Post-Conference

Auditing and Investigating Fraud

Seminar

Auditing Track

Asset Misappropriation Schemes

2 of 20

Asset Misappropriation Schemes

Cash schemes

• Theft of cash receipts

• Fraudulent disbursements

Inventory/other assets

• Misuse

• Larceny

3 of 20

Theft of Cash Receipts

Skimming

• Sales

• Receivables

Cash larceny

• From the register

• From the deposit

4 of 20

Detection of Theft of Cash Receipts

Analyze sales accounts by employee.

Review journal entries.

Compare dates of customer payments with

dates payments are posted to accounts.

Analyze cash receipts and their recording.

Analyze the relationship between sales, cost

of sales, and returns and allowances.

Watch for altered register tapes.

Follow up on complaints and inquiries from

customers.

5 of 20

Fictitious Disbursements

Check tampering schemes

Billing schemes

Register disbursement schemes

Expense reimbursement schemes

Payroll schemes

6 of 20

Check Tampering Schemes

Forged maker schemes

Forged endorsements

Altered checks

7 of 20

Detection of Check Tampering Schemes

Investigate customer complaints.

Investigate missing canceled checks.

Investigate past due notices received.

Review unusual endorsements on checks.

Review unusual payee names.

Conduct analytical reviews.

Reconcile checks using a positive pay system.

8 of 20

Billing Schemes

Personal purchases with company funds

False invoicing

Altering existing purchase orders/requisitions

Returning merchandise for cash

Related-party businesses

9 of 20

Detection of Billing Schemes

Search for:

• Vendor addresses that match employee

addresses

• Unusual activity in “soft” accounts

• Increased payments to certain vendors

Perform site visits of vendors.

Investigate noticeable changes in an

employee’s lifestyle.

10 of 20

Detection of Billing Schemes

Conduct analytical reviews.

Review high-volume vendor activity for new

vendors.

Investigate refunds sent to addresses other

than the organization’s permanent address

on file.

11 of 20

Register Disbursement Schemes

False refunds

False voids

12 of 20

Detection of Register Disbursement Schemes

Account for consecutive sales orders/transactions.

Compare volume of credit memos by period.

Account for missing register tapes.

Investigate voided transactions not properly

documented.

Investigate refunds or voids just under review limit.

Analyze:

• Sales volume by employee

• Voids/refunds by employee

13 of 20

Expense Reimbursement Schemes

Fictitious expenses

Altered expenses

Mischaracterized expenses

Duplicate reimbursements

14 of 20

Detection of Expense

Reimbursement Schemes

Compare actual and budgeted expenses by

cost center.

Investigate reimbursements over a certain

amount or in even amounts.

Investigate reimbursements charged to

unusual accounts.

Examine accounts that have unusual activity.

15 of 20

Payroll Schemes

Ghost employees

Overpayment of wages

16 of 20

Detection of Payroll Schemes

Independent payroll distribution

Analysis of payee addresses or accounts

Search for duplicate employee information

Review of overtime

Analysis of deductions

17 of 20

Non-Cash Asset Schemes

Misuse of inventory/fixed assets

Theft of fixed assets

Theft of inventory

18 of 20

Detection of Fixed Asset Theft

Perform physical counts of fixed assets,

including computer software.

Analyze depreciation schedules for unusual

patterns.

Compare fixed asset purchases for multiple

years.

Analyze salvage and scrap sales for unusual

patterns.

Review surveillance camera videos, if

available.

19 of 20

Theft of Inventory

Methods of stealing inventory:

• Unconcealed larceny

• Fraudulent requisitions and transfers

• Falsified receiving reports

• Fraudulent shipments of merchandise

Methods of concealing shrinkage:

• Altering inventory records

• Recording fictitious sales and accounts receivable

• Writing off the missing inventory

• Padding the physical inventory

20 of 20

Detection of Inventory Theft

Compare cost of goods sold to sales.

Conduct periodic and surprise inventory counts.

Analyze shrinkage.

Compare shipping addresses to employee

addresses.

Reconcile shipments to sales records.

Analyze inventory recorded as scrap.

Analyze inventory balances and entries.