Table of Contents
Preface ix
Acknowledgments xv
Introduction xvii
Chapter 1 The World of Fraud 1
Definition of Fraud 1
The Many Types of Fraud 2
Chapter 2 Why Is Fraud Committed? 19
A Rationalizing Society 20
Financial Statement Fraud 22
Financial Fraud Comes in Different Shapes and Sizes 23
Motivators Differ by Type of Business 25
Employee Schemes 27
In the End 32
Chapter 3 Financial Statement Fraud Schemes 33
Where Do Things Go Wrong? 34
Trend Analysis 42
Beyond Traditional Audits 45
Chapter 4 Employee Embezzlements 51
The Fraud Triangle 55
Areas for Concern 57
Chapter 5 Other Fraud Schemes 69
Duplicate Payment Fraud 71
Multiple Payee Fraud 72
Shell Fraud 73
Defective Delivery Fraud 77
Defective Receipt Fraud 88
Defective Shipment Fraud 89
Defective Pricing Fraud 91
Chapter 6 Contract Rigging Schemes 97
Stage One: Obtaining the Contract 97
Stage Two: Contract Change Orders 102
Unbalanced Bidding 114
Detection Recommendations 118
Rotation Fraud 119
Where Do We Go from Here? 121
Chapter 7 Responses to Fraud 123
Government’s Response to Fraud 124
Accounting Profession’s Response to Fraud 129
Internal Audit Profession’s Response to Fraud 133
New Credentials, More Training, Better Awareness 134
Articles, Books, and More Resources 136
Chapter 8 The Importance of Internal Controls and Internal Audit 143
Why Have Internal Controls? 144
Déjà Vu 148
Good Internal Controls 150
Internal Audit 152
Chapter 9 Evidence 159
What Is Evidence? 160
Documentation 163
Chapter 10 Conducting Fraud Investigations: A Practical Approach 171
Proactive Fraud Investigations 171
Discovery Investigations 172
Supportive Investigations 175
Strategy 178
Predication 180
The Investigative Plan 181
Conducting the Procedures 183
Findings 186
Use of the Findings 188
Chapter 11 Fraud Investigation Alternatives 189
Assessing the Feasibility of a Full Investigation 189
Monitoring Operational Areas at Risk of Fraud 197
Revamping Internal Controls: Closing the Barn Door 200
Doing Nothing? 203
Appendix A Vending 209
Lessons Learned 213
Appendix B Living a Façade 217
Prevention Techniques 221
Appendix C Disappearing Inventory 225
Internal Controls 230
Index 231
