In PricewaterhouseCoopers’s 2018 Global Economic Crime and Fraud Survey, fraud is identified as “the biggest competitor you didn’t know you had,” which is an interesting way of looking at the problem (https://pwc.to/37TnAFC). According to the study, the three largest sources of economic crime and fraud were asset misappropriation, cybercrime, and consumer fraud. Half of the reported frauds were committed by people inside the company, and 24% of frauds were committed by senior management.
FightingIdentityCrimes.com, one of several subscription services that report on personal and corporate data breaches, indicated in its article “Third-Party Data Breaches: An Unavoidable Threat for All Businesses” that two-thirds of mal-ware attack victims are small businesses, just like those served by many CPAs (Steve Turner, Feb. 24, 2020, http://bit.ly/2TiCM9W). Two professional associations that offer some excellent free resources to help CPAs advise their clients on fraud issues are the Association of Certified Fraud Examiners (ACFE) and American Board of Forensic Accounting (ABFA).
Association of Certified Fraud Examiners
The ACFE is a professional organization that provides certified fraud examiner (CFE) credentialing, continuing education, and career information to its members on its website (https://www.acfe.com/default.aspx.) There are also several excellent free resources available to the general public, such as reports, white papers, checklists, videos, podcasts, and a downloadable toolkit. An easy place to start is the “Fraud Resources” tab on the main menu bar (http://bit.ly/37VH10n), which highlights several free resources and connects to the Fraud Resources Library (http://bit.ly/2SYD9aJ).
“Fraud Prevention Checkup” is a 14-page downloadable checklist that walks managers and advisors through seven self-assessment factors, beginning with identifying a process for oversight of fraud risk (http://bit.ly/32xY5J2). Other factors include the implementation of regular assessment activities and establishing ownership and risk tolerance.
Report to the Nations: 2018 Global Study on Occupational Fraud and Abuse can be downloaded as the complete 80-page document or as selected infographics (http://bit.ly/2SWz7ji). The report covers the cost of occupational fraud, how it is committed, and how it can be detected. Interesting demographic information on victim organizations and perpetrators is presented in easy-to-read charts and graphs.
The data is also summarized by geographic region. An 11-question fraud prevention checklist is available toward the end of the report.
Most of the more recent videos on the ACFE website appear to be restricted to members, but a few are available to the general public on the Fraud Resources page and Fraud Videos Library page (http://bit.ly/3c7NIQA). One six-minute presentation, “5 Steps to Reduce Small Business Fraud,” features an interview of an small business owner who experienced employee-perpetrated fraud and an outline of five steps that business owners can use to proactively prevent becoming victims (http://bit.ly/3c7esAC). Interestingly, several fraudsters explain how their thefts could have been prevented.
“How to Conduct an Interview, Parts 1 [http://bit.ly/3c7H4tv] and 2” [http://bit.ly/37U4i2N]” include advice such as conducting thorough research of the potential perpetrator and the situation beforehand, showing empathy and respect, and remembering that the goal is to obtain information. The ease or difficulty of establishing rapport will vary based on the people involved, and the presenter discusses several important factors that interviewers need to consider.
The ACFE also presents a monthly podcast, Fraud Talk, that ranges from 15 to 50 minutes in length, with most episodes averaging approximately 20 minutes (http://bit.ly/2usUH5q). The January 2020 episode is from ACFE’s popular annual fraud list, “The 5 Most Scandalous Fraud Cases of 2019” (http://bit.ly/3a5lzYy). It runs for 30 minutes and includes the Steinhoff accounting fraud uncovered by PricewaterhouseCoopers, the college admissions scandal, the Capital One server hack of 100 million individuals’ personal information, Huawei’s indictments for bank fraud and technology theft, and the $1 billion in Medicare fraud by doctors and medical equipment companies. “Stories Behind the Numbers” is a 20-minute episode from April 2019 that features a collection of some of the case studies presented in the 2018 Report to the Nations (http://bit.ly/32y0vHC).
The ACFE’s Fraud Magazine offers several downloadable white papers after free registration (http://bit.ly/2wF8q9Y). “Automating Fraud Detection: the Essential Guide” is an eight-page booklet that addresses integrating fraud detection through audit, risk management, and compliance, as well as important considerations in selecting data analytics software (http://bit.ly/2w3iucM). A list of more than two dozen common data analysis tests is provided, along with 10 steps to create an effective automated fraud detection process.
“Analytics in Compliance: Using Predictive Analytics to Proactively Identify Compliance Risks in Transactions” is a 16-page guidebook that describes predictive analytics as the practice of extracting information to make predictions about future events through data mining, machine learning, and modeling (http://bit.ly/2HXchSq). The booklet explains how and why predictive analytics can be used in compliance and provides an interesting case study.
Finally, the ACFE offers a toolkit of fraud prevention resources that can be downloaded or ordered as a CD-ROM (http://bit.ly/2Tcpgok). The kit includes an excerpt from the ACFE Small Business Fraud Prevention Manual, a sample fraud policy and code of ethics, and selected Fraud Magazine articles. It also contains a guidebook on fraud management and a video about the importance of “tone at the top” in the fight against fraud.
American Board of Forensic Accounting
The American Board of Forensic Accounting (ABFA) sponsors several certifications targeted to CPAs, chartered accountants, government accountants, internal auditors, and corporate accountants. It offers online programs and courses in forensic accounting (https://abfa.us/), and its Resources page (http://abfa.us/resources/) is a one-stop shop for general materials, such as forensic accounting tools, newsletters, and articles.
The forensic accounting tools include a sample engagement letter and a discourse fraud analysis scoring matrix. The seven-page engagement letter is an editable PDF and includes identification of the intended recipient (the client), the purpose of the engagement, client responsibilities, challenges to the admissibility of an expert’s opinion, and several other issues (http://bit.ly/2HYuoHi). The fraud analysis matrix is an Excel worksheet that lists approximately 40 risk factors to be scored at 0 for “no risk,” 1 for “cannot determine,” or 2 for “perceived risk” (http://bit.ly/2ThCIqT). The worksheet will then add up the entered points and indicate whether the organization is at low, moderate, high, or extreme risk, based on the total score.
The ABFA monthly newsletters are generally short. The May 2019 issue addresses “Forensic Accounting Tips for the Practitioner,” which include conducting preplanning analysis to determine conflicts of interest and other reasons to not accept the engagement, as well as planning stage analysis, which should entail a formal engagement letter (http://bit.ly/37Y5Dpl).
Longer selected articles from the Journal of Forensic and Investigative Accounting, as well as other sources, are also available. Many are entertaining to read, and may give the reader new ideas. “Discourse Fraud Analysis: A New Paradigm for Forensic and Investigative Accounting” (Brian K. Harte and Scott P. McHone, December 2019; http://bit.ly/2SY1Nsd) is a thought-provoking academic article that examines how organizational culture may affect the occurrence of fraud. The authors explain the concepts behind discourse fraud analysis, make the theory applicable to accounting practitioners, and present the original scoring matrix (discussed above) provided by ABFA as a forensic accounting tool.
More Fraud Podcasts
The following is a short selection of some general fraud-related podcasts that readers may enjoy during some mental downtime.
Swindled presents true crime podcasts at http://swindledpodcast.com/. One useful feature of the podcast is a list of reference sources with links to individual episodes. If readers are looking for something specific, the Tag feature will help identify topics. For starters, try “The Horse Queen: Rita Crundwell, Trust but Verify” (http://bit.ly/2PoOBum) or “The Hitman: Frank Howard and Jeffery Locker” (http://bit.ly/3c7qzxo).
More Fraud Resources
PwC Fraud Webpage https://pwc.to/2PokMtz
PwC Forensics Library https://pwc.to/32taGNj
PwC Forensics Video Spotlight https://pwc.to/2PokOBH
Thomson Reuters, “Checklist: How to Build an Accurate Risk Profile” https://tmsnrt.rs/2HTx89d
Hiscox: 2018 Small Business Cyber Risk Report http://bit.ly/2I7h8R7
CNBC offers a podcast archive that includes its American Greed series (https://cnb.cx/2SVDc7f). Episodes on Bernie Madoff include “Best of Greed: Madoff Behind Bars” and a three-part “Madoff: Ten Years Later” series.
ABC Radio also presents true crime pod-casts, available at https://abcaudio.com/pod-casts/. Readers may recall “The Dropout: Elizabeth Holmes and Theranos,” provided in eight 40-minute episodes (http://bit.ly/2Po91DC).