Corporate Fraud Handbook: Prevention and Detection

Put the brakes on fraud. It is much more cost-effective to prevent fraud than to punish it. Providing an insider's look into the most prevalent fraud schemes used by employees, owners, managers, and executives, Corporate Fraud Handbook, Fourth Edition provides you with a systematic approach to stop fraud in its tracks before it happens. Sharing his four decades of experience in the field of fraud detection and deterrence, author Dr. Joseph T. Wells—founder and chairman of the Association of Certified Fraud Examiners—brings each scheme to life by using real case studies submitted to the ACFE by the fraud examiners who investigated them. Written for anyone responsible for reducing fraud losses and mitigating the risk of fraud, Corporate Fraud Handbook features: Tips and techniques for quantifying financial losses from fraud schemes Observations and conclusions in each chapter to help you devise prevention and detection strategies Real-life case studies that provide a view inside the mind of a fraudster The fraud tree, a systematic classification of the various types of occupational fraud Statistics from the ACFE's 2012 Report to the Nations on Occupational Fraud and Abuse From sophisticated investment swindles to petty theft, false overtime to bribery, discover how to prevent and detect corporate fraud with the expert guidance found in Corporate Fraud Handbook, Fourth Edition.

Table of Contents:
Preface ix About the ACFE xiii 1. INTRODUCTION1 Defining “Occupational Fraud and Abuse” 2 Research in Occupational Fraud and Abuse 6 2012 Report to the Nations on Occupational Fraud and Abuse 25 Notes 42 PART 1 ASSET MISAPPROPRIATIONS45 2. INTRODUCTION TO ASSET MISAPPROPRIATIONS 47 Overview 48 Definition of “Assets” 48 How Asset Misappropriations Affect Books of Account 49 Notes 58 3. SKIMMING 59 Overview 63 Skimming Data from ACFE 2011 Global Fraud Survey 64 Unrecorded Sales 68 Understated Sales and Receivables 73 Theft of Checks through the Mail 74 Short-term Skimming 79 Converting Stolen Checks 80 Concealing the Fraud 83 Detection 89 Prevention 90 Notes 91 4. CASH LARCENY 93 Overview 96 Cash Larceny Data from ACFE 2011 Global Fraud Survey 97 Incoming Cash 101 Cash Larceny from the Deposit 106 Miscellaneous Larceny Schemes 110 Detection 111 Prevention 113 5. CHECK TAMPERING 115 Overview 118 Check Tampering Data from ACFE 2011 Global Fraud Survey 119 Forged Maker Schemes 123 Intercepted Checks 129 Forged Endorsement Schemes 129 Altered Payee Schemes 133 Concealed Check Schemes 137 Authorized Maker Schemes 137 Concealment 141 Detection 149 Prevention 151 Electronic Payment Tampering 153 Prevention and Detection 153 Notes 155 6. REGISTER DISBURSEMENT SCHEMES 157 Overview 157 Register Disbursement Data from ACFE 2011 Global Fraud Survey 161 False Refunds 165 False Voids 171 Concealing Register Disbursements 171 Detection 174 Prevention 174 7. BILLING SCHEMES 177 Overview 181 Billing Scheme Data from ACFE 2011 Global Fraud Survey 182 Cash-Generating Schemes 186 Invoicing via Shell Companies 186 Invoicing via Nonaccomplice Vendors 191 Personal Purchases with Company Funds 196 Detection 202 Prevention 203 8. PAYROLL AND EXPENSE REIMBURSEMENT SCHEMES 205 Overview 208 Payroll Scheme Data from ACFE 2011 Global Fraud Survey 209 Payroll Schemes 212 Expense Reimbursement Data from ACFE 2011 Global Fraud Survey 226 Expense Reimbursement Schemes 230 Detection of Payroll Schemes 237 Detection of Expense Reimbursement Schemes 238 Prevention of Payroll Schemes 239 Prevention of Expense Reimbursement Schemes 241 9. INVENTORY AND OTHER ASSETS 243 Overview: NonCash Misappropriation Data from ACFE 2011 Global Fraud Survey 246 Misuse of Inventory and Other Assets 249 Theft of Inventory and Other Assets 252 Concealment 264 Detection 266 Prevention 269 Misappropriation of Intangible Assets 271 Note 272 PART II CORRUPTION273 10. BRIBERY 275 Overview 278 Corruption Data from ACFE 2011 Global Fraud Survey 282 Bribery Schemes 286 Something of Value 300 Economic Extortion 301 Illegal Gratuities 301 Detection 301 Prevention 303 Notes 305 11. CONFLICTS OF INTEREST 307 Overview 311 Purchasing Schemes 312 Sales Schemes 315 Other Schemes 316 Detection 318 Prevention 319 Note 319 PART III FRAUDULENT STATEMENTS321 12. ACCOUNTING PRINCIPLES AND FRAUD 323 Introduction 323 Fraud in Financial Statements 327 Major Generally Accepted Accounting Principles 330 Responsibility for Financial Statements 334 Users of Financial Statements 335 Types of Financial Statements 335 Sarbanes-Oxley Act 336 Financial Statement Fraud Data from ACFE 2009 Global Fraud Survey 347 Notes 352 13. FINANCIAL STATEMENT FRAUD SCHEMES 353 Overview Defining Financial Statement Fraud Costs of Financial Statement Fraud Methods of Financial Statement Fraud 359 Fictitious Revenues 359 Timing Differences 362 Concealed Liabilities and Expenses 368 Improper Disclosures 371 Improper Asset Valuation 374 Detection of Fraudulent Financial Statement Schemes 379 Deterrence of Financial Statement Fraud 395 14. OCCUPATIONAL FRAUD AND ABUSE: THE BIG PICTURE 401 Defining “Abusive Conduct” 401 Measuring the Level of Occupational Fraud and Abuse 402 Understanding Fraud Deterrence 405 Corporate Sentencing Guidelines 409 Ethical Connection 411 Concluding Thoughts 413 Notes 414 APPENDIX: SAMPLE CODE OF BUSINESS ETHICS AND CONDUCT 415 Introduction 415 Conflicts of Interest 417 Company Assets 421 Political Contributions 423 Employee Conduct 423 Compliance Letter and Conflict of Interest Questionnaire 425 Bibliography 427 Index 435

About the Author :
Dr. JOSEPH T. WELLS, CFE, CPA, spent nearly a decade as a U.S. FBI Special Agent, is the founder and Chairman of the Association of Certified Fraud Examiners (ACFE) and the author of twenty-two books. For his landmark research in fraud detection and deterrence, Dr. Wells has been inducted into the American Institute of Certified Public Accountants' Business and Industry Hall of Fame and, for nine years in a row, was named to Accounting Today's list of the 100 most influential people. He holds a doctorate in commercial science from York College, The City University of New York. Dr. JOSEPH T. WELLS, CFE, CPA, spent nearly a decade as a U.S. FBI Special Agent, is the founder and Chairman of the Association of Certified Fraud Examiners (ACFE) and the author of twenty-two books. For his landmark research in fraud detection and deterrence, Dr. Wells has been inducted into the American Institute of Certified Public Accountants' Business and Industry Hall of Fame and, for nine years in a row, was named to Accounting Today's list of the 100 most influential people. He holds a doctorate in commercial science from York College, The City University of New York.