Fraud Prevention and Deterrence Pam Peters CFE Office

Fraud Prevention and Deterrence Pam Peters, CFE Office of Internal Audit 1

What is Fraud? v. A knowing misrepresentation of the truth or Thanks for Attending! concealment of a material fact to induce another to act to his or her detriment. The next BCUG meeting will be held on any November 12, 2013 v. Fraud includes intentional or deliberate act to deprive another of property or money by deception or unfair means. Happy 2

Types of Fraud Thanks for Attending! Internal Fraud The next External BCUG meeting will be Fraud held on November 12, 2013 Fraud Against Individuals Happy 3

Internal Fraud Thanks for Attending! Also referred to as occupational fraud The next BCUG meeting will be “The use of one’s occupation for personal heldthrough on November 12, or 2013 enrichment the deliberate misuse misapplication of the organization’s resources or assets. ” Happy 4

Occupational Fraud Three. Thanks Major types Occupational forof Attending! Fraud: The next BCUG meeting will be § Corruption § Asset Misappropriation held on November 12, 2013 § Financial Statement Fraud Happy 5

Occupational Fraud v Corruption: Thanks for Attending! § Conflict of Interest • Purchasing Schemes • Sales Schemes The next BCUG meeting will be §held Bribery on November 12, 2013 • Invoice Kickbacks • Bid Rigging Happy § Illegal Gratuities § Economic Extortion 6

Occupational Fraud v Asset Misappropriation: Thanks for Attending! § Cash • Theft of cash The • next BCUG meeting Theft of cash receipts • Fraudulent Disbursements will be heldo on November 12, 2013 Billings Schemes Payroll Schemes Expense Reimbursement Schemes Check Tampering Register Disbursements Happy o o 7

Occupational Fraud v Asset Misappropriation Cont’d: Thanks for Attending! § Inventory and All Other Assets • Misuse The • next BCUG Larceny meeting will be held on November 12, 2013 Happy 8

Occupational Fraud v Financial Statement Fraud: Thanks for Attending! § Asset/Revenue - Overstatements • Timing Differences The • next BCUG meeting will be Fictitious Revenues held on November 12, 2013 • Concealed Liabilities and Expenses • Improper Asset Valuations • Improper Disclosures Happy 9

Occupational Fraud v Financial Statement Fraud Cont’d: Thanks for Attending! § Asset/Revenue - Understatements • Timing Differences The • next BCUG meeting will be Understated Revenues held on November 12, 2013 • Overstated Liabilities and Expenses • Improper Asset Valuations Happy 10

External Fraud v Dishonest Vendors Thanks for Attending! v Dishonest customers nextbreaches BCUG meeting will be v. The Security held on November 12, 2013 v Hacking v Theft of proprietary information Happy 11

Fraud Against Individuals Thanks for Attending! Identify Theft The next Ponzi BCUG meeting will be Schemes held on November 12, 2013 Phishing Schemes Happy 12

Why Does Fraud Occur? v The Fraud Triangle: Thanks for Attending! § Developed by Dr. Donald Cressey – his Theresearch next BCUG will be focused on meeting embezzlers, people he calledon “trust violators” held November 12, 2013 Happy § A model for explaining the factors that cause someone to commit occupational fraud 13

Fraud Triangle 14

What Can We Do? v Detect, Deter, andfor Prevent fraud before it occurs Thanks Attending! v Look for early warning signs: § Accounting records that do not balance or cannot be The next BCUG meeting will be reconciled §held Too much or ownership of 12, records or oncontrol November 2013 § § 15 processes by one individual Missing or altered documentation Employee living beyond their means, lifestyle is inconsistent with known income Happy

What Can We Do? v Look for early warning signs cont’d: § Long-term or “model” employees, who never take Thanks for Attending! vacation or sick leave § Unexplained changes in an employee’s work behavior § Employees receiving calls at work from creditors or collection agencies § Employees who appear to have unusually close relationships with customers or vendors These are just a few examples which may indicate potential fraudulent activity. The next BCUG meeting will be held on November 12, 2013 Happy 16

What Can We Do? v Steps to mitigate risks: § § Thanks for Attending! Be aware of your surroundings and daily activities Ensure your area has proper internal controls and segregation of duties Document what you observed Report your concerns to your immediate supervisor, Dean/Chair, or the Office of Internal Audit http: //audit. unl. edu The next BCUG meeting will be § §held on November 12, 2013 Happy DO NOT INVESTIGATE POSSIBLE FRAUD YOURSELF! 17

Questions? Thanks for Attending! Thank you! The next BCUG meeting will be Pam Peters, CFE Senior Auditor 12, 2013 held on November Office of Internal Audit ppeters 2@unl. edu Happy Source: ACFE 18