Types of Fraud

1
Types of Fraud

• Some Common Frauds and responsibility for fraud
  detection and deterrence

2
Some General Types of Fraud

• Frauds against individuals
• Frauds against organizations
• Frauds perpetrated by organizations
• Organized Crime

3
Frauds Against Individuals

• Home repair scams
• Fictitious medical treatments
• Misrepresented investments
• Erroneous or false invoices
• Altering checks
• Credit card information theft
• Computers are used as a tool in fraud

4
Frauds Against Organizations

• Misappropriation of assets
• Theft for personal benefit
• To harm the organization
• Stealing or corrupting data
• For personal profit or harm to organization
• To gain competitive advantage
• Erroneous or false invoices

5
Frauds Perpetrated by Organizations

• Financial statement fraud
• Misrepresenting financial situation
• Fraudulent business practices
• False advertising
• Bait and switch schemes
• Pyramid or Ponzi schemes

6
Organized Crime

• Mafia, gang, or business organization
• Motives
• Profit
• Power

7
Who is Responsible?

• Board of Directors
• Management
• Independent Auditor
• Internal Auditor
• Fraud Examiner

8
Board of Directors

• Oversight responsibility
• Audit Committee of the Board
• Outside directors
• Written charter
• Authority and resources
• Participate, informed, vigilant and effective
• Liability

9
Management

• Sets the tone within the organization
• Written code of conduct
• Enforcement of the Code of Conduct
• Provide an example for employees
• Responsible for personnel
• Hiring, training, and proper assignment of duties
• Day-to-day responsibility
• Monitoring controls

10
Independent Auditor

• Statement on Auditing Standards 82 is the
  primary source of guidance
• effective for audits of financial statements for
  periods ending on or after December 15, 1997.
• The auditor has a responsibility to plan and
  perform the audit to obtain reasonable assurance
  about whether the financial statements are free
  of material misstatement whether caused by error
  or fraud.

11
Internal Auditor

• IIA Statement on Internal Auditing Standards No.
  3 expanded the internal auditors role.
• Deterrence
• Evaluate mgmt actions
• Detection
• Sufficient knowledge to identify indications of
  fraud
• Investigation
• May involve internal auditors
• Reporting
• Findings, conclusions, recommendations actions.

12
Certified Fraud Examiner

• Helps resolve allegations of fraud
• Obtains evidence
• Takes statements
• Writes reports of fraud examinations
• Testifies to findings
• Assists in the detection and prevention of fraud.