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5 Myths About Fraud

Join us for a comprehensive session that addresses common misconceptions about fraud in organizations. Based on insights from Tracy Coenen, we explore myths such as the belief that auditors will detect fraud, the insignificance of small frauds, and reliance on government regulations for protection. This educational opportunity highlights the need for robust internal controls, the impact of employee behavior on fraud, and the reality of fraud occurring even at reputable institutions. Discover the importance of proactive fraud prevention measures.

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5 Myths About Fraud

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Presentation Transcript

  1. 5 Myths About Fraud FBS Lunch and Learn August 13, 2009

  2. 5 Myths About Fraud(Adapted from www.fraudauthor.wordpress.com Tracy Coenen) • Fraud will be detected by our auditors • Small frauds aren’t important enough to worry about • If we follow government regs, we will be protected against fraud • Most people are honest and won’t commit fraud • The University doesn’t have a fraud problem

  3. Myth 1…cont’d • Why won’t auditors detect fraud? • Audits are not designed to detect fraud • Designed to provide “reasonable assurance” regarding the financial statements • Auditor “complacency” • Employee knowledge of audit procedures

  4. Myth 2…cont’d • Why should we worry about small frauds? • Virtually every big fraud started out small • A zero tolerance policy is a necessary part of any good fraud prevention program • More cost effective to catch early • Also, easier to catch before the fraudster becomes really good at it

  5. Myth 3…cont’d • Why aren’t government regs enough? • We still need good internal controls such as segregation of duties • We still need actively engaged managers and supervisors • Poor business practices such as over-delegation aren’t prohibited by government regs

  6. Myth 4…cont’d • Why can’t we rely on people’s inherent honesty? • While most people are inherently honest, this doesn’t substitute for good internal controls • Past behavior doesn’t necessarily predict future behavior • Cannot predict who will commit fraud • Outside pressures cause people to behave in ways they normally would not

  7. Myth 5…cont’d • Does fraud happen at the University? • Yes…and the University actively assists in the resultant criminal investigations • PI and Account Executive review of management reports is one of our best controls • What can we do centrally to prevent and detect fraud? That’s the subject of future training….

  8. “Fun” Facts • According to the ACFE (2008 Report) • 46% of frauds are detected through tips • Lack of adequate internal controls is the biggest contributing factor • The average organization loses 7% of revenue to fraud and abuse • The average fraud loss is $175,000 • The average fraud has gone on for 2 years before detection • 46% of frauds involved small businesses employing less than 100 people*** (from an earlier report) • Only 7% of fraud perpetrators had prior convictions and only 12% had previously been terminated for fraud

  9. Questions?

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