Fraud Awareness Program - OpenThinking

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Fraud Awareness Program

Iyad Mourtada, CIA, CFE, CMA, CPLP, M.A

Investigation !

LOGO Fraud Risk

The Institute of Internal Auditors "Any%illegal%act%characterized%by%deceit,%concealment,%or%violation%of%trust.%These%acts%are%not%dependent%upon%threat%of%violence%or%physical%force.%Frauds%are%perpetrated%by%parties%and%organizations%to%obtain%money,%property,%or%services;%to%avoid%payment%or%loss%of%services;%or%to%secure%personal%or%business%advantage”%

Association of Certified Fraud Examiners "The%use%of%one's%occupation%for%personal%enrichment%through%the%deliberate%misuse%or%misapplication%of%the%employing%organization's%resources%or%assets.”%%

LOGO Legal Elements of Fraud

1.#A#material#false#statement##

2.#Knowledge#that#the#statement#was#false#when#

it#was#spoken#

3.#Reliance#on#the#false#statement#by#the#victim##

4.#Damages#resulting#from#the#victim’s#reliance#

on#the#false#statement#

LOGO Major Categories of Fraud

@%Asset%misappropriations%%Skimming#revenues,#stealing#inventory,#and#payroll#fraud.#%

@%Corruption##Accepting#kickbacks#and#engaging#in#conDlicts#of#interest.##

E#Financial%statement%fraud%and%other%fraudulent%statements%%

Overstating#revenues,#understating#liabilities#or#expenses,#or#

making#false#promises#regarding#the#safety#and#prospects#of#

an#investment.#

LOGO Definition of Fraud

LOGO Financial Statement Fraud

The%Association%of%CertiBied%Fraud%Examiners%%%“The#intentional,#deliberate#misstatement#or#

omission#of#material#facts#or#accounting#data#

that#is#misleading#and,#when#considered#with#

all#the#information#made#available,#that#would#

cause#the#reader#to#change#or#alter#his#or#her#

judgment#or#decision.”#

Major%Areas:%%%1.#Fictitious#revenue#(and#related#assets)##

2.#Improper#timing#of#revenue#and#expense#recognition##

3.#Concealed#liabilities##

4.#Inadequate#and#misleading#disclosures##

5.#Improper#asset#valuation##

6.#Improper#and#inappropriate#capitalization#of#expenses#

%The%essential%characteristics:%#

(1)  %The#misstatement#is#material#and#intentional.#(2)  %Users#of#the#Dinancial#statements#have#been#misled.##

LOGO Management's%Role

Managing Fraud Risk: %

! #Establishing#a#FraudErelated#policy#and#procedures.#

! #Assessing#Fraud#Risk#Assessment##

! #Establishing#Preventive#Techniques##

! #Establishing##Detective#Techniques##

! #Establishing#a#Reporting#Process#

LOGO Internal%Auditor's%Role

! #Consider#fraud#risks#

!  Have#sufDicient#knowledge#of#fraud#to#identify#

red#Dlags#

! #Be#alert#to#opportunities#that#could#allow#fraud##

! #Evaluate#the#indicators#of#fraud##

! #Notify#the#appropriate#authorities###

! Proficiency 1210.A2 – Internal auditors must have sufficient knowledge to evaluate the risk of fraud and the manner in which it is managed by the organization, but are not expected to have the expertise of a person whose primary responsibility is detecting and investigating fraud.

! Due Professional Care 1220.A1 – Internal auditors must exercise due professional care by considering the Probability of significant errors, fraud, or noncompliance;

! Risk Management 2120.A2 – The internal audit activity must

evaluate the potential for the occurrence of fraud and how the organization manages fraud risk.

! Engagement Objectives 2210.A2 – Internal auditors must

consider the probability of significant errors, fraud, noncompliance, and other exposures when developing the engagement objectives.

! Reporting to Senior Management and the Board 2060 The chief audit executive must report periodically to senior

management and the board on the internal audit activity’s purpose, authority, responsibility, and performance relative to its plan. Reporting must also include significant risk exposures and control issues, including fraud risks, governance issues, and other matters needed or requested by senior management and the board.

LOGO Fraud Examination

Fraud%examination%is#a#methodology#developed#by#ACFE#for#resolving#fraud#allegations#from#inception#

to#disposition,#including#obtaining#evidence,#

interviewing,#writing#reports,#testifying#to#Dindings,#

and#assisting#in#the#detection#and#prevention#of#

fraud.##

LOGO Fraud Examiner

%%%%%Lawyer%%%%%%%%%%%%%%%%%%%%%%%Accountant%%

Criminologist%%%%%%%%%%%%%Investigator%%

LOGO Auditing vs. Fraud Examination

OpenThinking*is*an**ACFE*Authorized*Trainer*in*the**UAE*and*Qatar**

Observa+on"

Tools*Used*in*Fraud*Examina<on*

Occupa<onal*Fraud*and*Abuse*Asset""

Misappropria+ons"Corrup+on" Fraudulent"Statements"

Conflicts of Interest

Bribery

Illegal Gratuities

Economic Extortion

Inventory & All Other Assets

Nonfinancial

Financial

Obtaining*Evidence*

•  Covert*opera<ons*•  Surveillance*•  Using*informants*•  “Dumpster*diving”*•  Subpoenas*•  Search*warrants*•  Voluntary*consent*

How Occupational Fraud is Committed

Duration of Fraud Schemes

Initial Detection of Occupational Frauds

Source of Tips

Impact of Hotlines

Detection Method by Region

Type of Victim Organization

Industry of Victim Organization

Anti-Fraud Controls at the Victim Organization

Control Weaknesses That Contributed to Fraud

Perpetrator’s Position

Position of Perpetrator Based on Region

Perpetrator’s Age

Perpetrator’s Gender

Perpetrator’s Gender Based on Region

Median Losses Based on Gender

Position of Perpetrator Based on Gender

Perpetrator’s Education Level

Perpetrator’s Department

Behavioral Red Flags Displayed by Perpetrators

Recovery of Losses

Countries with Reported Cases

LOGO Definition of Fraud

LOGO Certified Fraud Examiner (CFE)

1.  Be#an#Associate#member#of#the#ACFE#in#good#standing.###

2.  Submit#the#CFE#Exam#application#with#proof#of#education#and#

professional#recommendations.####

3.  Prepare#for#the#CFE#Exam###

4.  Pass#the#CFE#Exam.###

5.  Gain#Dinal#approval#from#the#certiDication###########################

committee#and#become#a#CFE.###

" 10#hours#to#complete#the#CFE#Exam.##

" Each#section#is#allocated#a#maximum#of#2.6#hours#to#complete.##

" Each#of#the#four#exam#sections#has#125#questions.#

" You#will#have#a#maximum#of#75#seconds#to#answer#each#question.#

" You#have#30#days#to#complete#all#four#sections#of#the#CFE#Exam.#

" You#must#complete#each#section#in#one#sitting.##

•  Fraud Prevention and Deterrence

•  Financial Transactions

•  Fraud Investigation

•  Legal Elements of Fraud

Questions

Fraud Awareness Program - OpenThinking

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