Forensic Accounting BA 124 Professor Bill OBrien FORENSIC

Forensic Accounting BA 124 Professor Bill O’Brien FORENSIC ACCOUNTING – BA 124 - Spring 2015

Today’s Topics n n n Seriousness of fraud Definition of fraud Types of fraud Criminal versus civil statutes Fraud-related careers FORENSIC ACCOUNTING – BA 124 - Spring 2015

Remember the “P” in CPA n n The public trust is essential You have only one reputation FORENSIC ACCOUNTING – BA 124 - Spring 2015

Cost of Fraud n n n Association of Certified Fraud Examiners (ACFE) Close to $1. 0 trillion annually in U. S. ; close to $3. 0 trillion worldwide Over 7% of revenue…straight to the bottom line FORENSIC ACCOUNTING – BA 124 - Spring 2015

How Does Fraud Impact You? n Financially n Reputation of your firm n Opportunity cost FORENSIC ACCOUNTING – BA 124 - Spring 2015

Here’s What Happens. . . n n It is a dollar for dollar impact on net income Dollars that have a multiplier effect on revenue in order to generate new profits FORENSIC ACCOUNTING – BA 124 - Spring 2015

Defining Fraud n n n n A statement SLIMBAD Which is a lie, And intentionally or recklessly so, About a material point, Which is believed And acted upon by the victim To the victim’s damage Let examine each highlighted term FORENSIC ACCOUNTING – BA 124 - Spring 2015

What Drives Fraud n Consider the Ponzi Fraud of the early 20 th Century n n n See www. mark-knutson. com Primary age of fraudsters--36 -45 yrs. Key drivers n n n Confidence earned Pressures Greed FORENSIC ACCOUNTING – BA 124 - Spring 2015

Classifications of Fraud n Fraud versus an organization n n Occupational fraud Fraud on behalf of an organization FORENSIC ACCOUNTING – BA 124 - Spring 2015

Occupational Fraud n n Clandestine Violates fiduciary interest Direct or indirect financial benefit Damages the organization FORENSIC ACCOUNTING – BA 124 - Spring 2015

Fraud on Behalf of an Organization n Most common…fraudulent financial reporting FORENSIC ACCOUNTING – BA 124 - Spring 2015

A More Detailed Classification List n n n Occupational fraud…embezzlement Management fraud Investment scams Vendor fraud Customer fraud Know the table on WSA pg. 10 FORENSIC ACCOUNTING – BA 124 - Spring 2015

Examples. . . n n n Embezzlement: CVC Management: World-com Investment: see scams Vendor: Halliburton; Customer: Florida State football player and department store; bank case FORENSIC ACCOUNTING – BA 124 - Spring 2015

Prosecution n Criminal law for public offenses n n n n Bribery laws Anti Kickback Act of 1986 Mail Fraud statutes Bank Fraud statutes RICO and FCPA IRS and tax evasion Civil law for violations of private rights Note the comparative table on p. 15 FORENSIC ACCOUNTING – BA 124 - Spring 2015

Fraud Related Careers n n n ACFE and CFE requirements Government n FBI, Postal Inspectors, IRS n Forensic accountants n Internal auditors Public accounting Corporation Consulting n n Lawyers Expert witnesses FORENSIC ACCOUNTING – BA 124 - Spring 2015

Critical Skills n n n n Analytical Communication Technological Accounting and law Language Behavioral Common sense FORENSIC ACCOUNTING – BA 124 - Spring 2015