Median losses - $2 Million per scheme </li></ul>MOST COSTLY TYPE OF FRAUD
  10. 10. Median Loss Breakout Fraudulent Statements $2 Million Corruption $375,000 Check Tampering $138,000 Billing $100,000 Non-cash $ 80,000 Cash Larceny $ 75,000 Payroll $ 49,000 Cash on Hand $ 35,000 Expense Reimburse $ 25,000 Register Disburse $ 25,000
  11. 11. <ul><li>Living beyond means </li></ul><ul><li>Financial difficulties </li></ul><ul><li>Wheeler-dealer attitude </li></ul><ul><li>Control issues, unwillingness to share duties </li></ul><ul><li>Divorce/family problems </li></ul><ul><li>Unusually close association with vendors, customers </li></ul><ul><li>Irritability, suspiciousness, or defensiveness </li></ul><ul><li>Addiction problems </li></ul>BEHAVIORAL RED FLAGS
  12. 12. <ul><li>Past legal problems </li></ul><ul><li>Past employment related problems </li></ul><ul><li>Complaints about inadequate pay </li></ul><ul><li>Refusal to take vacations </li></ul><ul><li>Excessive pressure from within organization </li></ul><ul><li>Instability in life circumstances </li></ul><ul><li>Excessive family/peer pressure for success </li></ul><ul><li>Complaints about lack of authority </li></ul>BEHAVIORAL RED FLAGS, CONTINUED

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