Starting Out: For new and budding fraud examiners
Graduating students often lack the hands-on experience that employers want. However, some faculty are creating opportunities for students to gain valuable, real-world, career-building skills. This program is a good jumping-off point for students, new CFEs and young professionals looking to gain knowledge and proficiency in applying fraud examination methodology.Students often have difficulty getting their career started because they lack work experience. Most accounting students, of course, attend school to prepare themselves for their careers, but seldom does that translate into actual involvement in anti-fraud activities. To help fill this vacuum, the University of New Mexico’s (UNM) graduate level Information Assurance concentration created the Fraud Awareness/Prevention Project. For the past seven years, this project has provided local nonprofit organizations with fraud examination course students who have educated the groups on internal controls, fraud prevention and similar issues. The project also has provided the students with practical experience applying the material taught in the classroom. The nonprofits, the community and students all benefit. Win, win and win!Interested students complete the fraud examination class during the fall semester and then take the more-focused forensic accounting course in the spring. During this course, students must participate in the semester-long Fraud Awareness/Prevention Project, which accounts for a substantial portion of the final grade. HELPING HAND Each UNM project team of three to five students is connected with a client — a local nonprofit. They work together to determine the specific scope of their project, which, of course, varies because of each client’s needs. A major focus for many student groups is devising internal controls because many of the nonprofits are sorely lacking in this area. Students mostly use their fraud and forensic accounting skills as they work with their clients, but because some of them are studying other disciplines they can answer client questions about human resources policies and procedures, corporate governance information technology and other areas. These experiences show future employers that the graduates will be capable of working closely with other departments when they eventually enter the workforce. COLD CALLS AND SCREENINGWhen the Information Assurance concentration first began planning the project, we cold-called nonprofits to determine their interest and visited others. We then worked with the local Center for Nonprofit Excellence (CFNE) to send a mass email to members and screened the many responding nonprofits. Some of the key questions to the participating groups were: Are you willing to make the necessary time commitment? Will your organization’s executive director agree to have the student team contact at least one board member? Will you agree to attend a presentation by the student team at the conclusion of the project? STUDENTS GET ORGANIZED Before the beginning of the spring semester in which they take the forensic accounting course, students must meet to organize into teams, choose their leaders and nonprofits, and determine goals and objectives. Team leaders, because they’re the main points of contact with the nonprofits’ chief executives and the class’ faculty member, receive excellent training in management skills. BRINGING KNOWLEDGE TO THE TABLE Throughout the semester, students learn how to detect and prevent common fraud schemes and then apply that knowledge to their clients.In one case, the client was a small nonprofit with only one full-time employee. The team was able to help devise a system of internal controls for deterring and preventing employee and volunteer fraud. The team members were thrilled to apply the “professional skepticism” mantra they learned in the course as they produced a valuable product for the nonprofit.Though the project leaders don’t necessarily intend to identify fraud, students won’t look the other way if they see something that looks odd. Each student, who signs a confidentiality agreement with the nonprofit, will report red flags to the executive director and/or a board member. Over the past seven years, students have identified and reported multiple red flags, which had prevented further losses and bolstered nonprofits’ confidence in their recommendations. In another case, team members were waiting in a nonprofit’s lobby just before meeting with its new executive director. They noticed several people coming in the waiting area but only making quick stops at the front desk and then leaving. The executive director, who didn’t have a background in business or accounting, told the team that those people were clients who were placing envelopes with payments for services in a basket on the front desk.
During their fieldwork, the team members discovered that some clients were complaining that their cash payments weren’t being processed. The team had barely made it in the door and had identified a significant control weakness. They immediately recommended that the nonprofit issue receipts for payments made in the office and reconcile them afterward.
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