Corporate Fraud Handbook

Delve into the mind of a fraudster to beat them at their own game

Corporate Fraud Handbook details the many forms of fraud to help you identify red flags and prevent fraud before it occurs. Written by the founder and chairman of the Association of Certified Fraud Examiners (ACFE), this book provides indispensable guidance for auditors, examiners, managers, and criminal investigators: from asset misappropriation, to corruption, to financial statement fraud, the most common schemes are dissected to show you where to look and what to look for. This new fifth edition includes the all-new statistics from the ACFE 2016 Report to the Nations on Occupational Fraud and Abuse, providing a current look at the impact of and trends in fraud. Real-world case studies submitted to the ACFE by actual fraud examiners show how different scenarios play out in practice, to help you build an effective anti-fraud program within your own organization. This systematic examination into the mind of a fraudster is backed by practical guidance for before, during, and after fraud has been committed; you'll learn how to stop various schemes in their tracks, where to find evidence, and how to quantify financial losses after the fact.

Fraud continues to be a serious problem for businesses and government agencies, and can manifest in myriad ways. This book walks you through detection, prevention, and aftermath to help you shore up your defenses and effectively manage fraud risk.

• Understand the most common fraud schemes and identify red flags
• Learn from illustrative case studies submitted by anti-fraud professionals
• Ensure compliance with Sarbanes-Oxley and other regulations
• Develop and implement effective anti-fraud measures at multiple levels

Fraud can be committed by anyone at any level—employees, managers, owners, and executives—and no organization is immune. Anti-fraud regulations are continually evolving, but the magnitude of fraud's impact has yet to be fully realized. Corporate Fraud Handbook provides exceptional coverage of schemes and effective defense to help you keep your organization secure.

Preface

About the ACFE

Chapter 1: Introduction

Defining “Occupational Fraud and Abuse”

Research in Occupational Fraud and Abuse

2016 Report to the Nation on Occupational Fraud and Abuse

PART I: ASSET MISAPPROPRIATIONS

Chapter 2: Introduction to Asset Misappropriations

Overview

Definition of “Assets”

How Asset Misappropriations Affect Books of Account

CHAPTER 3: Skimming

Skimming Data from the ACFE 2015 Global Fraud Survey

Unrecorded Sales

Understated Sales and Receivables

Theft of Checks Through The Mail

Short-Term Skimming

Converting Stolen Checks

Concealing The Fraud

Detection

Prevention

Chapter 4: Cash Larceny

Overview

Cash Larceny Data from the ACFE 2015 Global Fraud Survey

Incoming Cash

Cash Larceny from the Deposit

Miscellaneous Larceny Schemes

Detection

Prevention

Chapter 5: Check Tampering

Overview

Check Tampering Data from the ACFE 2015 Global Fraud Survey

Forged Maker Schemes

Intercepted Checks

Forged Endorsement Schemes

Altered Payee Schemes

Concealed Check Schemes

Authorized Maker Schemes

Concealment

Detection

Check Tampering Red Flags

Prevention

Electronic Payment Tampering

Chapter 6: Register Disbursement Schemes

Overview

Register Disbursement Data from the ACFE 2015 Global Fraud Survey

False Refunds

False Voids

Concealing Register Disbursements

Detection

Prevention

Chapter 7: Billing Schemes

Overview

Billing Scheme Data from the ACFE 2015 Global Fraud Survey

Shell Company Schemes

Non-Accomplice Vendor Schemes

Personal Purchases with Company Funds

Detection

Prevention

Chapter 8: Payroll and Expense Reimbursement Schemes

Overview

Payroll Scheme Data from the ACFE 2015 Global Fraud Survey

Payroll Schemes

Detection of Payroll Schemes

Prevention of Payroll Schemes

Expense Reimbursement Data from The ACFE 2015 Global Fraud Survey

Expense Reimbursement Schemes

Detection of Expense Reimbursement Schemes

Prevention of Expense Reimbursement Schemes

Chapter 9: Inventory and Other Noncash Assets

Overview: Noncash Misappropriation Data from the ACFE 2015 Global Fraud Survey

Misuse of Inventory and Other Assets

Theft of Inventory and Other Assets

Concealment

Detection

Prevention

Misappropriation of Intangible Assets

PART II: CORRUPTION

Chapter 10: Bribery

Overview

Corruption Data from the ACFE 2015 Global Fraud Survey

Bribery Schemes

Something of Value

Economic Extortion

Illegal Gratuities

Detection

Prevention

Anti-Corruption Legislation

Chapter 11: Conflicts of Interest

Overview

Purchasing Schemes

Sales Schemes

Other Schemes

Detection

Prevention

PART III: FINANCIAL STATEMENT FRAUD

Chapter 12: Accounting Principles and Fraud

Introduction

Fraud in Financial Statements

Major Generally Accepted Accounting Principles

Responsibility for Financial Statements

Users of Financial Statements

Types of Financial Statements

Sarbanes-Oxley Act

Financial Statement Fraud Data from the ACFE 2015 Global Fraud Survey

Chapter 13: Financial Statement Fraud Schemes

Overview

Defining Financial Statement Fraud

Costs of Financial Statement Fraud

Methods of Financial Statement Fraud

Detection of Financial Statement Fraud Schemes

Deterrence of Financial Statement Fraud

Chapter 14: Occupational Fraud and Abuse: The Big Picture

Defining “Abusive Conduct”

Measuring the Level of Occupational Fraud and Abuse

Understanding Fraud Deterrence

Corporate Sentencing Guidelines

Ethical Connection

Concluding Thoughts

Appendix: Sample Code of Business Ethics and Conduct

Bibliography

Index

Dr. Joseph T. Wells is the founder and chairman of the Association of Certified Fraud Examiners (ACFE). He was a regular columnist for the Journal of Accountancy and is a past recipient of the Innovation in Accounting Education Award presented by the American Accounting Association (AAA).

You may be surprised to learn it doesn’t take a sophisticated level of complexity and innovation to steal from an organization—even when numerous people have eyes on it and work in it every day. An extensive examination of decades’ worth of fraud cases reveals all thieving can be classified into three main categories. In these categories, classifications of specific schemes exist, and they are all the possible ways your organization can be robbed. The Corporate Fraud Handbook demystifies the nefarious ways criminally minded employees steal in plain sight and often get away with it.

Unless auditors, investigators, managers, business owners, and others who need to stop losses know what to look for, their organizations could be suffering significant financial and human damages from crimes ranging from false overtime and petty theft to multilayered investment swindles and bribery. This fully updated Fifth Edition features real cases presented in the Report to the Nations on Occupational Fraud and Abuse, prepared by the Association of Certified Fraud Examiners (ACFE). Based on the broad framework mapped out in the reports, founder and chairman of the ACFE Joseph Wells takes serious practitioners much further in this practical handbook to all the nitty gritty details of illegal schemes. A diligent and meticulous approach to satisfying such regulatory requirements as Sarbanes-Oxley is critical to transparency—but it’s not enough. To develop the right kind of eyes to see the devil in the details, professionals need a comprehensive, convenient reference for what to look for and, most importantly, meaningful steps you can take to stop illegal activities before they start. Keep this resource at your fingertips for its:

• Psychological enlightenments of why employees become motivated to commit occupational crimes
• Flowchart illustrations of schemes and their variations, along with insightful observations and conclusions for creating prevention and detection strategies
• Valuable rules of thumb and techniques for spotting the warning signs of fraud and complying with the latest regulatory updates

Corporate Fraud Handbook, Fifth Edition is the definitive guidebook to preventing and detecting fraud in today’s complicated business environment.