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How to Catch Expense Reimbursement (T & E)
Cheaters Using Data Analysis
June 18, 2013
Special Guest Presenter:Katrina Kiselinchev, CIA, CPA, CFE, CFF
Copyright © 2013 FraudResourceNet™ LLC
Copyright © 2013 FraudResourceNet™ LLC
About Peter Goldmann, MSc., CFE
President and Founder of White Collar Crime 101
Publisher of White‐Collar Crime Fighter
Developer of FraudAware® Anti‐Fraud Training Monthly Columnist, The Fraud Examiner,
ACFE Newsletter
Member of Editorial Advisory Board, ACFE
Author of “Fraud in the Markets”
Explains how fraud fueled the financial crisis.
Copyright © 2013 FraudResourceNet™ LLC
About Jim Kaplan, MSc, CIA, CFE
President and Founder of AuditNet®, the global resource for auditors
Auditor, Web Site Guru
Internet for Auditors Pioneer
Recipient of the IIA’s 2007 Bradford Cadmus Memorial Award.
Author of “The Auditor’s Guide to Internet Resources” 2nd Edition
Copyright © 2013 FraudResourceNet™ LLC
About Katrina Kiselinchev, CPA, CIA, CFE, CFF
President of Inclusivitie, We Do “SMART”
Integration Partner with IDEA
Experience across industries, audit, fraud, and value
Achieved Value of $5+ Million & ROI of 2000+%, which
included using IDEA’s SMART Analyzer .
Adjunct Professor at Georgia State University
Specific Frauds in P‐Card & T‐E (Airfare, Mileage, Overstated)
Copyright © 2013 FraudResourceNet™ LLC
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Disclaimers
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The views expressed by the presenters do not necessarily represent the views, positions, or opinions of FraudResourceNet LLC (FRN) or the presenters’ respective organizations. These materials, and the oral presentation accompanying them, are for educational purposes only and do not constitute accounting or legal advice or create an accountant‐client relationship.
While FRN makes every effort to ensure information is accurate and complete, FRN makes no representations, guarantees, or warranties as to the accuracy or completeness of the information provided via this presentation. FRN specifically disclaims all liability for any claims or damages that may result from the information contained in this presentation, including any websites maintained by third parties and linked to the FRN website
Any mention of commercial products is for information only; it does not imply recommendation or endorsement by FraudResourceNet LLC
Copyright © 2013 FraudResourceNet™ LLC
Learning Objectives
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How to Detect Common T & E Schemes
Double Reimbursement
Corporate Credit Card Abuse
Innovative Hotel, Meal, & Airfare Ploys…
Best Practices for T & E Fraud Deterrence & Prevention
Data Analysis Techniques for Detecting T & E Frauds Quickly
How to Formulate a T & E Anti‐Fraud Policy
Copyright © 2013 FraudResourceNet™ LLC
Agenda
Introduction
The Auditor’s Role
Fraud State of the Union
Dishonest T & E Fraudsters
Detection of Common Schemes
IM a Traveling Bandit Case
Planning, Data Gathering & Software Introduction
Discovery with DA: Is There Fraud at IMA Traveling Bandit
Red Flag Detection & Collusion
Finding Fraud & Next Steps
Formulating an Anti‐Fraud Policy
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The Auditor’s Role
IPPF Standard 1210.A3
Internal auditors must have sufficient knowledge of…available technology
based audit techniques to perform their assigned work
Copyright © 2013 FraudResourceNet™ LLC
IIA Guidance – GTAG 13
Internal auditors require appropriate skills
and should use available technological
tools to help them maintain a successful
fraud management program that covers
prevention, detection, and investigation.
As such, all audit professionals — not just
IT audit specialists — are expected to be
increasingly proficient in areas such as
data analysis and the use of technology to
help them meet the demands of the job.
Copyright © 2013 FraudResourceNet™ LLC
Professional Guidance
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Fraud State of the Union
Source: 2012 ACFE Report to the Nations
Copyright © 2013 FraudResourceNet™ LLC
Fraud State of the Union
Source: 2012 ACFE Report to the Nations
Copyright © 2013 FraudResourceNet™ LLC
Dishonest T & E Fraudsters
What They Do:
Create Fake, Vendors, Expenses, Receipts
Do Not Submit in Itemized Receipts
Submit Duplicate Expenses
Misclassify Expenses
Submit Personal Expenses as Business
Take Advantage of Multiple Decentralized Policies
Air/Car Allowance/P‐Card/Mileage/Hotel
Create Travel Allowance “Credits”
Take Advantage of Policies for 1st Class v. Economy
Take Difference for Personal Gain
Copyright © 2013 FraudResourceNet™ LLC
Polling Question 1
What is the Frequency of Expense Fraud Cases in the Latest ACFE “Report to the Nation”
A. 6%
B. 30%
C. 15%
D. 2%
Copyright © 2013 FraudResourceNet™ LLC
Prevention & Detection of Common Schemes
Prevention:
Block Fake Receipt Sites
Block Vendors Not on Approved Listings
Block Certain Types of Vendors (P‐Cards)
Disallow Acceptance of Non‐Itemized Receipts
Implement Proper Segregation of Duties
Implement Automated Controls
Detection:
Continuous Monitoring Through Data Analysis
Compare Submitted Expense Report Charges v. Company Card Charges
Review Dates on Expenses Submitted for Non‐Working Days
Review for Proper Approver
Copyright © 2013 FraudResourceNet™ LLC
Prevention & Detection of Common Schemes
Detection Continued:
Review for Expenses in Round Dollar Amounts
Review Top 80% Spend by Individual, Vendor, Type
Compare Submission to Prior Two Expense Reports for Fraud
Request Travel Confirmations
Review Monthly & Annual Mileage for Driving Validity & Reasonableness
Periodically Analyze & Review Gaps
Air/Car Allowance/P‐Card/Mileage/Hotel
Copyright © 2013 FraudResourceNet™ LLC
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Large Amounts of Data Identify Red Flags Faster Increased Coverage Determine Trends Continuous Analysis Process Improvement
Data Analytics for Fraud:Tools You Can Use
Small Amounts of Data Delay in Identifying Red Flags Decreased Coverage Harder to ID Trends
Data Analytics Traditional Auditing
Show First View of IDEA
Copyright © 2013 FraudResourceNet™ LLC
Case Study: IM A TRAVELING BANDIT
Initial Contact:
You get a panicked call from someone in AP. They have reviewed T&E records for one department and found some alarming red flags. They think the have a traveling “bandit” on the loose.
“Concerns about Unrealistic Mileage”
“Concerns about Employee with Triple Spend in Department”
“We Need a Data Analysis Expert… .. Massive Data”
Copyright © 2013 FraudResourceNet™ LLC
Polling Question #2
Which of the following is One Way to Detect T & E Fraud?
A. Block Fake Receipt Sites
B. Block Certain Types of Vendors
C. Implement Automated Controls
D. Implement Continuous Monitoring with DA
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Copyright © 2013 FraudResourceNet™ LLC
IM A Traveling Bandit
Allow All Vendors on Expense Reports
Allow All Websites on Co. Computers
No Segregation of Duties Between Approving & Paying
No Comparison of Expense Reports v. Company Card
No Review of Proper Approver
No Review of Mileage Overlap and/or Reasonableness
.
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Software Overview & Introduction
Set Working Folder
Import Data
Check Control Totals
Copyright © 2013 FraudResourceNet™ LLC
Auditee Communication:Planning for Travel & Entertainment Fraud
Walk‐through of Approvals, Approvers, Policy
Procure‐to‐Pay Cycle
Complete Audit Plan with Data Analysis Incorporated
Include Different Types Alongside Consideration of Fraud
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Data Gathering for Data Analysis
Request All Meta Data Fields & FilesEmployee ID, Type of Spend, $ Amount, Budget
Microsoft Excel 97-2003 Worksheet
Copyright © 2013 FraudResourceNet™ LLC
Polling Question 3
Which of the following is/are important T&E fraud prevention controls?
A. Segregation of Duties Between Approver & Payer
B. Continuous Monitoring
C. Review of Mileage Overlap
D. Comparison of Co. Card Spend v. Expenses Submitted
E. All of the above
Copyright © 2013 FraudResourceNet™ LLC
Discovery with Data Analysis:Is There Fraud at IMA?
Initial Audits to Perform:
Approver
Approver Submissions
Expenses
Duplicates
Expenses v Co Card
Expenses v Budgets
Expense Type
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Discovery with DA: Spend
Audits to Perform:
Approver Submissions
Summarize by EmployeeRed Flag #1: Approved
Own Expenses
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Polling Question 4
Name a Test That IMA Should Run Initially
to Identify Red Flags?
A. Depreciation Calculation
B. Address v. Employee
C. Expenses Submitted v. Co. Card
D. Review Co. Telephone Charges
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Discovery with DA: Duplicates
Red Flag #2: Numerous Duplicates, Odd Amounts & Quantities
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Discovery with DA: Expense v. Card, Expense v. Budget, Type
Red Flag #3:Expense v Co Card
100% Match
Red Flag 4:Expenses v Budgets
Red Flag 5:Expense Type
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Finding Fraud & Next Steps
1) Complete Summary of Data & Findingsa) Total by Each Type of Discrepancyb) Aggregate Discrepancy
2) Determine Additional Tests to Run & Perform3) Discuss Findings with Owner Initially & Recommendations4) Complete Interviews with Employees 5) Review Gaps & Control Deficiencies & Provide Recommendations 6) Recommend Management Review for Cost v Benefit & Implement ASAP7) Determine if Client has Fraud Insurance Rider. If not, recommend.8) Contact Insurance Carrier (if applicable) & Begin Claim Process.9) Contact Authorities & File Report.10) Determine if Prosecution is Viable e.g. Dollar Amount, Management, etc.11) Complete Report (See ACFE.com) 12) Complete Supporting Doc for Insurance Co. & Authorities
Copyright © 2013 FraudResourceNet™ LLC
Formulating Anti-Fraud Policy
Policy Statement: To Prevent & Detect Fraud… and No Tolerance
Definition of Fraud: Intent to Defraud & Personal Gain
Reporting Responsibilities: By Staff Level
Reporting Suspicions: Process & Avenues
Fraud Response Plan: Process Once Potential Investigation is Warranted
Policy Communication: Avenues & Frequency
Copyright © 2013 FraudResourceNet™ LLC
Polling Question 5
Which of the following is/are Red Flag(s)/ Finding(s) Identified with IM a Traveling Bandit
A. 100% Match on Employee Expense Submissions & Co. CardB. Contracts v RatesC. Terminated Employees Receiving PaychecksD. Unreasonable Mileage
Copyright © 2013 FraudResourceNet™ LLC
Questions?
Any Questions?Don’t be Shy!
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Coming Up….
Ethics for Auditors: Understanding Current Issues in Financial Integrity June 26
Fraud Audit versus Fraud Investigation: Critical Distinction” July 10
Copyright © 2013 FraudResourceNet™ LLC
Thank You!
Website: http://www.fraudresourcenet.com
Jim KaplanFraudResourceNet™
800-385-1625 [email protected]
Peter GoldmannFraudResourceNet™
Katrina KiselinchevInclusivitie, LLC832-236-4778
[email protected]://www.inclusivitie.com