Case Study: How do your clients protect themselves from fraud?
An example: The executive director of a service fulfillment company insists on using high quality paper for surveys, and demands control of the ordering process. This allows the executive to set up a false vendor, pay exorbitant prices for inferior paper, and then receive "loans" back from the vendor. If this was your client, would they be able to identify the fraud and properly gather evidence against the perpetrator?
Studies show that, on average, organizations lose 5% of their gross revenue to fraud. Our forensic specialists, through seminars and consultation, teach how to understand fraud and how to implement internal controls to avoid it. We also offer the expertise to uncover fraud and gather evidence.
Fighting fraud requires a clear comprehension of fraud theory. This includes understanding the Fraud Triangle: Pressure, Opportunity, and Rationalization-elements that fraud theory asserts must exist for an employee to commit fraud. It also requires proficiency in gathering evidence: seeking accounting irregularities and analytical anomalies, and compiling notes from properly conducted interviews, properly prepared and signed statements, and forensically acceptable electronic media images.
In our November 2010 Forensic Accounting Seminar, our team of specialists explored this case, teasing out the factors that allowed the fraud to take place, the investigation that revealed the extent of the fraud, and the evidence that was gathered.
In this case, another employee discovered the fraud by questioning the executive's insistence on high-quality paper and noticing a suspicious address for the vendor. The company took the correct steps to investigate: putting the executive on paid leave, interviewing employees and vendors, and creating legally acceptable disk images. After accounting for most of the fraud, they interviewed the executive, obtained a statement, notified law enforcement, and began civil proceedings. Building the case from the ground up facilitated both the civil and criminal cases.
With appropriate controls in place, organizations can minimize their risk for this kind of fraud and lessen the damage if it occurs. We look forward to opportunities to work with you in the future to explore ways to best protect your clients.