This are the slides of The 3D Fraud Risk Assessment Model presented by Dr. DImiter Dinev, CFE at the 10th Congress of PIKW in September 201 in Krakow, Poland

1. 10th INTERNATIONAL CONGRESS
ON INTERNAL CONTROL, AUDIT AND ANTI-FRAUD,
ANTI-CORRUPTION ISSUES
MODELING
THE PROCESS
OF FRAUD
RISK ASSESSMENT
Dr. Dimiter Dinev, CFE
Founder & Chairman of Association for
Counteraction to Economic Fraud (ACEF)
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2. X PIKW CONGRESS IN KRAKOW
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3. KRAKOW IX -X PIKW CONGRESSES
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4. KRAKOW X PIKW CONGRESS
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5. KRAKOW X PIKW CONGRESSES
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6. KRAKOW IX -X PIKW CONGRESSES
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7. KRAKOW IX -X PIKW CONGRESSES
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8. KRAKOW IX -X PIKW CONGRESSES
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9. KRAKOW X PIKW CONGRESSES
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10. KRAKOW X PIKW CONGRESSES
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11. KRAKOW IX -X PIKW CONGRESSES
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12. KRAKOW IX -X PIKW CONGRESSES
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14. IX PIKW CONGRESS KRAKOW 2010
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15. 2009-2011 ACEF MODELS
• Dinev’s Compass for Fraud
Detection - Fraud Magazine,
ACFE, 1/2009, Seattle University
• Dinev’s Puzzle for Fraud
Investigation-2010, Krakow
• 3D Fraud Risk Assessment
Model-today
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16. 3D MODEL FOR FRAUD RISK
ASSESSMENT
• FUNCTIONAL
DIMENSION
• METHODOLOGICAL
DIMENSION
• TIMING DIMENSION
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17. 3D MODEL FOR FRAUD RISK
ASSESSMENT - 2011
• A STAND-ALONE SERVICE
• A PART OF THE ERM (THE
ENTERPRISE RISK
MANAGEMENT)
• AN AUDIT RESPONSIBILITY
UNDER ISA 240 or SAS 99
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18. WHO WILL BE THE ACTORS?
• Internal Auditors
• Financial Controllers
• Compliance Officers
• Fraud Examiners
• Certified Internal Control Auditors/
Specialists (CICA/CICS)
• External Auditors as a stand-alone
engagement
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19. 3D MODEL FOR FRAUD RISK
ASSESSMENT GOALS
• A NEW BUSINESS
OPPORTUNITY
• SIMPLE AND
UNDERSTANDABLE
• WORLD WIDE APPLICABLE
• COST EFFECTIVE
• USABLE, OF COURSE
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20. RISK AND FRAUD RISK ASSESSMENT
• RISK - a likelihood something
not good to be happened
• CHANCE - a likelihood
something good to be
happened
• FRAUD - common and
specific
• FRAUD RISK ASSESSMENT
- to increase the chance for
fraud deterrence 20
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21. FRAUD RISK ASSESSMENT
PROCESS
Systematic process of obtaining,
receiving and analyzing data as to
determine the likelihood of fraud
occurrence in the organization
and an adequate response and
timely decisions to be taken by
the stakeholders as to increase
the chance of the fraud deterrence
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22. FRAUD RISK ASSESSMENT
PROCESS - ELEMENTS
• Systematic process for • An adequate response
and timely decisions to
• Obtaining, receiving be taken
and analyzing data
• By the stakeholders
• To determine the
likelihood of fraud • To increase the chance
occurrence of fraud deterrence
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23. 3D MODEL FOR FRAUD RISK
ASSESSMENT
• FUNCTIONAL
DIMENSION
• METHODOLOGICAL
DIMENSION
• TIMING DIMENSION
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24. FUNCTIONAL DIMENSION -
WHAT TO DO?
• Interviews with the client as to provide him/her with awareness about the nature,
scope and goals of the fraud risk assessment engagement - this is not an audit, the
types of fraud are…, there would be fraud risk there, because…, fraud terminology!
• Collecting, receiving and analyzing data about the organization - about bylaws,
business cycle, activities, processes, transactions
• Collecting, receiving and analyzing data about the existing internal controls and
those applied for fraud deterrence (if any?!)
• Determination of the opportunities for fraud occurrence - ineffective controls,
controls override, no anti-fraud controls
• Description of the possible fraud scenarios, types of fraud and schemes, specific for
the different levels, processes and activities of the organization
• Ranging the fraud risk occurrence based on quantitative and qualitative measures
and criteria - 2 RANGES
• Development of proposal for adequate response and timely measures, if necessary!
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25. KNOWLEDGE ABOUT FRAUD
THEORY AND PRACTICE
• TAXONOMY OF FRAUD AND FRAUD
TERMINOLOGY
• ACFE FRAUD TREE - corruption,
misappropriation of assets, financial statements
and other statements fraud
• TYPES OF FRAUD - by activities, by direction,
by countries, specific for EU, USA etc.
• FRAUD INDICATORS - red flags, irregularities,
errors, abnormals etc. 25
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26. FRAUD SCENARIO
• WHAT • HOW MUCH
• WHERE • HOW TO CONCEAL
• WHO • HOW TO CONVERT
• WHEN • WHAT’S THE LAW/
RULE
• WHO ELSE
• WHAT CONTROLS ARE
• INTENT OVERRIDDEN
• TIME LAG FOR
DETECTION
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27. METHODOLOGICAL
DIMENSION - HOW?
• Methods for Collecting Data
• Techniques for Collecting Data
• Analysis Methodology
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28. METHODS FOR
COLLECTING DATA
• DATA MINING
• DISCOVERY SAMPLING
• DOCUMENT INSPECTION
• BE ON THE PLACE
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29. TECHNIQUES FOR
COLLECTING DATA
• Internet Search - Google, Lexus-Nexus, national
search engines
• Checking formats and content for an authenticity
• Using specialized software - Picalo
• Walking, Talking, Listening, Watching
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30. ANALYSIS METHODOLOGY
• Comparing data and trends
• Ratios analysis
• What-if Analysis
• Cost Benefit Analysis
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31. TIMING DIMENSION - HOW
MUCH TIME (MONEY)?
• PREPARATION
• PERFORMANCE
• CONCLUSION AND
• REPORT PRESENTATION
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32. TIMING DIMENSION -
PREPARATION
• CREATING AND TRAINING A
TEAM
• PLANNING
• ORGANIZING
• PREPARING A FRAUD
TERMINOLOGY FOR THE CASE
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33. TIMING DIMENSION -
PERFORMANCE
• FOLLOWING TIME SHEETS SCHEDULE
• BEING ON THE PLACE
• VISITS ON THE SIDES
• DISCUSSIONS WITH THE CLIENT AND TEAM MEMBERS
• RANKING THE FRAUD RISK - CRITERIA, 2 RANGES ONLY
• THERE IS NOT A FRAUD RISK
• THERE IS A FRAUD RISK
• quantitative measures
• qualitative measures
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34. TIMING DIMENSION -
CONCLUSION
• MAKING CONCLUSIONS
• PREPARING
RECOMMENDATIONS - “O”
TOLERANCE
• REPORT PREPARATION AND
PRESENTATION
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35. 3D MODEL FOR FRAUD RISK
ASSESSMENT - OUTCOMES
• A NEW BUSINESS
OPPORTUNITY
• SIMPLE AND
UNDERSTANDABLE
• WORLD WIDE APPLICABLE
• COST EFFECTIVE
• USABLE, OF COURSE
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36. WHO WILL BE THE ACTORS
TOMORROW?
• Internal Auditors
• Financial Controllers
• Compliance Officers
• Fraud Examiners
• Certified Internal Control Auditors/
Specialists (CICA/CICS)
• External Auditors as a stand-alone
engagement
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37. YOUR QUESTIONS AND MY
ANSWERS, PLEASE!
I WOULD BE GLAD TO ANSWER
YOUR QUESTIONS AND
TO ACCEPT ALL OF YOUR
REASONABLE
RECOMMENDATIONS!
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38. THANK YOU FOR YOUR
KIND ATTENTION!
Dr. Dimiter Dinev, CFE
Chairman of ACEF
dinev@acefraud.org
www.acefraud.org
www.iepinet.eu
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