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Fraud Awareness Program

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

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Investigation !

LOGO Fraud Risk

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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”%

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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.”#

#

LOGO Financial Statement Fraud

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#

#

LOGO Financial Statement Fraud

%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###

LOGO Internal%Auditor's%Role

! 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.

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LOGO Internal%Auditor's%Role

! 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.

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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%%

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LOGO Auditing vs. Fraud Examination

LOGO Auditing vs. Fraud Examination

1

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

2

2"

T"

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

Cash

Nonfinancial

Financial

Obtaining*Evidence*

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

How Occupational Fraud is Committed

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How Occupational Fraud is Committed

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Duration of Fraud Schemes

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Duration of Fraud Schemes

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Initial Detection of Occupational Frauds

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Source of Tips

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Impact of Hotlines

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Detection Method by Region

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Type of Victim Organization

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Industry of Victim Organization

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Anti-Fraud Controls at the Victim Organization

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Control Weaknesses That Contributed to Fraud

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Perpetrator’s Position

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Perpetrator’s Position

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Position of Perpetrator Based on Region

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Position of Perpetrator Based on Region

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Perpetrator’s Age

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Perpetrator’s Age

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Perpetrator’s Gender

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Perpetrator’s Gender Based on Region

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Median Losses Based on Gender

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Position of Perpetrator Based on Gender

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Perpetrator’s Education Level

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Perpetrator’s Department

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Perpetrator’s Department

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Behavioral Red Flags Displayed by Perpetrators

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Recovery of Losses

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Countries with Reported Cases

87

LOGO Definition of Fraud

LOGO Certified Fraud Examiner (CFE)

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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.###

LOGO Certified Fraud Examiner (CFE)

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" 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.##

LOGO Certified Fraud Examiner (CFE)

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•  Fraud Prevention and Deterrence

•  Financial Transactions

•  Fraud Investigation

•  Legal Elements of Fraud 

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Questions