UNIT 1
Advanced Forensic Accounting -ACC 465
Dr. Doug Letsch
I am online waiting for the live session to begin. If you have a general question, please ask
it in the chat window. The only talking you will here is when I welcome someone who has
just signed in. If you don’t hear me welcoming everyone, please adjust your speakers. Let
me know if you have problems. Thanks, Dr. Doug
CONTACT
INFORMATION
I am here to help
CONTACT INFORMATION
I am available at my office hours each Monday from
10am -11am (EST) in AIM Chat at DrDougLetsch@aim.com
Most students never use AIM as they just call me!
At other times, please post all course related questions
in the Virtual Office under Course Home. I always
respond within 24 hours!
If you have a special individual need, please call me at
903-638-0500 or send me an email.
EXPECTATIONS
1.
Discussions must be completed during week assigned –three
posts on three different days. Discussions cannot be made up.
2.
Assignments must be submitted on time-Tues midnight. Late
policy applies to all assignments.
3.
Attend seminars and participate, or complete alternative
assignment – I use pop questions.
4.
Alternative seminar assignments are to listen to the seminar
archive, send me a written summary of the seminar. Late
papers will not be accepted.
5.
If you are unsure of anything, ask!
The most important ingredient in success is YOU
ALTERNATIVE ASSIGNMENT FOR WEEK 1
You are required to write a 2-3 page paper after you have read articles
regarding the Bernie Madoff case. Article suggestions that can be found in the
KU Library include:
Zweig, J. (2008, December 13). How Bernie Madoff made smart folks look
dumb. Wall Street Journal.
Goldfarb, Z. (2009, January 6). SEC broadens its probe of failures in Madof
case. Washington Post.
Your response should include the following points:
In general, would you define Bernie Madoff’s clients as sophisticated or
naive? Why?
Whether you described Bernie Madoff’s customers as naïve or sophisticated,
what trait allowed his clients to become victims?
Why wasn’t the Bernie Madoff scheme caught earlier?
Your paper should be in APA format and cite all references used. Submit the
Unit 1 Alternate Assignment to the Unit 1 Seminar Dropbox.
GRADING
Assessments
Number
Points
Total Points
Discussions-one each week
9
20
180
50 point Assignments
2
50
100
20 point Assignments
7
20
140
Quiz
9
20
180
Seminar/Alternate Assignment
9
15
135
Historical Event Project
1
10
10
Journal Entry
3
15
45
Final Exam
1
160
160
Writing Assignment
1
50
50
Total Points
1,000
FORENSIC
ACCOUNTING
An Introduction!
Fraud
SURVEY QUESTION
Are you suited for
Forensic Accounting?
Anthony and Cleopatra are lying dead on
the floor in a villa. Nearby on the floor is
a broken bowl. There is no mark on
either of their bodies and they were not
poisoned. With this information,
determine how they died.
Provide your answer in the chat area
please.
SURVEY QUESTION
Are you suited for
Forensic Accounting?
Anthony and Cleopatra are lying dead on
the floor in a villa. Nearby on the floor is
a broken bowl. There is no mark on
either of their bodies and they were not
poisoned. With this information,
determine how they died.
Provide your answer in the chat area
please.
FRAUD
How would you
define Fraud?
FRAUD- DEFINED
Fraud is the most basic sense is the statement of a
mistruth for personal gain. Under common law fraud must
be material, knowingly made, relied upon, and which
creates measurable damages.
Take a few minutes and watch the following video. I will turn
off my audio. See if you can tell me how many common law
fraudulent statements Andy makes to Barney in the first 4
minutes and 15 seconds. Please type the number of fraudulent
statements made in the chat room when you return. See you in
about 4 ½ minutes.
http://www.youtube.com/watch?v=SrHvpNloCOU
FRAUD- DEFINED
Mayberry Exposed!!
If you counted like I did, you will find 9 basically
false statements.
However, as any Mayberry van knows
Andy would never cheat anyone.
Since there was no material misstatement and there
were no real damages, there was no common law
fraud.
CATEGORIES OF FRAUD
• Asset Misappropriation
• Corruption
• Financial Statement Fraud
Used everywhere by everyone in business
FINANCIAL FORENSICS -DEFINED
•the application of financial principles and theories to facts or
hypotheses at issue in a legal dispute. Financial forensics
consists of two primary functions:
– Litigation advisory services
– Investigative services
HOW BIG IS THE PROBLEM?
After a few stable
years, corporate
fraud case loads are
up about 25% from
2009 to the end of
2011.
Source: http://www.fbi.gov/stats-services/publications/financial-crimes-report-2010-2011
Poll Question
• Think about how many university level courses have you taken –write
that number down. Now consider in how many of those courses did you
read about or discuss ethics?
a.
76-100%
b. 51 – 75%
c.
26 – 50%
d. Less than 26%
Select your answer on the poll question box which will appear in a few seconds.
Remember to get credit you must answer all poll questions during a session.
HOW BIG IS THE FRAUD PROBLEM?
Common Fraud Scams
- Telemarketing Fraud
- Nigerian Letter or “419” Fraud
- Identity Theft
- Advance Fee Schemes
- Health Care Fraud/Health Insurance Fraud
- Redemption/Strawman/Bond Fraud
Internet Scams
- Internet Auction Fraud
- Non-Delivery of Merchandise
- Credit Card Fraud
- Investment Fraud
- Business Fraud
- Nigerian Letter or "419" Fraud
Investment-Related Scams
- Letter of Credit Fraud
- Prime Bank Note Fraud
- Ponzi Schemes
- Pyramid Schemes
Fraud Target: Senior Citizens
- Health Care Fraud/Health Insurance Fraud
- Counterfeit Prescription Drugs
- Funeral and Cemetery Fraud
- Fraudulent "Anti-Aging" Products
- Telemarketing Fraud
- Internet Fraud
- Investment Schemes
- Reverse Mortgage Scams
Source: http://www.fbi.gov/scams-safety/fraud
HOW BIG IS THE FRAUD PROBLEM?
• According to the ACFE from 2010-2011:
•
•
•
•
1338 cases
94 countries
median of 18 months before being detected.
Most occupational fraudsters are first-time offenders with clean
employment histories
• typical organization loses 5% of its revenues to fraud each year.
• a potential projected global fraud loss of more than $3.5 trillion.
• The median loss among frauds committed by owner/executives was
$573,000, the median loss caused by managers was $180,000 and
the median loss caused by employees was $60,000.
Source: http://www.acfe.com/rttn.aspx
FRAUD TRIANGLE
Perceived
Opportunity
Fraud
Triangle
Perceived
Pressure
Rationalization
THE RED FLAGS OF FRAUD?
•
•
•
•
•
•
Unexplained Accounting Anomalies
Exploited Internal Control Weaknesses
Identified Analytical Anomalies –financial/non-financial data different
Observed Extravagant Lifestyles
Observed Unusual Behaviors
Other Tips and Complaints
Here is a short video on an audit that turned into an investigation because
the auditor OBSERVED:
Watch and type “done” in the chat window when finished:
http://www.youtube.com/user/tgolden002?feature=results_main
What do you think was happening?
USE HYPOTHESIS-EVIDENCE MATRIX
•
•
•
•
•
Analyze Available Data
Create Hypotheses (Null to Worst-case)
Test Hypotheses
Refine
Draw Conculsions
Are there
any
questions?