prevent fraud in your organization - webinar slides

1 © ArmaninoLLP | amllp.com © ArmaninoLLP | amllp.com

ArmaninoLLP Welcomes You To Today’s Webinar:Prevent Fraud in Your Organization

The presentation will begin in a few moments

Participants will receive an email within 3 business days with access to their certificate of completion.

2 © ArmaninoLLP | amllp.com

About the Presenters

Jeff Stegner, CPA/ABV, CFEPartner, Forensic & Valuation Services

Jeff has nearly 25 years experience in public accounting, the last 15 of which have been focused on valuation and litigation support services. Jeff is Accredited in Business Valuation (ABV) and also a Certified Fraud Examiner (CFE).

He has been qualified as the Court’s expert in various civil litigation matters on over 100 occasions and been retained in over 650 such matters including: accounting fraud, economic damages, lost profits, tracing of funds or property, spousal support, community vs. separate property claims and business valuation.


About the Presenters

Natalie McFarlin, CPA/ABVManager, Forensic & Valuation ServicesNatalie has more than five years of experience preparing business valuations and working on hundreds of litigated matters. She is Accredited in Business Valuation (ABV) and a member of both the American Institute of Certified Public Accountants and California Society of Certified Public Accountants.


During today’s webinar, participants will:• Discuss the characteristics of fraud and those who commit

fraud• Identify key prevention techniques recommended by our firm

as well as the ACFE• Review case studies of actual engagements

we have been involved with

Learning Objectives


Presentation Overview

Types of Fraud• The Fraud Triangle• Three types of fraud

Discovering Fraud• Detection of Fraud• Targeted businesses• Employee red flags

Prevention of Fraud• Prevention techniques• Fraud prevention checklist


• Consequential Damageso Protect your job

o Protect your co-workers

o Protect your employer

Why Me? / Why Now?


Fraud Risk Triangle


• Fraudulent Financial Reporting• Asset Misappropriationo Employee steals or misuses organizations’ resources

• Corruptiono Employee misuses influence in a transaction that

violates their duty

• Financial Statement Fraudo Employee intentionally causes a misstatement

of material information in financial reports

Three Types of Fraud


Types of Fraud by Frequency

85%

37%

9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Asset Misappropriation Corruption Financial Statement Fraud


Type of Fraud by Median Loss

$130,000 $200,000

$1,000,000

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

Asset Misappropriation Corruption Financial Statement Fraud


• Profile of the average perpetratoro Level of authority

• Higher authority figures commit fraud with higher median losses

• Lower level employees committed fraud more frequently with lower median losses

o Length of time employed

• Longer employment associated with higher median losses

Employee Red Flags


• Profile of the average perpetrator (continued)

o Department • A majority of fraud was committed in the following departments:

o Accounting

o Operations

o Sales

o Executive/Upper Management

o Customer Service

o Purchasing

Employee Red Flags (continued)


• Behavior of the average perpetratoro Living beyond their meanso Experiencing financial difficultyo Unusually close association with vendors or customerso Excessive control issues

Employee Red Flags (continued)


• Implement an anonymous outside fraud hotline• Segregation of duties• Job rotation• Management review

Prevention Techniques


• Set proper “tone at the top”• Fraud assessments• Surprise audits• Do not rely on external audits as a primary

detection method• Implement fraud awareness training for all

Prevention Techniques (continued)


• Stated consequences of committing fraud• Communicate instances of discipline

(no-name basis)• Effective deterrent• Enforce environment of high ethical standards

Communicate Highly Ethical Culture


• Tips are most common methodo 42.2% of detected fraud was from tips in 2014

o Most common method since 2002

• Management review and internal audit are the next two most common methodso Combined these make up 30.1%

o A slight increase from 29.0% in 2012

• External audit is far less effectiveo Only discovers 3.0% of fraud cases

Detection of Fraud


Found How?

42%

16%

14%

7%

7%

4%

3%

3%

2%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Tips

Management review

Internal Audit

By Accident

Account Reconciliation

Document Examination

External Audit

Surveillance/Monitoring

Notified by Law Enforcement

IT Controls

Confession

Other


• Most common way to detect fraud

• More effective with anonymity

• Hotlines increase likelihood of receiving tips

Fraud Detected by Tips


• Overall o Estimated 5% of revenue lost to fraud. This equates to $3.7 trillion internationally

per year.o Same report - median loss per fraud occurrence investigated by its members was

$145,000 (over 1/5 exceeded $1,000,000).• Organizations with Hotlines:o Frauds were 41% less costlyo Frauds were detected 50% more quickly

The Facts


• 100% anonymous unless you choose otherwise • Toll free number• Live 24/7 coverage• Immediate reporting

Key benefits:• #1 way to detect fraud - communications• #1 way to prevent fraud – strong tone at the top• Reduces damages from fraud by 60%.

Taking Action

www.RedFlagReporting.com 1-877-64-RedFlag (1-877-647-3335)


Taking Action


Sign up for the hotline!

• Presentation for your Company• Easy to set up and go live• Inexpensiveo $1,500 annually (one time $1,500 set up fee)

Now What?


During this webinar, we’ve covered:

• Types of fraud committed and the impact each has on an organization

• The common signs of fraud and the individuals who commit it• How to be an organization that prevents fraud

In Conclusion…

27 © ArmaninoLLP | amllp.com © ArmaninoLLP | amllp.com

ArmaninoLLP Certified Public Accountants & ConsultantsJeff Stegner phone: 925.790.2692 email: [email protected]

Natalie McFarlin phone: 925.790.2885 email: [email protected]

Participants will receive an email within 3 business days with access to their certificate of completion.