In this series of blogs, we are discussing how auditors can detect shell company schemes that are occurring in their accounts payable files. Because the practice of effective fraud auditing is grounded in knowledge, each blog will have a knowledge section as well as a practical audit section. (This blog will not discuss how organized crime groups use shell companies to perpetrate criminal activities.)
Using Fraud Auditing to Detect Shell Company Fraud Schemes
The last two blogs were an esoteric discussion on fraud auditing using either a principal-based approach or a rule-based approach. With this blog, we'll launch into the practical use of fraud auditing. By way of example, we will look at how to detect shell company fraud schemes perpetrated against your company. Remember, our goal is to make audit the number one reason for fraud detection.
This is the third blog looking at the state of the auditing profession. In the first blog, we looked at what has changed as companies have grown and gone global. Last month we considered the use of words and the significance of precision. And in this blog, we'll delve into principles that form the bases for our work.
In this blog, we're going to talk about the Fraud Action Statement, the "what" part of the Fraud Risk Statement, but first the answers to the fraud trivia from the last blog:
What was the first recorded financial collapse? Medici Bank went insolvent in 1494 due to extensive spending. Check out Business Insider’s List of the worst company collapses in history.
Who coined the phrase “White Collar Crime”? Criminologist Edwin Sutherland created the phrase in the 1930s
Last Month's Trivia answers
What are the 10 most common sources of food fraud? Hint: Identify the food item.
According to scientists, the most common sources of food fraud are olive oil, milk, honey, saffron, orange juice, apple juice, grape wine, vanilla extract, and fish. Think about that the next time you go to the grocery store!
On which day of the year are online dates most vulnerable to fraud schemes?
Valentine’s day -- the heart wants what the heart wants! Does this make us vulnerable?
In the USA alone, romance swindles cost how many millions of dollars in one year?
Romance frauds resulted in losses of over $300 million in the US in 2021.
How does the sophistication of fraud concealment, apply to online dating fraud?
The romance scammer uses techniques to make you believe that their love for you is real. Fraudsters, also use techniques to make fraudulent transactions look real!
Last month’s trivia questions and answers...
What is the full name of the person who first perpetrated the Ponzi scheme?
Despite the notoriety of Charles Ponzi, the scheme that carries his name, it was first perpetrated by Sarah Howe in Boston in 1879.
Last month’s trivia questions and answers
In the movie “The Accountant”, as the protagonist solves the financial statement fraud scheme, what real life financial statement fraud did the Accountant sketch out on the glass walls of the conference room?
First, trivia questions and answers from last month’s blog:
What was the original name for the FBI?
Answer: B.O.I. Bureau of Investigation
What professions did J. Edgar Hoover like to hire for FBI agents?
Answer: Lawyers, reporters, and accountants
After a series of thought-provoking blogs, I thought it was time to write a practice blog. I hope you find it helpful in your next audit.
