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Saturday, December 20th, 2014


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What do you know about white collar crime?

What do you know about white collar crime?

Fraudulent activity is on the rise. Reports of money laundering rose 9% between 2009 and 2010 – and that’s only the crooks they caught (Journal of Accountancy, Fraud).  Becoming aware of the red flags of fraud and how to prevent book-cooking in the first place is the first step in keeping our organizations safe and secure.

Do you think you have the know-how to sniff out the stink of organizational fraud? Try your hand at these questions:

Which is NOT a characteristic of a fraudster?

  1. Volatile, melodramatic, arrogant, and aggressive when challenged
  2. Unwilling to let other work with a vendor, and maybe even accepting generous gifts from that vendor
  3. Reserved, doesn’t really talk to other team members
  4. Unhappy, apparently stressed and under pressure, but also bullying and intimidating colleagues

(KPMG, Who is a Typical Fraudster?)

Which organizational structure would be least likely to prevent fraud?

  1. The chief audit executive reports to the audit committee
  2. The audit reporting structure is very complex and has lot of oversight for each area
  3. There is a standardized set of  procedures for communication throughout the organization

(Journal of Accountancy, What’s Your Fraud IQ)

Which internal control would be most effective in helping prevent fraud?

  1. Hidden cameras
  2. Secret cash counts
  3. Covert email monitoring
  4. Fake surveillance cameras

(Journal of Accountancy, What’s Your Fraud IQ)

How’d you do?  Let’s find out.

Choice 3. Many times, fraudsters are afraid that they’ll be found out, so they will want to be the only one working with vendors and they will get aggressive when challenged. Sometimes, they seem overly stressed (because of the added pressure of a “double life”).

Choice 2. The more complicated the structure, the easier it is to be sneaky. According to the Journal of Accountancy, “a complex, confused organizational structure can enable a fraudster in perpetrating and concealing his or her misdeeds. Conversely, a well-designed organizational structure that clearly denotes key areas of authority, provides proper channels of reporting and enables flow of communication and information between employees and management can be an effective fraud prevention measure.”

Choice 4. The most effective and inexpensive option to prevent fraud is D. Just the thought that they might get caught strikes fear into the hearts of fraudsters. Security cameras can be a huge deterrent to evildoers, even if those cameras aren’t real. And although secret measures (like spontaneous cash counts and email monitoring) might help you catch the crooks who are cooking the books, what they can’t see doesn’t scare them.

Scoring:

2 or 3 of 3 – You’re a super sleuth already. Take that big brain of yours, register for the 2011 AICPA Accounting Competition and wow our judges with your team’s sleuthy savvy.

0 or 1 of 3 – You may not know it all now, but check out some resources, gather your smartest classmates and put your heads together to create a submission for the 2011 AICPA Accounting Competition. You’ll get a better understanding of fraud and the opportunity to earn $10,000.  Not too shabby.

What do you know about white collar crime?

Fraudulent activity is on the rise. Reports of money laundering rose 9% between 2009 and 2010 – and that’s only the crooks they caught (Journal of Accountancy, Fraud).  Becoming aware of the red flags of fraud and how to prevent book-cooking in the first place is the first step in keeping our organizations safe and secure.

Characteristics of fraudsters. According to a study performed by KPMG, the average white collar criminal is a 36- to 45-year old male in senior management in finance and/or an employee of longer than 10 years who can be in cahoots with another individual.

Fraudsters have some more general traits in common, too. Many times, fraudsters are afraid that they’ll be found out, so they will want to be the only one working with vendors and they will get aggressive when challenged about anything close to their fraudulent activity. They also tend to surround themselves with “yes men” to avoid being challenged.  Sometimes, white collar criminals seem overly stressed because of the added pressure of their “double life”.  (KPMG, Who is a Typical Fraudster?)

Organizational Structures. The more complicated the organizational structure, the easier it is to be sneaky. According to the Journal of Accountancy, “a complex, confused organizational structure can enable a fraudster in perpetrating and concealing his or her misdeeds. Conversely, a well-designed organizational structure that clearly denotes key areas of authority, provides proper channels of reporting and enables flow of communication and information between employees and management can be an effective fraud prevention measure.”(Journal of Accountancy, What’s Your Fraud IQ)

Effective Prevention. Just the thought that they might get caught strikes fear into the hearts of fraudsters, so even the appearance of surveillance can deter fraud. Security cameras can be a huge deterrent to these evildoers, even if the cameras aren’t real. And although secret measures (like spontaneous cash counts and email monitoring) might help you catch the crooks who are cooking the books, what they can’t see doesn’t scare them. (Journal of Accountancy, What’s Your Fraud IQ)

If you’re looking to practice your fraud detection and prevention skills, consider registering for the fraud- and forensics-themed 2011 AICPA Accounting Competition . You’ll get great experience in catching the crooks and the opportunity to earn $10,000. Registration is open until September 30th, 2011, on http://www.thiswaytocpa.com/competition.

Hungry for more?  Meet Rachel Buse, CPA and fraud-fighter extraordinaire.  She’s Accredited in Business Valuation and Certified in Financial Forensics, and she seriously goes undercover in her line of work.

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