Fraud Examination Casebook with Documents

A practical advantage for entry-level fraud examiners with start-to-finish casework

Fraud Examination Casebook with Documents provides critical practice for students and new CPAs; criminal and insurance investigators; and attorneys seeking additional guidance on real-world fraud investigation. With five cases that include over 100 pages of documentation, this guide helps you put your conceptual knowledge to work as you conduct full-length Fraud Examinations from predication through report. Short instructional narratives guide you through tools like horizontal and vertical analysis, report writing, and other important tasks, while Excel templates streamline the process and kick start your investigation. Multiple-choice questions help you gauge your understanding and practical mastery, while expert guidance throughout prompts you to draw on your existing knowledge and apply it to casework. With a focus on asset misappropriation and financial statement fraud, these cases provide highly relevant experience for real-world practice.

Learning concept isn't always enough to do the job effectively; "knowing" is different from "applying,” yet few practical resources exist for new and aspiring fraud examiners—until now. This book provides the much-needed practice that helps examiners polish their skills, with expert guidance every step of the way.

• Conduct actual Fraud Examinations
• Perform horizontal and vertical analyses
• Review checks and decode debit card transactions
• Examine adjustments to electronic records
• Perform simple forensic data analytics
• Vouch to/from documentation
• Write complete Fraud Examination reports

• Prepare court-ready schedules and audio-visuals

As you work your way through the cases, you'll develop the skills and instinct experienced examiners rely upon every day. You'll hone your analytical edge and master the essentials of report writing, leaving you fully equipped to conduct a thorough investigation and deliver your findings clearly, comprehensively, and authoritatively. Fraud Examination Casebook with Documents is a vital resource for students and new fraud examiners seeking a practical advantage in real-world skills.

Foreword ix

Preface xi

Overview of the Serial Fraud Cases (A Family of Fraudsters) 1

Fraudulent Financial Statements 2

Check Fraud, Debit Card Fraud, Cash Larceny 2

Fraudulent Edits/Adjusting Journal Entries to Cash Receipts 3

Excel Pivot Analyzes and Summarizes a Huge Amount of Data 3

Tracing Excel Pivot Red Flags Back to Source Documents and Documenting the Flow of Money 3

Chapter 1: Case 1: Fraudulent Financial Statements 5

1-1 Larsen Convenience Store: Using Analytical Procedures in Detecting Financial Statement Fraud 5

1-2 How to Perform a Horizontal, Vertical, and Ratio Analysis 13

1-3 Exercises—Fraudulent Financial Statements (Larsen Convenience Store) 19

1-4 Exercise Templates 22

1-5 Review Questions—Fraudulent Financial Statements (Larsen Convenience Store) 26

Chapter 2: Case 2: Check Fraud, Debit Card Fraud, Cash Larceny 29

2-1 Anderson Internal Medicine: Preparing a Bank Reconciliation and Spreading/Analyzing Transactions on Monthly Statements from Financial Institutions 29

2-2 How to Perform a Bank Reconciliation 35

2-3 How to Read Checks and Decode Debit Card Transactions 38

2-4 How to Spread and Analyze Check and Debit Card Transactions 41

2-5 Exercises—Check Fraud, Debit Card Fraud, and Cash Larceny (Anderson Internal Medicine) 45

2-6 Exercise Templates 48

2-7 Review Questions—Check Fraud, Debit Card Fraud, and Cash Larceny (Anderson Internal Medicine) 50

Chapter 3: Case 3: Fraudulent Edits/Adjusting Journal Entries 53

3-1 Anderson Internal Medicine (Edits/AJEs): Vouching from a Schedule to Source Documents 53

3-2 How to Vouch/Trace between a Source Document and an Accounting Ledger, Journal, or Activity Log 56

3-3 Exercise—Fraudulent Edits (or AJEs) (Anderson Internal Medicine) 57

3-4 Exercise Template 58

Chapter 4: Case 4: Using Data Analytics: Analyzing and Summarizing Data with Excel Pivot 61

4-1 Anderson Internal Medicine (Data Analytics): Using Data Analytics—Analyzing and Summarizing Data with Excel Pivot 61

4-2 How to Use Excel Pivot to Analyze and Summarize Data 65

4-3 Exercises—Using Data Analytics (Anderson Internal Medicine) 77

4-4 Review Questions—Using Data Analytics (Anderson Internal Medicine) 81

Chapter 5: Case 5: Tracing Data Analytics Red Flags Back to Source Documents Using Subpoenas 85

5-1 Anderson Internal Medicine and Larsen Convenience Store (Conspiracy and Loan Fraud): Trace Transactions Discovered during Data Analytics Back to Source Documents Using Subpoenas 85

5-2 How to Write Wording to Subpoena Documents, Information, and/or Objects 89

5-3 Exercise—Anderson Internal Medicine and Larsen Convenience Store (Conspiracy and Loan Fraud) 91

Chapter 6: Reports, Schedules, and Audiovisuals 93

6-1 Writing a Fraud Examination Report 93

6-2 Formatting Schedules for Inclusion with Reports 100

6-3 How to Simplify the Complex with Audiovisuals 104

Chapter 7: Documents 115

7-1 Case 1: Fraudulent Financial Statements (Larsen Convenience Store) 115

Recorded Interview on January 2, 2016—Gregory Larsen 115

Authorization for Release of Financial Records 117

Sworn Statement in Proof of Loss 118

2013 IRS Individual Tax Returns (Schedules C) 121

2014 IRS Individual Tax Returns (Schedules C) 127

2015 IRS Individual Tax Returns (Schedules C) 133

2014 SBA Personal Financial Statements 138

2015 SBA Personal Financial Statements 141

2016 SBA Personal Financial Statements 144

Transcripts—2015 Sales and Use Taxes per Form ST-3 147

Shamrock Groceries 2015 Purchases by Month 148

Georgia-Tennessee Fuel Partners 2015 Purchases by Month 149

Marietta Beverage Company 2015 Purchases by Month 150

Discount Tobacco Supply 2015 Purchases by Month 151

Jenkins Media Services 2015 Purchases by Month 152

10-30-15 Physical Inventory 153

7-2 Case 2: Check Fraud, Debit Card Fraud, Cash Larceny (Anderson Internal Medicine) 155

Bank Reconciliation—April 1, 2016—Tonya Larsen 155

Bank Statement—March 2016 156

Canceled Checks (Front & Back) 158

Deposit Tickets—March 2016 168

Cash Receipts Journal—March 2016 173

Cash Disbursements Journal—March 2016 176

7-3 Case 3: Fraudulent Edits/Adjusting Journal Entries [Anderson Internal Medicine (Edits/AJEs)] 179

Report of Interview—Jennifer Anderson, MD 179

Data Extraction 203—Tonya Edits 181

Deposit tickets—January through March 2016 184

7-4 Case 4: Using Data Analytics: Analyzing and Summarizing Data with Excel Pivot [Anderson Internal Medicine (Excel Pivot)] 194

Excel Spreadsheet—Anderson Bank Transactions (Sep Oct Nov Dec Jan Feb) 194

7-5 Case 5: Tracing Data Analytics Red Flags Back to Source Documents Using Subpoenas [Anderson Internal Medicine and Larsen Convenience (Husband/Wife Loan Fraud and Conspiracy)] 210

Report of Interview—John Grayson 210

Credit Application—Waleska Bank 211

Waleska Bank Statement for Greg Larsen—December 2015 213

Front of Official Checks—Loan No. 15-3989 215

Back of Official Checks—Loan No. 16-3989 216

Front of Checks for Account 7011176 (Greg Larsen) 217

Back of Checks for Account 7011176 (Greg Larsen) 218

Sample U.S. Court Subpoena to Produce Documents, Information, or Objects or to Permit Inspection of Premises in a Civil Action 221

Sample U.S. Court Subpoena to Produce Documents, Information, or Objects in a Criminal Case 223

Sample U.S. Court Subpoena to Testify Before a Grand Jury 225

Sample U.S. Court Subpoena to Testify at a Deposition in a Criminal Case 227

Sample U.S. Court Subpoena to Testify at a Hearing or Trial in a Criminal Case 229

About the Authors 231

About the Website 233

Index 235

WILLIAM H. BEECKEN is director of fraud services for Assurance Forensic Accounting, former ATF senior forensic auditor, and has taught fraud examination for eight years at Brenau and Southern Polytechnic State universities.

CLARK A. BEECKEN is an auditor who conducts forensic audits and forensic data analytics. Previously, he was a senior forensic auditor with Georgia Tech, conducting financial investigations and digital forensics.

Learning concepts does not always prepare you for real-world application, and this is particularly true in fraud examination. Typically, graduates had to cut their teeth as auditors, claims adjusters, forensic accountants, and investigators before entering the field—but now that has changed. Based on the hands-on training approach used to prepare federal special agents, the Fraud Examination Casebook with Documents provides the only complete development program for gaining the working knowledge of simple fraud cases needed to get on the fast track to a career as a fraud examiner.

Thorough enough for students seeking real- world experience, with a depth of sophistication new CPAs, investigators, and attorneys look for to advance their skillset, this single resource enables you to confidently and effectively produce a written report, schedules, and clarifying audio-visuals capable of withstanding attorney examination and cross-examination in depositions, hearings, and trials. Each of the five cases begins with a fraud scenario, and it is up to you to connect the dots through more than 100 pages of accounting documentation and witness interviews. As in real life, you may not get all the information you would like. Working these specially designed cases trains you to become adept at the skills and instinctual responses experienced examiners depend on every day to uncover fraud in all its forms. Fraud examinations quickly become second nature with:

• Concise instructional narratives with actionable guidance on such practical tasks as examining canceled checks, probing edits to digital information, and otherwise spreading and analyzing mountains of data and documentation
• State-of-the-art coverage on performing horizontal and vertical analysis, decoding debit card transactions, using simple data analytics, and more
• Ready-to-use spreadsheet templates for conducting the investigations inside, downloadable from a companion website

With Fraud Examination Casebook with Documents, it doesn’t get any more real until you get paid to do it.