Tracy Coenen lists 9 reasons for “Escaping Detection: Why Auditors Do Not Find Fraud”.
If we understand why audits are a poor tool for detecting fraudulent financials, we can improve our chances of finding material frauds.
Check out her post, it will be worth your time.
Here are a few thoughts expanding on her list. …
“Going to meet your Maker with the fresh scent of theft on your hands is not a good way to go…”
is how Charles Hall starts his story of a long ago fraud – Stealing While Dying.
We’ve all seen the situation where the bookkeeper does the main bookkeeping, receives the bank statements, reconciles the accounts, and is an authorized check signer.
In this situation, the most-honest-and-nicest-person-you’ll-ever-meet bookkeeper starting stealing lots of money when she became gravely ill.
Check out the full story. …
Price reduced to only $0.99, now available here.
“Tragedy of Fraud – The Ripple Effects from Fraud and the Wages Earned” describes the tragic consequences from fraud.
There are ripple effects that spread out to harm innocent bystanders. The perpetrator draws a wide range of well-deserved wages that will be paid in full.
The book looks at two fraud incidents to learn what happens after a fraud is discovered. One took place in a local megachurch and the other in the mayor’s office of a small city.
This book is a compilation of blogs posts that have been previously published at Nonprofit Update and Attestation Update. The posts have been edited slightly and reorganized for easier reading.
Major sections of the book:
The other book I have available at Amazon is Once Upon Internal Control.
I walk into the room while my wife is watching a movie on Lifetime Movie Network™.
I watch for 30 or 60 seconds.
I guess who is the bad guy/bad gal.
I’m usually right.
How is it possible to guess correctly most of the time? Well, let’s see…
I know there’s normally a bad guy on the network’s movies. There’s usually a small cast of characters and the bad gal gets lots of screen time. There’s usually ominous music playing when the bad guy is engaged in bad-guy-stuff.
How does that help CPAs?
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For a good stretch on how to analyze fraud, check out a great article “Beyond the Fraud Triangle,” in The CPA Journal, written by Jack Dorminey, Scott Fleming, Mary-Jo Kranacher, and Richard Riley. This article was mentioned by a commenter in an earlier post.
I heartily recommend the article for all auditors. It goes beyond the standard fraud triangle and provides an overview of several other models, including:
If you want to stretch your knowledge of the concepts, check out those models. Hint for auditors: stretching your brain on fraud is a very good thing to do.
My thoughts:
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New models of analyzing fraud – triangle, diamond, double diamond, and MICERead More »
Like all working CPAs, I get the concept of the fraud triangle. Opportunity, motivation, and rationalization combine to create a ripe environment for fraud.
I get it. I’ve written about it a lot. Even wrote a short e-book.
I have a vague realization we need to expand the discussion somehow. Why my discomfort?
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Is it time to upgrade our understanding of the fraud triangle?Read More »
One thing that jumps out from Amy Wilson’s story is that she takes full responsibility for her actions and the consequences.
There is none of that ‘well, you just don’t understand the pressure I was under’, or ‘I had to do it’, or our culture’s favorite ‘it’s mommy and daddy’s fault’.
Instead, what happened is fully her fault.
Consider her comments, which I extracted from the article. I feel free to quote her extensively since I have permission to reprint her article.
Look at the strong statement early in the article: …
Amy Wilson’s story of her embezzlement and the journey she has taken since then provides insight to the fraud triangle.
That’s the concept which says for a fraud to flourish, three factors need to be present:
In this situation, her opportunity to commit fraud is quite visible.
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Previous post started a discussion of the consequences of Amy Wilson’s embezzlement story told here. These two posts are another case study of the tragedy of fraud.
I’ve discussed the consequences of fraud extensively on my blog. Even compiled those posts into a book, available at Amazon.
Let’s wrap up a review of the consequences earned by Mrs. Wilson and the impact on innocent people she loves. Here are more things visible in her article:
I’m guessing this covers sentences a lot of ground: …
Let’s look at Amy Wilson’s embezzlement story, explained here, as another case study of the tragedy of fraud.
I’ve discussed the consequences of fraud extensively on my blogs. Check out the tags here and here . Even compiled those posts into a book, available at Amazon.
Let’s look at some of the consequences Mrs. Wilson has endured and the impact on innocent people she deeply cares about. Here are some things visible in her article:
She is a convicted felon. I doubt that record will ever go away. Accountants rarely have the political juice to persuade a governor or president to grant a full pardon.
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Here’s a fraud story to tickle an accountant’s funny bone…
A team of five in England are on their way to jail after making a low-budget real movie to cover up that a high-budget fake movie was nothing other than an excuse to rip off the government for $4.2 million. Check out 5 convicted of inventing movie to hide tax fraud from the AP. (Link goes to boston.com but story was picked up by lots of news outlets.)
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It is just a feeling.
That is Amy Wilson’s explanation as she describes her journey through embezzlement into recovery as told in this earlier post. Thanks to Mrs. Wilson for granting me permission to reprint her article.
Her article is very good. It is so well constructed that we can analyze it in detail. I’ll have several posts to draw out my reactions to her article.
Trust is not an internal control
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The following article is by Amy Wilson, speaker and staff accountant. It is printed with permission of Mrs. Wilson.
For ease of reading, I won’t put the full article in quotes. Here is her story:
My name is Amy Wilson. I am a wife, a mother, an accountant — and an ex-convict.
Early on as a struggling single mother, I wanted a better life for my children, so I went to night school at the University of Indianapolis and earned my bachelor’s degree. For the next 16 years, I worked hard to achieve a respected position in the corporate world. I started in my teens as a cashier at a car dealership. Next, I worked as a payables clerk for a major hospital in Indianapolis. Finally, degree in hand, I became a staff accountant for a large manufacturing firm. Seven years later, I was hired as an office manager for a small manufacturing business.
For most of my life, I was an overachiever, an attribute that eventually led to my downfall and put me behind bars, a convicted felon.
My slow decline into theft
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One accountant’s journey through fraud, jail, and rebuildingRead More »
Charles Hall has some ideas for you on easy fraud tests you could perform on your upcoming audits: Five Disbursement Fraud Tests
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Would this call ruin your day?
You answer the phone and your client says:
“George, we just found out our controller has stolen about $70,000 per year for the last three years. Since you guys have been doing our audit, I thought I’d call and discuss what we need to do.” The caller does not verbally say it, but he intimates, “where were you guys?” and “how are you going to resolve this?”
That’s the sobering start to Charles Hall’s post at CPA-Scribo – Fraud Stings Auditor.
He outlines three mistakes you may have made on your latest audits:
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