Fraud Auditing, Detection, and Prevention Blog

Complex Fraud Scheme: Vendor Overbilling Part 2

Aug 6, 2018 9:47:00 AM / by Leonard W. Vona posted in Fraud Definitions, Fraud Detection, ...

This is part two of a blog post series examining a worked exampled using fraud data analytics on a complex fraud scheme.

In this post we will look at how to use fraud data analytics designed to uncover the complex fraud scheme and the fraud audit procedures designed to provide creditable evidence that the scheme is being perpetrated by the budget owner.

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Complex Fraud Scheme: Vendor Overbilling Part 1

Aug 2, 2018 9:07:00 AM / by Leonard W. Vona posted in Fraud Definitions, Fraud Auditing, ...

In our fraud risk registers, we have identified over 100 procurement fraud schemes and over 100 overbilling fraud schemes. When these kinds of numbers are involved the idea of finding complex fraud schemes in your core business systems may seem overwhelming. However, fraud data analytics can simplify and improve the process.

In this blog we have selected a complex corruption scheme and a complex overbilling scheme to illustrate how fraud auditing can detect even the most complex schemes. The starting point is to identify the fraud risk statement and then understand how and where the scheme can occur in your organization.

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Fraud Data Analytics: A Worked Example for Ghost Employee Fraud Schemes

Jul 12, 2018 12:38:00 PM / by Leonard W. Vona posted in Worked Example, Fraud Detection, ...

Ghost employee schemes are a common fraud scheme during which there are people on the payroll who don’t work for the company in question but do collect a salary or remuneration.

Let’s take a closer look at how you can use fraud data analytics when creating an executing an audit program for ghost employees:

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The Fraud Triangle: Putting Theory into Practice

Jul 6, 2018 1:06:00 PM / by Leonard W. Vona posted in Fraud Plan, Fraud Triangle, ...

The fraud triangle, authored by Dr. Cressey, has been adopted by the auditing profession as a tool to help detect and deter occupational fraud. 

The model has many applications in the fraud audit.  The primary purpose is in the planning stage to help identify where and why your organization would be vulnerable to someone committing a fraud risk scenario. 

Here’s a closer look at the fraud triangle and how you can implement this model.

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The Fraud Plan: Misappropriation in Payroll

Jul 2, 2018 10:48:00 AM / by Leonard W. Vona posted in Fraud Detection, Fraud Auditing, ...

How you determine which concepts to evaluate to “consider fraud” and how to integrate fraud into your audit program is a challenge that is easily solved if you approach it with the scope and objectives of your audit clearly defined.

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What is a Fraud Risk Statement & How Can You Write One?

Jun 18, 2018 11:02:00 AM / by Leonard W. Vona posted in Fraud Definitions, Fraud Risk Statements, ...

There tends to be a fair amount of confusion when it comes to a fraud risk identification approach versus an experience-based approach – in no small part because within the industry it’s not uncommon to see terms used interchangeably – but here we set out to create a list of universal definitions intended to clarify how and why you might use this approach. 

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Fraud Data Analytics for Shell Companies: A Worked Example

Jun 7, 2018 12:17:00 PM / by Leonard W. Vona posted in Fraud Definitions, Fraud Data Analytics, ...

Shell companies are a common fraud scheme you might come across when carrying out a fraud audit. Let’s take a look at how you can implement fraud data analytics into your audit when approaching shell company schemes in particular as a worked example.

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The Traditional Audit Vs. the Fraud Audit

May 24, 2018 11:00:00 AM / by Leonard W. Vona posted in Fraud Auditing, Traditional Auditing, ...

In order to fully appreciate how a traditional audit can differ from a fraud audit, it is necessary to grasp how the two types of audit are similar. Bridging the gap between the two can help you minimize the fraud risk for your company and better deploy the programs that are going to work within your organization. While the two audit types can produce vastly different results, they both have similar groundings and structure:

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Concealment Strategies & Red Flags: Better Detecting Fraud

Apr 24, 2018 1:00:00 PM / by Leonard W. Vona posted in Concealment Strategies, Red Flags, ...

As per the commonly understood fraud triangle there, are three typical components why someone would commit a fraud scheme: motive, opportunity, and rationalization. While motive and rationalization are factors that could be limited to individual behavior and psychology, opportunity is something your internal controls can and should account for.

Within rationalization, anyone involved in a fraud scheme needs to have the ability and opportunity to conceal and commit fraud. There is a direct relationship between having the opportunity to commit fraud and having the ability to conceal the fraud and so auditors need to consider both opportunity and the ability to conceal in the design of an audit plan.

Knowing which common concealment strategies might have been deployed by any given fraud scheme is an essential part of any approach to preventing and detecting fraud. Let’s examine concealment in more detail.

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Using a Fraud-Based Approach to Fraud Detection

Apr 11, 2018 1:00:00 PM / by Leonard W. Vona posted in Fraud Based Approach, Fraud Detection ...

It is often the case that fraud scenarios are not as simple as meets the eye. Most financial executives are aware of the importance of having internal controls in fraud prevention and detection, yet few realize the potential fraud-based approaches have in finding complex fraud that is often overlooked by basic evidence of control measures. 

While no fraud methodology is entirely foolproof, taking a systematic and methodical approach to data by finding hidden patterns is a proven and robust approach to detection. This is something we’ve been specializing in for over 30 years at Fraud Auditing Inc., and so we have a wealth of experience in the area.

 Here’s a look at how you can implement a fraud-based approach in your organization and its advantages.

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