The Institute of Internal Auditor Los Angeles Chapter Annual Fraud Conference Fraud Risk Assessment: Think Like a ‘Demon’ & Add IA Value April 10, 2013 2:30p – 3:30p Mark P. Ruppert CPA, CIA, CISA, CHFP, CHC Director, Internal Audit (CAE) Fraud Risk Assessment IA Perspective on Fraud Risk Why Care? Why Consider Fraud Risk? What is Fraud Risk? Engaging Management in the Fraud Risk Discussion: • Fraud Risk Assessment • ‘Angels & Demons’ Data Collection Exercise Incorporating Fraud Risk into Internal Audit Work Plans Addressing Fraud Risk on an Ongoing Basis and in Individual Audits 2 IA’s Perspective: Fraud Risk Heightened Risk & Challenge: • IIA professional standards • Ever increasing legal & compliance requirements • Management and Board expectations • High risk environment for fraud, corruption & abuse • Ever increasing ingenuity on the part of fraudsters Huge IA Opportunity: • Get a better sense of management intuition around fraud matters • Improve organization’s financial performance • Protect brand value and professional reputation • Mitigate criminal, regulatory and civil legal risk • Enhance IA prestige/relevance 3 Fraud Risk Assessment Why? Federal Sentencing Guidelines require that compliance programs: • address specific areas of potential fraud • use audits and/or other risk evaluation techniques to monitor compliance and assist in the reduction of identified problem areas 4 Fraud Risk Assessment Why? United States Sentencing Guidelines (USSG) Effective 11/2004 = USSG amended to provide greater guidance regarding compliance program criteria for an effective program to prevent and detect violations of the law: (USSC Guidelines Manual §8B2.1. Effective Compliance and Ethics Program) (a)(1) exercise due diligence to prevent and detect criminal conduct (a)(2) otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law – (b)(1)Establish standards and procedures to prevent and detect criminal conduct (c) periodically assess the risk of criminal conduct and take appropriate steps to…..to reduce the risk of criminal conduct identified 5 Fraud Risk Assessment Why? Like Compliance Professionals, Internal Audit Professionals must also address fraud risk… IIA Standards and Fraud Practice Guide Emphasize Internal Audit’s Role in Addressing Fraud • Antifraud Programs & Controls Assessment: Must evaluate how organization manages risk (IIA Standard 2120) • Fraud Risk Assessment: CAE must report periodically to management /board on significant fraud risk exposures (IIA Standard 2060) • Individual Audits: Must consider fraud when developing engagement objectives (IIA Standards 1220, 2210) • Proficiency: Evaluate the risk of fraud & the manner in which it is managed by the organization (IIA Standard 1210) 6 Fraud Risk Assessment Why? Look at what companies are saying! -- 2010 Global Fraud Trends* % of survey respondents hit by fraud in past year = 88% • More “viruses” than “diseases”: under $100M “Fraudsters’ take” = increased 20% from 2009 • Up to $1.4M per $1B sales * [Source: 2010 Global Fraud Survey – Economist Intelligence Unit/Kroll Consulting (www.kroll.com)] Theft of information and electronic data = #1 reported fraud • Overtakes Physical Theft for first time • #3 & #4= Management Conflict of Interest, Vendor/Supplier Fraud Fear of fraud is dissuading 48% of companies from operating in other countries • China & Africa = most affected (corruption #1 concern) Companies appear unprepared for heightened FCPA enforcement and lack adequate understanding • 2005-2009: 60 DOJ cases (more than 1977-2005) • 2010: already 130 open cases Fraud is largely an inside job • 44% employees, 11% agents/intermediaries Industry Lens: Fraud Prevalence • Declining: Natural Resources, Construction, Health/Pharma/Bio, Travel, Manufacturing • Increasing: Financial, Professional Services, Tech/Media/Telecom, Retail, Consumer 7 Fraud Risk Assessment Why? • US government admits losing 10% of spending to fraud; US government realizes a $9.75 : 1 on fraud management • Effective fraud management produces 8:1 ROI for financial services industry • ACFE estimate: companies lose $1 trillion or 7% of revenue to misconduct • PwC GECS survey – 40% increase in fraud, before the recession – Controls paradox Don’t Intelligence Unit: • Economist 85% of companies detected Forget significant frauds Operational over past 3 years) – 10% suffer >$100 million & Personal – Large companies - $23 million Impact! – Small companies - $8.2 million average loss pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 8 Fraud Risk Assessment Why? To Address the Impact of Healthcare Reform: Fed Unveils New Plan for Fraud Detection The What: Enhanced enforcement requirements detailed in the reform law = Medicare, Medicaid and CHIP The Why: • Medicare ‘Improper Payments’ in 2009: 8% of 4.5 million claims per day = $24 Billion • Goal to increase fraud detection and increase certainty of punishment The Impact: Depending on provider type = more work, more expense, getting personal • Easier for CMS to suspend Medicare payments if credible fraud allegations & to prevent new enrollments in higher-risk service areas Provider Type Risk CMS Treatment Hospitals, ASC, health centers, medical groups, clinics, physicians, publicly traded providers/suppliers, skilled nursing facilities Limited Risk Verify licenses and provider/supplier specific regulatory requirements O/P Rehab, currently enrolled DME/prosthetics/ortho/supplies providers, currently enrolled home-health agencies & hospice organizations Moderate Risk Limited + unscheduled or unannounced site visits Newly enrolled DME/prosthetics/ortho/supplies providers and home-health agencies High Risk Moderate + criminal background check & fingerprinting The When: • Sept 2010: Proposed regs released (all 187 pages of it!) • Sept – Nov 2010: Comment period • March 2011: Implementation * [Source: “Cracking Down”, Modern Healthcare – 9/27/10] 9 Now More Than Ever, Compliance & Internal Audit Must Have the Fraud Triangle in Focus!!! Incentives / Pressures Rationalization • Loss avoidance • Job dissatisfaction • Job • Family priorities • Money • Health priorities • Prestige • “Everybody else” syndrome • Dissatisfaction with the company • Self-denial of • Management & 3rd party Opportunity consequences to company • Insufficient internal controls • “Survival” mode • Temporary loans • Community relationships • External collaboration • Loss of health coverage • Management over-ride • Internal collaboration • Long term unemployment • Corrupt business customs pressures If Economic Downturn is the “Perfect Storm” for Fraud and Waste, will an Upturn be Even More Perfect? 10 So, Why Bother? It makes good business sense!! • Demonstrate you administer an effective Compliance Program and Internal Audit Function by documenting an understanding of how and where fraud might occur. • Minimize revenue leakage, cut costs, and safeguard assets. • Safeguard company and employee reputation. • Avoid and/or reduce criminal, civil and regulatory penalties, should misconduct occur. • Help avoid/reduce government sanctions • Increase IA relevance and add value! Detected Losses QUADRUPLE when Anti-Fraud Controls are Enhanced! - pwc 2009 Global Economic Crime Survey 11 Fraud Risk: Defined / Applied Fraud: (defined) - Any intentional*act committed to secure an unfair/unlawful gain Federal Sentencing Guidelines: - Intent not required “Apply the Fraud Lens to Enterprise Risks” Reputational Risk • External and internal impression of the organization Operational Risk • Loss of earnings or inefficient business operations Financial Risk • Over statement of revenues, understatement of expenses Reporting Risk • Non disclosure or false disclosure Compliance / Legal Risk • Potential criminal, civil or regulatory liability Strategic Risk • Impact on new products, services, or strategic alliances 12 Fraud Risk: Types and Categories "Leakage” vs. “Liability” Fraud GREEN Fraud = Leakage related Revenue Leakage Financial Reporting & Disclosure Manipulation activities, that when prevented or detected early, leads to improved financial results (“Risk Type = “Opportunity” ) Misappropriation of Assets Expenditure Leakage Unauthorized Receivables / Acquisition of Assets Unauthorized Expenses / Disposal of Assets RED Fraud = Liability related activities, that if not prevented, leads to government sanctions, and damage to brand value and reputation of individual members of the Board and senior management (Risk Type = “Hazard”) pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 13 Fraud Risk Types: “Leakage” Expenditure Leakage Illustrations: Revenue Leakage Financial Reporting & Disclosure Manipulation • Orders from fictitious vendor • Kickbacks in return for allowing supplier to inflate price Misappropriation of Assets Unauthorized Receivables / Acquisition of Assets • Advertiser charges for advertising not delivered • Vendors/contractors charge for work not performed Expenditure Leakage Unauthorized Expenses / Disposal of Assets • “Double dips” on p-card and credit card • Salesperson obtains reimbursement for fictitious travel expenses pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 14 Fraud Risk Type: “Liability” Unauthorized Expenses / Disposal of Assets Revenue Leakage Financial Reporting & Disclosure Manipulation Illustrations: • Payments to public officials for permits or patents • Payments to public officials for Misappropriation of Assets Unauthorized Receivables / Acquisition of Assets patents • Gifts to public officials to evade taxes • Payments to agents to facilitate Expenditure Leakage Unauthorized Expenses / Disposal of Assets sales • Illegal disposal of goods/waste pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 15 Fraud Risk Assessment • A comprehensive fraud risk assessment (FRA) is critical to the effectiveness of an organization’s overall antifraud programs and controls. • An FRA expands upon traditional risk assessment. It is scheme and scenario based. • The assessment considers the various ways that fraud and misconduct can occur by and against the company. • The execution of the assessment requires: o Internal Audit to: “Think out of the box”! Get creative and get out into/work with the business! o Management to: Be participative in the process Openly share schemes, scenarios, concerns, events Reinforces risk and the control ownership! 16 Fraud Risk Assessment: A Five Component Process Planning and Obtaining Senior Management Support and Sponsorship Assess Antifraud Programs and Controls against PwC Framework Inventory of High Impact Scenarios & Evaluate Existing Response Update Audit Risk Universe Integrate into Audit Plan Practical Execution – Theory to Practice: – Approach – Challenges – Benefits – Lessons learned pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 17 Identifying Significant Fraud Risk Exposures: Planning Planning and Obtaining Senior Management Support and Sponsorship Assess Antifraud Programs and Controls against PwC Framework Inventory of High Impact Scenarios & Evaluate Existing Response Update Audit Risk Universe Integrate into Audit Plan • Assemble team Cedars-Sinai Plan: • Consider scope and objectives • Board and senior management support Overall antifraud program assessment Categories of fraud and depth within organization Controls evaluation built into internal audit plan and compliance work plan development and approval processes. • Combined Internal Audit and PwC resources including PwC SMEs in key areas. Risk response Use and sustainability • Initial Internal Audit Team fraud risk • Design process discussion for full day. Format of deliverable (e.g., PwC template) Organize by business unit, function, geography or combination Role and interviews of management • Second phase, facilitated sessions with key director-level groups. • Roll results into annual planning processes and individual project processes for ongoing update. Sustainability 18 pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 Identifying Significant Fraud Risk Exposures: Gaining Senior Management Sponsorship Planning and Obtaining Senior Management Support and Sponsorship Assess Antifraud Programs and Controls Inventory of High Impact Scenarios & Evaluate Existing Response • Vitally important that senior management embrace and sponsor the assessment • Senior management ideally would communicate to middle management the importance of the initiative (drafted by IA or Compliance) • Recommend an initial meeting with C-suite Update Audit Risk Universe Integrate into Audit Plan Cedars-Sinai C-Suite Buy-In: • Internal Audit Planning and Compliance Work Plan processes involve the C-suite for input on risk and project selection. • Plans are approved by C-suite. • Plans presented to Audit Committee for review, input and approval. representatives to: Explain business benefits of FRA process Obtain their perspective of high impact monetary, compliance and financial reporting fraud risks • Plans presented to Board for review, input and approval. Formal meeting C-Suite meeting not held relative to kick off. Seek input regarding making process efficient and effective pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 19 Identifying Significant Fraud Risk Exposures: Evaluating Antifraud Program & Controls Planning and Obtaining Senior Management Support and Sponsorship Assess Antifraud Programs and Controls • Begin with high level assessment of how organization manages fraud risk (e.g., PwC Antifraud, Corruption and Misconduct Assessment Tool) Self-Evaluation: “Where are we as an organization?” • Conduct validation procedures as needed Inventory of High Impact Scenarios & Evaluate Existing Response Update Audit Risk Universe Integrate into Audit Plan Cedars-Sinai Assessment: • Internal Audit Team Assessment • PwC Tool • Overall Assessment Results: Corporate Fraud Policy Coordinated Investigation Resources Consistency in Criminal Prosecution and Employee Discipline Decisions High Level Fraud Risk & Individual Audit Fraud Risk Considerations pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 20 Element Criteria Leading Practice Control Environment Management Accountability The organization should: The organization: (1) promote an organizational culture (1) demonstrates a strong "tone at the top" that encourages ethical conduct and that flows up and down and across the a commitment to compliance with organization, the law, and (2) views mitigating fraud, corruption and (2) exercise due diligence to misconduct as a core responsibility, prevent and detect fraud, corruption, (3) has management participate actively in the and other misconduct, fraud, corruption and misconduct risk and controls (3) implement effective programs and assessment, controls intended to prevent, detect and (4) ensures that all suspected allegations of respond to fraud, corruption and misconduct are independently investigated, and misconduct. (5) takes appropriate, consistent remediation action in instances of violations. Operations, Finance and Other "Front Line" Personnel Operations, finance and other "front line" Operations and finance personnel acknowledge personnel should be equipped with the their responsibilities and are equipped with and appropriate knowledge, skills and tools to apply knowledge, skills and tools to: prevent, detect, and respond to fraud, (1) identify significant misconduct risks impacting corruption and abuse. their component of the organization, (2) tailor control activities to mitigate the risk, and (3) detect and report indications of misconduct. Generally In Compliance Sub-Standard Description of Existing Policies and Procedures The organization takes sufficient actions with respect to prevention, detection, investigation, remediation, and monitoring of fraud, corruption and misconduct. Taken as a whole, the organization fails to take sufficient action to prevent and detect high impact fraud, corruption and misconduct; and/or management does not: (1) view mitigating fraud, corruption and misconduct as a core responsibility, (2) participate in the fraud, corruption and misconduct risk and controls assessment, or (3) take appropriate, consistent remediation action in instances of violations. (1) Describe the actions taken by the organization to promote a culture that encourages ethical conduct. - Corporate Compliance Function and Policies - Code of Conduct - New Manager Orientation training that includes Corporate Compliance and Internal Audit Presentations - New Employee Orientation that includes review of code of conduct and compliance plan. - Hot line - Media Response promoting acknoweldgement, apology and corrective action as applicable. - CEO who's mantra is "do the right thing" Operations and finance personnel Operations and finance personnel acknowledge responsibility for view other functions, e.g., legal, compliance, internal audit, as preventing, detecting and responding to fraud, corruption and owning responsibility for presenting and detecting fraud, misconduct. corruption and misconduct. pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 Discussion Points (1) Describe the actions taken by the organization to cultivate a culture that curbing fraud, corruption and misconduct is every employee's responsibility. (2) Describe actions to equip front line personnel with necessary knowledge, skills and tools to identify, prevent, detect and respond to fraud, corruption and misconduct. 21 Predicting the Unpredictable is Key!! Think Like A Criminal When Assessing the Risk of Fraud, Corruption & Abuse! How would a criminal manage your XYZ business unit? What if a criminal were hired as a XYZ associate? What would happen if a criminal were a XYZ vendor or customer? What if a trusted employee begins to think like a criminal? 22 Identifying Significant Fraud Risk Exposures: Create “Straw” Schemes List: “the What” Planning and Obtaining Senior Management Support and Sponsorship Assess Antifraud Programs and Controls Inventory of High Impact Scenarios & Evaluate Existing Response • Create a list of inherent fraud risks Inventory of common and sector specific fraud and abuse scenarios by selected process areas Past allegations, suspicions and investigations Industry research of frauds at other companies, organizational vendors, customers, etc Brainstorming among business, compliance, internal audit and fraud experts Operational, design and other deficiencies identified during business reviews, compliance monitoring activity and internal and external audits Update Audit Risk Universe Integrate into Audit Plan Cedars-Sinai Inventory: • Upcoding; Claims for Services not Provided; A/R & Rate Manipulation / Outliers • Theft: Radiology Incident; Heparin Incident; EMTALA • Bribery: Siemens – 2008 global fraud • Imaging Room; Chillers; Data Manipulation; Vendor Relationships • Look at potential impact of identified control deficiencies; broken processes; significant hand-off requirements, etc. pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 23 Identifying Significant Fraud Risk Exposures: Create “Straw” Schemes List: “the How” Planning and Obtaining Senior Management Support and Sponsorship Assess Antifraud Programs and Controls Inventory of High Impact Scenarios & Evaluate Existing Response • Determine Fraud Risk Classifications i.e. - Revenue, Expenditure, Reporting • Take your fraud risks and think/discuss HOW they could occur Update Audit Risk Universe Integrate into Audit Plan CSHS: practical application and lessons learned • Fraud classifications: Revenue, Expense or Reporting Impact • Brainstorm scenarios by organizational Think SCHEMES and SCENARIOS! Get creative! lines of authority and three impact areas • Director and Manager Level Focus Never mind controls!! Utilize group facilitation sessions! Create your master Gross Risk list Group Discussions; decision of with/without VP’s • Angels and Demons!! • Scribe pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 24 Identifying Significant Fraud Risk Exposures: Narrow to Significant Residual Risks Planning and Obtaining Senior Management Support and Sponsorship Assess Antifraud Programs and Controls Inventory of High Impact Scenarios & Evaluate Existing Response • Narrow list to capture high impact vulnerabilities Consider likelihood Update Audit Risk Universe Integrate into Audit Plan CSHS: practical application and lessons learned • Two Hour facilitated Sessions Qualitative and quantitative impact, as well as, direct and indirect consequences Establish thresholds (risk tolerance) to measure impact on reputation, operations, financial, legal, compliance, and strategic objectives • Consider the design of existing controls Consider whether existing processes and controls are able to withstand intentional misconduct Examine incentives pressures and opportunities to collude, circumvent and override Necessary for: Schemes Likelihood & Impact Controls • Director/Manager but not both • Scribe • Focus on Schemes (how it’s done – criminal perspective) • Common beliefs / identified schemes across sessions pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 25 Identifying Significant Fraud Schemes Brainstorming Exercises!! “Angels & Demons” Select a Business Area: i.e.- Hospital Admissions Demons : Identify Potential Fraud Schemes Angels: Recommend & Evaluate How it can happen! Why it won’t! Anti-fraud Controls Schemes Controls pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 Impact/ Likelihood 26 Identifying Significant Fraud Schemes Brainstorming Exercises!! “Angels & Demons” Demons - Identify Potential Fraud Risks & Schemes This is how I would do it son… This is how it can happen! pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 27 Identifying Significant Fraud Schemes Brainstorming Exercises!! “Angels & Demons” Angels - Recommend & Explain Anti-fraud Controls Sorry, partnerit ain’t gonna happen… If you did, I would know because… pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 28 Identifying Significant Fraud Risk Exposures: Tailor to Business Units & Functions Planning and Obtaining Senior Management Support and Sponsorship Assess Antifraud Programs and Controls Inventory of High Impact Scenarios & Evaluate Existing Response • Entity level of assessment = very limited business value • Assessment needs to be conducted and tailored to individual business units/functions, particularly in high risk markets; focus on both internal and external risks • Tailored assessments & group facilitation sessions simultaneously reinforce that management “owns” risk • Hold focus groups of management & staff to tailor inventory • Meet and validate results with business unit leaders • Capture assessment for senior management and board - Self Assessment; A&D Results (Gross & Residual risk); discuss Risk Tolerance; plans to update universe pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 Update Audit Risk Universe Integrate into Audit Plan CSHS: practical application and lessons learned • Provide fraud background/concepts • Business units – positive response to facilitate sessions and Angels and Demons; engage audience • Lot’s of Aha’s and Really?’s in sessions • Positive comments from Senior Mgmt! • Entity Level Assessment – Proof remains to be seen. 29 Identifying Significant Fraud Risk Exposures: Update Internal Audit Risk Universe Planning and Obtaining Senior Management Support and Sponsorship Assess Antifraud Programs and Controls Inventory of High Impact Scenarios & Evaluate Existing Response • Based upon final listing of scenarios update audit risk universe for key risk factors and indicators • Refine any pre-existing audit risks based upon additional risk assessment procedures • Incorporate into annual update process of audit and/or compliance risk universe Update Audit Risk Universe Integrate into Audit Plan CSHS: practical application and lessons learned • If not already categorized in your risk universe, add category or metadata for easy identification • Refining can be time consuming • Annual update development in progress, to be completed through: Improved annual interviewing Individual Audit Capture Complete redevelopment of risk model using TeamMate in progress pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 30 Identifying Significant Fraud Risk Exposures: Integrate into Audit Plan Planning and Obtaining Senior Management Support and Sponsorship Assess Antifraud Programs and Controls Inventory of High Impact Scenarios & Evaluate Existing Response • Evaluate whether any current year audits should be updated based on new risk universe • Determine appropriate way to keep fraud risk assessment process evolving rather than static As new investigations or industry trends occur Automated controls are added into Update Audit Risk Universe Integrate into Audit Plan CSHS: practical application and lessons learned • In addition to current year updates, could identify new priority audits Annual interviewing Individual audits Possible facilitate session repeats environment Integrate into individual audit plans as well by already having the risk scenarios to consider pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 31 Integrating Fraud Risk Into Individual Compliance and Audit Engagements: • Planning • Execution (cont’d) Brainstorming among team and forensics Fraud risk factors & indicators Past incidents Analytics - - not just ACL Past audits and business reviews Interview, interview, interview!! Management inquiries Industry research • Completion Tailor procedures Documentation is essential Identify planning and how audit tailored • Execution Design and operating effectiveness of existing response Consider need for substantive testing Close the Loop! Use findings to strengthen controls, develop & deliver education/awareness to process owners & mgmt! pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 32 Creating Value While Meeting Fraud Standards Raising Auditor Fraud Proficiency • Skills • Knowledge Scheme components Critical thinking! Preventive & detective controls Scheme and scenario risk assessment Key risk factors & indicators Assessing how organization manages risk Detection procedures Operations knowledge Devising fraud audit procedures Forensic investigation Interviews Raising Management Awareness Use of electronic data tools In addition to scheme discussions and fraud risk identification, management is also getting interactive awareness training Working ‘with’ the business! pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 33 Creating Value While Meeting Fraud Standards Antifraud Tools of a Highly Equipped Compliance and/or Internal Audit Function • Specialized fraud examiners on staff • Antifraud training for staff • Investigative training for staff • Use of Computer Assisted Audit Techniques to promote fraud detection • Focused fraud risk assessment with inclusion of functional management and employees of all levels • Direct and regular interaction with senior management and audit committee • Use of specific and targeted fraud audit techniques – SAS 99 • Can lead and/or support investigation and/or remediation efforts pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 34 Creating Value While Meeting Fraud Standards Other Activities Compliance and/or IA Departments are Taking to Deliver Value • Equip front line to serve as an effective first line of defense; fraud education!! • Conduct a “good” fraud risk assessment pilot at a high risk entity to develop a sustainable and repeatable process • Expand FCPA and other compliance reviews to identify opportunities to cut revenue leaks, cut costs and safeguard assets • Form a “fraud council” comprised of key business and corporate stakeholders • Host a “perfect crime” dinner and/ or facilitate “angels v. demons” exercise for management, internal audit and/or compliance • Create on-line or live interactive learning modules tailored to specific functions, e.g., procurement, sales, controllers pwc Fall 2010 IART – Fraud Risk Assessment – 11/4/10 35 Creating Value While Meeting Fraud Standards Perspectives From IA Industry Leaders* “ I currently see a lot more management awareness of the possibility of fraud, which in turn is causing a lot more people to come forward and ask Internal Auditing, ‘Is this right?, Is this appropriate?’’ --Richard Schmidt, Vice President of Internal Audit, Del Monte Foods “ Internal auditing is often the only proactive source of fraud detection that management has. Auditors are out there looking for indicators of fraud during every engagement they conduct; no one else in the organization plays this vital role.” --Kim Hatley, Assistant VP of Internal Audit, Hospital Corporation of America (HCA) “ It is management’s responsibility to institute, establish and monitor controls and uncover fraudsters. Internal Auditing’s job is to encourage management to undertake what is necessary and then provide assurance to the audit committee that management is getting it right.” --Douglas Anderson, former Corporate Auditor, The Dow Chemical Co. * [Source: Internal Auditor magazine, October 2010] IIA - San Gabriel Valley Chapter: 2010 Fraud Symposium, 11/1/10 36 Don’t be this guy! Stamp out… ? Mark P. Ruppert, CPA, CIA, CISA, CHFP, CHC Director, Internal Audit Conflict of Interest Administrator Cedars-Sinai Health System Los Angeles, California 323-866-6900 office 323-866-6901 fax Mark.Ruppert@cshs.org 37