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5 Myths About Fraud

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

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5 Myths About Fraud

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  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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