Fraud’s Finer Points: Accounts Receivable Fraud, Part Five: Other Accounting Manipulations


Fraud’s Finer Points: Case history applications - Accounts Receivable Fraud, Part Five: Eliminating Customer Accounts and Fictitious Account Adjustments
Here are learning objectives from two types of on-book accounts receivable fraud schemes the author has seen routinely in state and local government.

An Unholy Trinity: The Three Ways Employees Embezzle Cash
The three costliest embezzlement schemes, which include larceny of cash, skimming, and fraudulent disbursements, are illustrated in scenarios.

… And One for Me
Skimming is by far the most popular method for stealing an organization’s cash.

Asset Misappropriations: Taking It Personally.
Tom Westwood could charm the paint off the side of his house. But as the controlling shareholder of a large car dealership he could also find ways to misappropriate company funds to repaint that same house.

Audit Those Vendors
A vendor can be an entity’s best colleague or worst nemesis. Keep the relationship pleasant and successful by conducting vendor audits.

Avoiding Embezzlement Embarrassment Or Worse
An entity can lose twice in an embezzlement case. Consider these 10 actions to avoid even more revenue loss during the fraud examination and litigation.

Basic Recipes for Slush Funds: Circumventing Internal Controls Through Slush Concoctions
In the beginning, the agency managers meant to use the 'unofficial' bank account for good and not for evil, as the comic book super-heroes would say.

Beating fraud through internal auditing: A fraud primer for the new internal auditor
When new internal auditors are assigned the task of looking for fraud, many find themselves without the necessary skills to do a proper examination. In this session, you'll get an overview of what the new internal auditor needs to know about fraud in his or her first fraud assignments.

Billing Schemes, Part 1: Shell Companies That Don't Deliver
A focus on billing schemes that involve shell companies.

Billing Schemes, Part 2: Pass-Throughs
This article's case study shows auditors and CPAs how to recognize the pass-through billing schemes crooked purchasing agents and others sometimes use to illegally line their pockets.

Billing Schemes, Part 3: Pay-and-Return Invoicing
This article explains the pay-and-return billing scheme, in which an employee creates an overpayment to a vendor and pockets the subsequent refund.

Billing Schemes, Part 4: Personal Purchases
This article's case study shows CPAs the far-reaching consequences of not setting up controls in a business to detect and prevent seemingly immaterial frauds.

CASE IN POINT: Bringing Down the House: Extra Effort Found Roots of Federal Housing Funds Fraud
Executives at a large housing management firm stole thousands of federal dollars from low-income, rural rental housing projects. An extensive fraud examination found more than the initial investigation.

Built-in Glitches: Controls in Accounts Payable Software not Fraudproof
We discovered that the internal control functions in some Accounts Payable software packages are far from dependable.

Check fraud: Separating Money from Worthless Paper
Despite the heavy use of credit cards and online payments, and the redoubled efforts of the FBI and police anti-fraud units, check fraud continues to increase. CFEs can benefit from reviewing the rudiments of check fraud detection and prevention, and the new twists.

CASE IN POINT: Check This Out
The executive secretary of a local charity was beloved for her hard work and generous nature. Unfortunately, she was working hard to tamper with the organization's checks so she could be generous to herself.

Collaring Crime at Work
This article details the findings of one of the most comprehensive studies into occupational fraud and abuse ever undertaken in the United States, the 1996 Report to the Nation.

Effective solutions for combating employee theft: Combating internal fraud in the banking industry: Page 1
Fraud continues to prosper in the banking industry with a variety of fraud schemes. This session will be a practical discussion of fraud schemes that are perpetrated by banking insiders. You'll also learn some of the solutions that your organization can implement to prevent the fraud from occurring.

Effective solutions for combating employee theft: Combating internal fraud in the banking industry: Page 2
Fraud continues to prosper in the banking industry with a variety of fraud schemes. This session will be a practical discussion of fraud schemes that are perpetrated by banking insiders. You'll also learn some of the solutions that your organization can implement to prevent the fraud from occurring.

Construction Fraud: Beware the ‘Outside Facilitator’
Crafty manipulators will use weak employees at construction job sites to defraud companies for many months – long before the home office smells any problems.

Control Cash-Register Thievery
Show your clients the importance of looking above the bottom line.

Effective solutions for combating employee theft: Creative employee theft schemes & how to detect them
Just when you think that you've seen every way an employee can steal from you, a new one comes along. Employees are always coming up with creative ways of making you part with your money. In this session you'll learn some of these ways and especially how you can detect them, the first step in stopping them.

Fraud prevention: the latest techniques. Developing and auditing loss prevention policies and procedures, Part 1
Sweeping changes continue to reshape the workplace. The role of the loss prevention director has found his role dramatically changing from the primary role of protecting the organization's assets. This session provides an in-depth look at the essential elements of developing an effective loss prevention program. Also discussed will be guidance in auditing policies and procedures.

Fraud prevention: the latest techniques. Developing and auditing loss prevention policies and procedures, Part 2
Sweeping changes continue to reshape the workplace. The role of the loss prevention director has found his role dramatically changing from the primary role of protecting the organization's assets. This session provides an in-depth look at the essential elements of developing an effective loss prevention program. Also discussed will be guidance in auditing policies and procedures.

Easy Come, Easy Go: Examining Fraud on the Loading Dock
The functions that take place on loading docks are as varied as the businesses themselves, but the one thing common to all docks is their vulnerability to fraudulent activity.

Enemies Within
In a study of 2,608 cases of occupational fraud and abuse, we learned that asset misappropriation can be subdivided into specific types.

Ethics or Employment? How One Accountant Chose Morals over Money
My surprise first encounter with fraud began with a search to find a better job. It ended with losing my new position, but keeping my integrity and CPA license intact.

A Fistful of Dollars
The best fraud prevention efforts will concentrate on increasing an employee's perception of being caught.

Fighting fraud with technology: Following the cash
While there are many fraud schemes that fraudsters perpetrate, most involve, in some way, cash. Cash is embezzled, commingled, moved, and spent. Following the cash and proving the fraud can be a difficult task for all but the most experienced. In this session, you'll learn how to follow the cash money trail, and how to recover it in spite of the many hurdles, some new that you'll have to jump.

Protecting the public interest: Fraud in the government, Lessons learned while building an investigative procurement fraud detection program
It’s a fraud that affects both the public and private sector — procurement fraud. It’s also a fraud that is difficult to detect. In this session, you’ll learn how to build a proactive investigative procurement fraud detection program and how to avoid making some mistakes that could be costly and program counter-productive. Also discussed will be procurement fraud risk analysis, financial system data-mining, and the need for procurement fraud referrals.

Protecting the public interest: Fraud in the government: Stealing from the court, a case study
The analysis of any employee embezzlement fraud case study begins with the basics – the who, what, when, where, and how.

Fraud Edge: Cleaning our Own House. De-frauding the halls of academe
As Certified Fraud Examiners, we learn that three factors, collectively referred to as the Fraud Triangle, may portend fraudulent behavior. According to the late Donald Cressey, when pressures/incentives, opportunity, and rationalization converge, the environment is ripe for fraud. Although many may presuppose that academe is above such behavior, history has shown otherwise. All types of organizations are susceptible to fraud - even colleges and universities.

Fraud Forum Results
The Association is proud to announce the results of the first-ever Occupational Fraud Forum.

Fraud's Finer Points: Case History Applications
I'm closing our discussion about accounts receivable fraud with this column by unveiling some of the more creative methods fraud perpetrators use to steal money from the organization. We'll also examine some learning objectives from the final type of on-book accounts receivable fraud scheme I see routinely in state and local government.

Fraud's Finer Points: Case History Applications. Cash Larceny, Part One. No fixed responsibility losses
With this column, we begin a new series about cash larceny - on-book frauds in which employees steal the organization's revenue after accountability for the funds has been recorded in the accounting records.

Fraud's Finer Points: Cash Larceny, Part Two: Internal Controls at Decentralized Locations
In the previous column, we discussed the issue of no fixed responsibility when losses of funds occurred. We continue the topic by reviewing internal controls at decentralized locations within the entity. When cash receipting losses occur, sometimes there's fixed responsibility and sometimes there isn't. Let's explore why this condition occurs by studying two fraud case studies.

Fraud's Finer Points: Cash larceny part four: Alteration of manual cash receipt forms
Unscrupulous cashiers often alter manual cash receipt forms for customer payments to misappropriate funds from the entity. These manual cash receipt forms usually come in a book with three or more receipts to a page.

Ghost Employees
Managers have the authority (but not the license!) to issue paychecks to fictitious employees or real persons who have ghostly appearances.

Ghost Goods: How to Spot Phantom Inventory
Inventory overstatements make up the majority of asset valuation frauds and are the focus of this article.

Global Risks Reduced: International Business Doesn’t Have to Be Risky
Being aware of and prepared for issues like personal safety, office supply needs, technology, and language barriers will help you adapt more smoothly to a foreign environment. Even more important is understanding the business culture of the country you’

Protecting the public interest: Fraud in government. Grant/Contract fraud in the public sector
Not all fraud involves the theft of assets, but rather some involve the misuse of assets. Every year, Federal, State and Local Governments award thousands of dollars in grant/contracts to vendors. However, the grant money is not always prudently managed. This session focuses on the ways and manner in which government grants are misapplied or misused, oftentimes to the benefit of the program administrator.

Preventing and detecting financial statement fraud: Identifying fraudulent financial transactions
One of the most difficult tasks that an auditor has is to identify fraudulent transactions. In this session you'll not only learn what the schemes are, but develop a framework for detecting fraud. Of particular emphasis is a type of financial statement fraud that is not often discussed - inadequate disclosures. You'll get tips for finding the frauds but also how to prevent the fraud.

Effective solutions for combating employee theft. Ignoring indicators equals fraud: a case study
Financial statement audit failures contribute to the untimely discovery and prevention of fraud. How and why does this happen? The appropriate use of Generally Accepted Auditing Standards can identify fraud risk resulting in deterrence and discovery. In this session, GAAS will be discussed and common deficiencies in work will be highlighted together with the disastrous fraud schemes that were discovered too late.

Effective solutions for combating employee theft: Implementing and managing a fraud hotline
One of the most common methods for detecting fraud is by a tip from an employee, customer, vendor, or an anonymous source. This session will focus on the benefits of utilizing a fraud hotline as well as what should be reported, and how to develop effective procedures for recording, reporting, and tracking hotline information.

Keep Ghosts Off the Payroll
Strong internal controls and well-trained, attentive auditors can prevent phony-employee schemes.

Lapping It Up
Lapping is the fraudster's version of robbing-Peter-to-pay-Paul skimming.

Using the law to fight fraud: Legal and practical issues related to fraud examinations
In every fraud examination, inevitably, legal issues will find their way into your case and usually at the worst possible time. In this session you'll learn some of the legal issues that you might come across in a fraud examination, and more importantly, how to resolve them before they become a serious problem.

FRAUDBASICS: The Many Faces of Fraud, Part Two
This article reviews the concepts of conflicts of interest, theft of money or property, theft of trade secrets or intellectual property, and breach of fiduciary duty.

Modern-day Horseplay: Trojan Horse Fraud
Don't let Trojan horse fraud buck your company's financial future.

No Confession, No Evidence, No Case?
Fraud examiners often have to use time-honored techniques to parse the words of alleged fraudsters during an interrogation. But sometimes the absence of a suspect's deception can help make the case.

Occupational Fraud: The Audit as Deterrent
From actual case studies taken from the Report to the Nation, auditors and their clients will learn the methods used by employees and insiders to commit occupational fraud and what can be done to better detect and deter these offenses.

The Padding That Hurts
Auditors cannot ignore expense account cheating by management.

Padding the Numbers
Retail store managers occasionally manipulate inventory systems to increase their year-end bonuses and preserve their jobs.

Perils in Purchasing: Fraudulent Activities by a Telecoms Manager
In procuring the upgraded parts and accessories, Williams initially used about seven reputable telecoms vendors. However, as time went on, only one vendor seemed to meet Williams’ requirements.

Pilfering in the Pews: What One Cagey Church Treasurer Taught Me
When the offering plate is passed in church on Sundays, most of us assume that our donations are going to be spent wisely.

Preventing and detecting financial statement fraud: Investigation alter ego companies
Scams involving alter ego companies include diverting assets, hiding income and ownership, are common in bankruptcy fraud, organized crime, tax evasion, and employee embezzlements. This session will focus on discussing how to tie companies together to prove that they are, in fact, one company. Learn how.

Promotional Funds Fraud: The Hidden Multi-million Dollar Scam
Promotional funds fraud is the embezzlement of hundreds of millions of dollars annually from the promotional budgets of consumer product manufacturers.

Protect Small Business
Small businesses - Especially those that do not have regular audits - have every reason to worry about fraud.

Protecting the Public Interests: Mismanagement of Government Grant and Contract Funds
Fraud, waste, abuse, and mismanagement of government contract and contract funds will never be eliminated. But frequent, modest proactive audits and reviews that focus on fraud indicators will help identify and prevent misuse before the funds are expended.

Restaurant Skimming: Taking a little cream off the top
With a little cash register magic, restaurant employees and owners can slyly skim receipts and decrease taxes. Here's how to catch them at their game.

Rules for the Written Record
Documenting the case is every bit as important as investigating it. This article looks at how to record the results so end users receive the information they need and, equally essential, the report stands up in court.

Fraud's Finer Points: Case History Applications. Skimming revenue, part one: The highest-risk employee
After a lengthy discussion of accounts receivable fraud, it's time to focus our attention on other prime areas where fraudsters abuse the systems of internal control to raid organizations' treasuries for their own personal benefit. With this column, we begin a journey through the many facets of cash receipting and types of fraud that occur in every organization. Our first step involves skimming: removing funds prior to recording accountable transactions in the accounting system.

Fraud's Finer Points: Skimming revenue, part three: Stealing cash payments from customers
In the past two columns, we've discussed many methods fraud perpetrators use to steal checks from the organization and then convert them for personal benefit. Employees perpetrate these skimming frauds by removing funds from the organization prior to recording accountability for the transactions in the accounting system. Here we'll discuss some of the methods employees use to skim funds by stealing customer payments made in cash.

Soft Dollar Fraud: Diversion of Funds from a Directed Brokerage Account
Soft dollars also exist in the business world. Examples include free tickets awarded through airlines’ frequent flier programs, points given by medical device suppliers toward free training programs in exotic locations or on cruise ships to healthcare pro

Starting Out: For and About Fraud-Fighting Students in Higher-Ed
Who learns more, the teacher or the student? The answer to this question is irrelevant in today's world since each of us needs to be CONTINUALLY learning as a student and sharing our knowledge as a teacher. In this column we get to access the knowledge of the best and brightest who are entering the fraud profession.

The Suspense Could Kill You: Fraud Committed Through General Ledger Suspense Accounts
Devise a logical examination process to find fraud committed through general ledger suspense accounts.

Tracking Troublesome Travelers: Preventing Travel Fraudsters from Flying into the Sunset
Let’s review how fraud examiners can inspect air travel records to find incriminating evidence that can help nail flying fraudsters.

Traveling the World in Style on the Company's Nickel
Don't ignore travel and entertainment expense reporting records. Small infractions can add up to thousands in losses and lead to greater frauds.

FraudBasics: When Employees GO BAD. Conducting internal investigations, part one.
This FraudBasics article is adapted from part of the ACFE course, "Conducting Internal Investigations." For more information on this and other courses, visit CFEnet.com/events/seminars.asp.

When Employees Count Too Much: Spotting Overstated Inventory
Because inventory fraud is often more difficult to prevent and detect than other asset thefts, fraud examiners need to understand the mechanics of inventory accounting and the signs of overstated inventory schemes.

The Whole, Not the Parts
Outcome-oriented fraud auditing - looking at a situation as a whole rather than its individual parts - will help you think like a fraudster and find deeply embedded crimes.

Who’s in Control Here? Anatomy of a Bank Infrastructure’s Failure
A bank can have the most airtight internal control structure imaginable, but if senior management sends out signals that some people in the organization are above these rules, major frauds can result.

Why Employees Commit Fraud
It is important for CPAs to understand what motivates people to commit fraud so they can better assess risk and assist employers or clients in implementing appropriate preventive and detective measures.

The World’s Dumbest Fraudsters
I've searched high and low to bring you examples of the dumbest of the dumbsters. And I admit it up front: The only lesson to be learned is just how stupid some people can be.

This article is for ACFE members only. Click here for information about membership.

The Association of Certified Fraud Examiners assumes sole copyright of any article published in Fraud Magazine. Fraud Magazine follows a policy of exclusive publication. Permission of the publisher is required before an article can be copied or reproduced. Requests for reprinting an article in any form must be e-mailed to: FraudMagazine@ACFE.com.