Forensic Accounting. A Glimpse Into Forensic Accounting. Portland State University Professional Nancy Young, CPA, CISA, CFE Moss Adams, LLP

Transcription

1 Forensic Accounting A Glimpse Into Forensic Accounting Professional Nancy Young, CPA, CISA, CFE Moss Adams, LLP Summary by Michael Wong Manager of Presentations εα Portland State University

2 Introduction εα

3 Introduction About the Speaker A special thanks to Nancy Young for speaking to PSU students about Fraud and Forensic Accounting! Nancy Young is a Certified Fraud Examiner, Certified Public Accountant, and Certified Information Systems Auditor. She has vast experience in fraud examination for the State of Oregon. She currently works for Moss Adams in their governmental auditing group. Nancy teaches ACTG 445: Forensic Accounting during the winter at PSU.

4 Fraud εα

5 What is Fraud? Definition Fraud is a deliberate, dishonest act. It involves trickery, deceit, and intentional misleading. When investigating fraud, you have to show where the money went and prove the perpetrator s intent to deceive. Deceit might be through messy bookkeeping or lying by omission. There are many other techniques individuals use to deceive.

6 Fraud Fraud Detection On average, it takes 18 months to detect asset misappropriation and 24 months to detect financial statement fraud. An auditor may be at a client 2-3 times in a 24 period. What are the red flags for fraud?

7 Fraud Auditing Financial statement audits look to ensure financial statements are not materially misrepresented. OMB Circular A-133 Compliance audits. Forensic audits are focused on intent of fraud. Fraud investigations look at every transaction and do not use sampling like typical audits.

8 Fraud Fraud Triangle Incentive: These are needs and wants. The person needs to pay their bills or have a drug or alcohol problem. Incentive is out of management s control. Rationalization: Employees tell themselves it s ok to steal. They think they deserve it or they ll pay it back. Opportunity: A breakdown in the company s internal control system.

9 Fraud Quick Facts Fraud is a multi-trillion dollar business. The average organization loses 5% of its annual revenue to internal and external fraud. There is fraud in every industry, including government. Because of this, there is a great demand for forensic accountants and CFEs.

10 Fraud Quick Facts Banking is the number one industry hit by fraud. The average loss is $175,000 per occurrence. Other industries often hit by fraud are manufacturing, government, retail, health, insurance, education, services, tech, and transportation. The average loss in mining is over a million dollars. Fraudsters will hit any industry!

11 Fraud Schemes εα

12 Fraud Schemes Schemes The #1 fraud scheme is billing. Corruption is the second highest. The type and popularity of schemes vary by industry. You have to understand variations of fraud schemes so you can identify them. You must think like a fraudster.

13 Fraud Schemes Financial Statement Fraud Financial statement fraud is the least likely to occur but the most impactful. The traditional auditor is worried about financial statement fraud. The financial statements are materially misstated and management intended to misstate them. Financial statement fraud is designed to deceive the users of the financial statements.

14 Internal Controls εα

15 Internal Controls Protective, Detective, Corrective Protective controls: Things put in place before a transaction occurs. These include policies and procedures, written job descriptions, preapprovals, spending limits, and good hiring practices. Detective controls: Controls put in place after a transaction occurs. These include reconciliations, budget reports, variance reports, and exception reporting.

16 Internal Controls Protective, Detective, Corrective Corrective controls: Management s corrective action after they find an error. Many company s fail with corrective controls because they don t impose significant consequences. The corrective action should send a message to all employees about management s tolerance level for inappropriate behavior.

17 ACTG 445: Forensic Accounting εα

18 ACTG 445 About the Class ACTG 445: Forensic Accounting is offered once per year in the winter. The class is limited to 22 students and is filled on a first come, first served basis. Applicants must fill out the applications with their own penmanship and in blue ink only. The application must be notarized. Having a felony on your record for a financial crime will make you ineligible.

19 ACTG 445 About the Class The Portland Police Bureau provides real cases to the class. Your investigative work can help a fraud victim and lead to the actual prosecution of a fraudster. From the first night of class, you are given a case to start working on. Guest Certified Fraud Examiners will come to class to speak about their experience in the field.

20 ACTG 445 About the Class Portland State University is participating in the Fraud Victims Project (JFVP), which helps victims of fraud who cannot afford a fraud examination by a CFE. The JFVP is a partnership between PSU, Portland Law Enforcement, Moss Adams, LLC, and the Portland Chapter of Certified Fraud Examiners. You can get real-world experience in forensic accounting!

21 ACTG 445 How to Apply Visit pdx.edu/sba/jfvp to download the application and submit the following documents to Faculty Services: Application, notarized Signed authorization for criminal background check Unofficial transcript Faculty Services: SBA All items should be submitted to this no later than end of day on Friday, five business days before registration opens. Applicants will be notified of admission in the following week.