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The Hunt for Fraud: The Devil’s in the Data

2008 Financial Management Institute of Canada – Manitoba Chapter  Professional Development Day. The Hunt for Fraud: The Devil’s in the Data. Presented by: David R. Hancox, CGFM, CIA Co-Author: Government Performance Audit in Action

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The Hunt for Fraud: The Devil’s in the Data

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  1. 2008Financial Management Institute of Canada – Manitoba Chapter Professional Development Day The Hunt for Fraud: The Devil’s in the Data Presented by: David R. Hancox, CGFM, CIA Co-Author: Government Performance Audit in Action Faculty: Siena College and USDA Graduate School, Washington DC Director – State Government Accountability: NYS Comptroller’s Office

  2. Fraud • A deception deliberately practiced in order to secure unfair or unlawful gain. Copyright 2008 David R. Hancox, CGFM, CIA

  3. Audit Requirements • GAGAS – Financial Audits • Auditors should design the audit to provide reasonable assurance of detecting material misstatements resulting from violations of provisions of contracts or grant agreements that have a direct and material effect on the determination of financial statement amounts or other financial data significant to the audit objectives. Copyright 2008 David R. Hancox, CGFM, CIA

  4. Audit Requirements • GAGAS – Attestation Engagements • In planning examination-level attestation engagements, auditors should design the engagement to provide reasonable assurance of detecting fraud, illegal acts, or violations of provisions of contracts or grant agreements… Copyright 2008 David R. Hancox, CGFM, CIA

  5. Audit Requirements • GAGAS – Performance Audits • When laws, regulations, or provisions of contracts or grant agreements are significant to the audit objectives, auditors should design the audit methodology and procedures to provide reasonable assurance of detecting violations that could have a significant effect on the audit results. Copyright 2008 David R. Hancox, CGFM, CIA

  6. Audit Tools for Detecting Fraud • A true understanding of internal controls • Real knowledge about the program, function or activity being audited • Sophisticated data analysis – looking for trends, patterns or outliers • True professional skepticism Copyright 2008 David R. Hancox, CGFM, CIA

  7. Understanding Internal Controls • Strong controls, but the wrong controls • Understanding the control environment • Art Hayes • Internal controls activities are subject to impairment from at least five directions: • The extent to which the controls are not updated to cover actual business operations • The extent to which the controls are routinely ignored • The extent to which the controls are overtly overridden. • The extent to which the controls are covertly overridden • The extent to which the controls have express exceptions Copyright 2008 David R. Hancox, CGFM, CIA

  8. Knowledge About The Program • You don’t know, what you don’t know! Copyright 2008 David R. Hancox, CGFM, CIA

  9. Data Analysis • Understanding new statistical techniques and software Copyright 2008 David R. Hancox, CGFM, CIA

  10. Professional Skepticism • There is a plausible explanation for every fraud Copyright 2008 David R. Hancox, CGFM, CIA

  11. Would You Climb A Smokestack? Copyright 2008 David R. Hancox, CGFM, CIA

  12. Copyright 2008 David R. Hancox, CGFM, CIA

  13. Copyright 2008 David R. Hancox, CGFM, CIA

  14. THEFT AT ROSLYN:Total Stolen $11.2 Million Copyright 2008 David R. Hancox, CGFM, CIA

  15. Clementine – A powerful tool Copyright 2008 David R. Hancox, CGFM, CIA

  16. Mapping Software - for Finding Fraud Copyright 2008 David R. Hancox, CGFM, CIA

  17. Dolly Rosen – 900 Dental Procedures a Day Copyright 2008 David R. Hancox, CGFM, CIA

  18. Dolly Rosen & The Shelters Copyright 2008 David R. Hancox, CGFM, CIA

  19. Accurint – Finding Relationships to Uncover Fraud Copyright 2008 David R. Hancox, CGFM, CIA

  20. Looking for the Relationship Copyright 2008 David R. Hancox, CGFM, CIA

  21. Establishing the Relationship Copyright 2008 David R. Hancox, CGFM, CIA

  22. Comprehensive Reports Copyright 2008 David R. Hancox, CGFM, CIA

  23. Detailed Information Copyright 2008 David R. Hancox, CGFM, CIA

  24. Frauds • NYC Public Administrators • Need for investigators to confirm • Misappropriating cash – Utica Psychiatric Center • Gas Credit Cards • Inventory Fraud – Supply Support • Program Fraud – TAP • Procurement Card Fraud • Payroll Fraud – No Show Employee • Revenue Fraud – Ski Centers Copyright 2008 David R. Hancox, CGFM, CIA

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