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Dr Dinev's3d modelinkrakow sept2011
The document presents insights from the 10th International Congress on Internal Control, Audit, and Anti-Fraud, focusing on a 3D model for fraud risk assessment developed by Dr. Dimiter Dinev. This model emphasizes systematic data analysis for assessing fraud risk, involving various stakeholders such as internal auditors and compliance officers to enhance fraud deterrence. The document outlines the functional, methodological, and timing dimensions of the assessment process, detailing potential fraud scenarios and the necessary responses for organizations.
Dr Dinev's3d modelinkrakow sept2011
- 1. 10th INTERNATIONAL CONGRESS ONINTERNAL 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) 1 1
- 2. X PIKW CONGRESSIN KRAKOW 2 2
- 3. KRAKOW IX -XPIKW CONGRESSES 3 3
- 4. KRAKOW X PIKWCONGRESS 4 4
- 5. KRAKOW X PIKWCONGRESSES 5 5
- 6. KRAKOW IX -XPIKW CONGRESSES 6 6
- 7. KRAKOW IX -XPIKW CONGRESSES 7 7
- 8. KRAKOW IX -XPIKW CONGRESSES 8 8
- 9. KRAKOW X PIKWCONGRESSES 9 9
- 10. KRAKOW X PIKWCONGRESSES 10 10
- 11. KRAKOW IX -XPIKW CONGRESSES 11 11
- 12. KRAKOW IX -XPIKW CONGRESSES 12 12
- 13. 13 13
- 14. IX PIKW CONGRESSKRAKOW 2010 14 14
- 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 15 15
- 16. 3D MODEL FORFRAUD RISK ASSESSMENT • FUNCTIONAL DIMENSION • METHODOLOGICAL DIMENSION • TIMING DIMENSION 16 16
- 17. 3D MODEL FORFRAUD 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 17 17
- 18. WHO WILL BETHE ACTORS? • Internal Auditors • Financial Controllers • Compliance Officers • Fraud Examiners • Certified Internal Control Auditors/ Specialists (CICA/CICS) • External Auditors as a stand-alone engagement 18 18
- 19. 3D MODEL FORFRAUD RISK ASSESSMENT GOALS • A NEW BUSINESS OPPORTUNITY • SIMPLE AND UNDERSTANDABLE • WORLD WIDE APPLICABLE • COST EFFECTIVE • USABLE, OF COURSE 19 19
- 20. RISK AND FRAUDRISK 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 20
- 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 21 21
- 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 22 22
- 23. 3D MODEL FORFRAUD RISK ASSESSMENT • FUNCTIONAL DIMENSION • METHODOLOGICAL DIMENSION • TIMING DIMENSION 23 23
- 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! 24 24
- 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 25
- 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 26
- 27. METHODOLOGICAL DIMENSION - HOW? • Methods for Collecting Data • Techniques for Collecting Data • Analysis Methodology 27 27
- 28. METHODS FOR COLLECTING DATA • DATA MINING • DISCOVERY SAMPLING • DOCUMENT INSPECTION • BE ON THE PLACE 28 28
- 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 29 29
- 30. ANALYSIS METHODOLOGY • Comparing data and trends • Ratios analysis • What-if Analysis • Cost Benefit Analysis 30 30
- 31. TIMING DIMENSION -HOW MUCH TIME (MONEY)? • PREPARATION • PERFORMANCE • CONCLUSION AND • REPORT PRESENTATION 31 31
- 32. TIMING DIMENSION - PREPARATION • CREATING AND TRAINING A TEAM • PLANNING • ORGANIZING • PREPARING A FRAUD TERMINOLOGY FOR THE CASE 32 32
- 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 33 33
- 34. TIMING DIMENSION - CONCLUSION • MAKING CONCLUSIONS • PREPARING RECOMMENDATIONS - “O” TOLERANCE • REPORT PREPARATION AND PRESENTATION 34 34
- 35. 3D MODEL FORFRAUD RISK ASSESSMENT - OUTCOMES • A NEW BUSINESS OPPORTUNITY • SIMPLE AND UNDERSTANDABLE • WORLD WIDE APPLICABLE • COST EFFECTIVE • USABLE, OF COURSE 35 35
- 36. WHO WILL BETHE ACTORS TOMORROW? • Internal Auditors • Financial Controllers • Compliance Officers • Fraud Examiners • Certified Internal Control Auditors/ Specialists (CICA/CICS) • External Auditors as a stand-alone engagement 36 36
- 37. YOUR QUESTIONS ANDMY ANSWERS, PLEASE! I WOULD BE GLAD TO ANSWER YOUR QUESTIONS AND TO ACCEPT ALL OF YOUR REASONABLE RECOMMENDATIONS! 37 37
- 38. THANK YOU FORYOUR KIND ATTENTION! Dr. Dimiter Dinev, CFE Chairman of ACEF dinev@acefraud.org www.acefraud.org www.iepinet.eu 38 38