accounting fraud

Price cut on my newest e-book, “Tragedy of Fraud”

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:                        

  • Tragedy of Fraud – The Ripple Effects from the Embezzlement Fraud in a Local Church.
  • Wages of Fraud – Consequences from the Corruption Fraud in a Mayor’s Office.
  • Why is it Difficult to Find Fraud? – The lack of documentation inside an organization makes it even more difficult to identify a fraud scheme.
  • The Fraud Triangle – A discussion of the three sides of a fraud triangle. That’s the idea that three components need to be present for a fraud to take place – opportunity, motivation, and rationalization. Great danger is in play when all three factors are present.

The other book I have available at Amazon is Once Upon Internal Control.

Why auditing is not like watching a movie

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? 

New models of analyzing fraud – triangle, diamond, double diamond, and MICE

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:

  • a four-sided diamond model, which adds capability in addition to opportunity
  • a dual diamond which allows for separate analysis of accidental and predator fraudsters
  • MICE – money, ideology, corruption, and ego/entitlement – as a model of motivation for high-level, skilled fraudsters that don’t seem motivated by small-scale payoffs

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:

Taking ownership

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: …

Tragedy of fraud – another case study – 1

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.

Trust is not an internal control

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

One accountant’s journey through fraud, jail, and rebuilding

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

“Tragedy of Fraud” e-book now available at Amazon

“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.

The book closes with a discussion of the fraud triangle. That’s the idea that three components need to be present for a fraud to take place – opportunity, motivation, and rationalization. There are steps an organization can take to reduce those factors.

You can find the book at Amazon here.

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:

‘Tragedy of Fraud’ in e-book format – soon to be released

(Cross posted from my other blog, Nonprofit Update.)

Tragedy of Fraud – The Ripple Effects from Fraud and the Wages Earned will be released soon in Kindle format. This is a compilation of blog posts about the damage caused by fraud. It will also discuss the fraud triangle.

The sections of the book are:

Official report on New Mexico Finance Authority’s faked audit report – Part 3

The Office of State Auditor (OSA) has issued several official reports on the fabricated June 30, 2011 financial statements from the New Mexico Finance Authority. You can find two of the reports here and here.

This is the third in a series of posts on the reports.  Previous posts are here and here.

Are lots of new procedures needed inside NMFA?

Official report on New Mexico Finance Authority’s faked audit report – Part 2

The Office of State Auditor (OSA) has issued several official reports on the fabricated June 30, 2011 financial statements from the New Mexico Finance Authority. You can find two of the reports here and here.

This is the second in a series of posts on the reports.  Previous post is here.

Report conclusion

Official report on New Mexico Finance Authority’s faked audit report – Part 1

The New Mexico Office of State Auditor (OSA) has issued several official reports on the fabricated June 30, 2011 financial statements from the New Mexico Finance Authority.

This will be the first in a series of posts on the report.

You can find a 47 page report dated December 3, 2012 hereYou can find a more detailed 174 page report dated December 12, 2012 here.

The longer report has a very helpful 10 page executive summary. If you are a CPA interested in learning about fraud, systemic failures of internal control, the importance of tone at the top, and all the other things that we CPAs look at, you will learn a lot by reading the executive summary.

Good news from the investigation