![Page 1: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/1.jpg)
Catch It If You Can
Michael G. Ueltzen CPA/CFF, CFEPartner, Ueltzen & Company, LLP 1
![Page 2: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/2.jpg)
Fraud – Right Here in California!
City of Bell County of Modoc City of Hercules City of Montebello City of Cudahy Delta College Bankruptcies
Vallejo Stockton Mammoth Lakes San Bernardino
SEC Investigations/Complaints City of Victorville City of Bell Others
2
![Page 3: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/3.jpg)
Who Should We Worry About?
Executive – Finance No criminal background College degree Frequently has an accomplice 40 years or older Male
3
![Page 4: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/4.jpg)
Cost of Fraud
5% of Annual Revenues Lost
Median Loss - $140,000
More than 20% - Over $1 million
4
![Page 5: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/5.jpg)
Categories of Fraud
Asset Misappropriation
Financial Statement Fraud
Corruption
5
![Page 6: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/6.jpg)
Typical Fraud Schemes
Billing Corruption Expense Reimbursements Skimming Check Tampering Payroll Financial Statement
6
![Page 7: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/7.jpg)
How Fraud is Committed
7
![Page 8: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/8.jpg)
Fraud Triangle
8
![Page 9: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/9.jpg)
Fraud - Frequency
9
Financial Statement Fraud
![Page 10: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/10.jpg)
Opportunity
10
Perpetrators of fraud have (or perceive) an opportunity to:
Commit the fraud; and
Conceal the fraud.
![Page 11: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/11.jpg)
Incentives/Pressures
11
Incentives/pressures include: Financial pressure
Living beyond means Greed Poor credit
Lifestyle pressure (“vices”) Gambling Drugs/alcohol Extramarital affairs
Work-related pressure Meet expectations “Get even”
![Page 12: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/12.jpg)
Attitude and Rationalization
12
Justifications for behavior include: “I deserved it.”
“I work my tail off, and no one appreciates it.” “I’m so much smarter, and get paid so much less.”
“I was going to pay it back.” “It was only temporary.” “Things got out of control.”
“Everyone else is doing it.” “The boss is padding his expense report, so why
shouldn’t I?” “Everyone is dipping into the till, so no one will
care if I do too.”
![Page 13: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/13.jpg)
Median Loss - Category
Asset Misappropriation86.7%
Corruption33.4%
Financial Statement Fraud7.6%
$135,000
$250,000
$4,100,000
13
![Page 14: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/14.jpg)
The Fraud Life Cycle
The First Lie Cognitive Dissonance with
Rationalization Failure to See the Ethical Big Picture
Can we do it v. is it the right thing to do? The Fraud Spreads We Lie Because We Care Searching for Resolution
14
![Page 15: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/15.jpg)
Duration
Median – 18 Months Types
Payroll – 36 Months Cash Disbursements – 12 Months
15
![Page 16: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/16.jpg)
Methods of Detection
16
![Page 17: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/17.jpg)
Fraud StatisticsHow Fraud is Detected
Detection Method Percent of Cases
Tip 40%
Management review 15%
Internal audit 14%
By accident 8%
Account reconciliation 6%
Document examination 5%
External audit 5%
Other controls/methods 5%
Confession 1%
![Page 18: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/18.jpg)
Detection - Sources of Tips
18
![Page 19: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/19.jpg)
Victim Organizations
19
![Page 20: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/20.jpg)
Industry
Banking and Financial Services
Government Manufacturing Health Care Education
16.% 10.3% 10.1% 6.7% 6.4%
20
![Page 21: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/21.jpg)
Profile – Finance and Government
Corruption Billing Skimming Expense Reimbursements Financial Statement Fraud Payroll
21
![Page 22: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/22.jpg)
Perpetrators
22
![Page 23: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/23.jpg)
Perpetrator’s Position
23
![Page 24: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/24.jpg)
Perpetrator’s Background
24
![Page 25: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/25.jpg)
25
Perpetrator’s Gender
©2012 Association of Certified Fraud Examiners, Inc.
Position of Perpetrator — Median Loss Based on Gender
![Page 26: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/26.jpg)
Perpetrator’s Education
26©2012 Association of Certified Fraud Examiners, Inc.
![Page 27: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/27.jpg)
Perpetrators – Effect of Collusion
27©2012 Association of Certified Fraud Examiners, Inc.
![Page 28: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/28.jpg)
28
Perpetrator’s Age
©2012 Association of Certified Fraud Examiners, Inc.
Age of Perpetrator — Frequency
![Page 29: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/29.jpg)
Case Results
29
![Page 30: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/30.jpg)
Criminal Prosecution
Referred to Law Enforcement
Not referred
65.2%
34.8%
30
![Page 31: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/31.jpg)
Reasons not Referred to Law Enforcement
Fear of bad publicity Internal discipline sufficient Private settlement Too costly
31
![Page 32: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/32.jpg)
Civil Lawsuits - Pursued
Civil Complaint Filed
No
23.5%
76.5%
32
![Page 33: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/33.jpg)
33
Case Results
©2012 Association of Certified Fraud Examiners, Inc.
Result of Civil Suits
![Page 34: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/34.jpg)
Methodology
34
![Page 35: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/35.jpg)
Investigators
35©2012 Association of Certified Fraud Examiners, Inc.
![Page 36: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/36.jpg)
Fraud Prevention
36
![Page 37: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/37.jpg)
Internal Controls
AB 1248 – SCO to Development Guidelines for Internal Controls –
MalfeasanceSolvency
37
![Page 38: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/38.jpg)
Profile – Finance and Government
Corruption Billing Skimming Expense Reimbursements Financial Statement Fraud Payroll
38
![Page 39: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/39.jpg)
Fraud Types -
City of Bell County of Modoc City of Dixon, Ill. Bankruptcies
City of Stockton City of San Bernardino
39
![Page 40: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/40.jpg)
Fraud Prevention Checklist
Ongoing anti-fraud training Fraud reporting mechanism in place Increased perception of detection
Aggressive response to claims Organization seeks out fraud
assessment Surprise audits Use of auditing software
40
![Page 41: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/41.jpg)
Fraud Prevention Checklist –(continued)
Tone at the Top – Integrity Honest fraud risk assessments Anti-fraud controls in place Internal control department
adequately staffed Thorough hiring policy Employee support programs Anonymous surveys – employee
morale41
![Page 42: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/42.jpg)
Control Weakness
Lack of Internal Control System Override of the Systems of Internal
Control Poor Tone at the Top
42
![Page 43: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/43.jpg)
Common Anti-Fraud Controls
External Financial Statement Audits Audits of Internal Controls Formal Code of Conduct Management Certification of
Financial Statements Internal Audit Department Whistleblower Hotlines
43
![Page 44: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/44.jpg)
Simple Steps YOU Can Take1) Check the checks: Always look at canceled
checks to make sure that the funds went to a legitimate account and that the signatures are authentic.
2) Tamp down tampering: Open and look at the bank statement before the bookkeeper does. Consider having it sent to your home address.
3) Look at lifestyle: Be attentive to how your key people are living. If your assistant shows up to work in a Jaguar, you might need to be a bit more attentive.
4) Separate the signers: Always split authority to sign and prepare checks between at least two people. When one person can do both, it sets him or her up to be tempted.
5) Take those tips: Midsized and larger businesses should set up a hot line to take anonymous tips. Publicize it to employees, customers and vendors.
6) Check background: Perform checks of criminal and employment history for each locale where the person has lived.
![Page 45: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/45.jpg)
Simple Steps YOU Can Take1) Check the checks: Always look at canceled checks to make sure that
the funds went to a legitimate account and that the signatures are authentic.
2) Tamp down tampering: Open and look at the bank statement before the bookkeeper does. Consider having it sent to your home address.
3) Look at lifestyle: Be attentive to how your key people are living. If your assistant shows up to work in a Jaguar, you might need to be a bit more attentive.
4) Separate the signers: Always split authority to sign and prepare checks between at least two people. When one person can do both, it sets him or her up to be tempted.
5) Take those tips: Midsized and larger businesses should set up a hot line to take anonymous tips. Publicize it to employees, customers and vendors.
6) Check background: Perform checks of criminal and employment history for each locale where the person has lived.
![Page 46: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/46.jpg)
Simple Steps YOU Can Take1) Check the checks: Always look at canceled checks to make
sure that the funds went to a legitimate account and that the signatures are authentic.
2) Tamp down tampering: Open and look at the bank statement before the bookkeeper does. Consider having it sent to your home address.
3) Look at lifestyle: Be attentive to how your key people are living. If your assistant shows up to work in a Jaguar, you might need to be a bit more attentive.
4) Separate the signers: Always split authority to sign and prepare checks between at least two people. When one person can do both, it sets him or her up to be tempted.
5) Take those tips: Midsized and larger businesses should set up a hot line to take anonymous tips. Publicize it to employees, customers and vendors.
6) Check background: Perform checks of criminal and employment history for each locale where the person has lived.
![Page 47: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/47.jpg)
Simple Steps YOU Can Take1) Check the checks: Always look at canceled checks to make sure that the
funds went to a legitimate account and that the signatures are authentic.
2) Tamp down tampering: Open and look at the bank statement before the bookkeeper does. Consider having it sent to your home address.
3) Look at lifestyle: Be attentive to how your key people are living. If your assistant shows up to work in a Jaguar, you might need to be a bit more attentive.
4) Separate the signers: Always split authority to sign and prepare checks between at least two people. When one person can do both, it sets him or her up to be tempted.
5) Take those tips: Midsized and larger businesses should set up a hot line to take anonymous tips. Publicize it to employees, customers and vendors.
6) Check background: Perform checks of criminal and employment history for each locale where the person has lived.
![Page 48: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/48.jpg)
Simple Steps YOU Can Take1) Check the checks: Always look at canceled checks to make sure
that the funds went to a legitimate account and that the signatures are authentic.
2) Tamp down tampering: Open and look at the bank statement before the bookkeeper does. Consider having it sent to your home address.
3) Look at lifestyle: Be attentive to how your key people are living. If your assistant shows up to work in a Jaguar, you might need to be a bit more attentive.
4) Separate the signers: Always split authority to sign and prepare checks between at least two people. When one person can do both, it sets him or her up to be tempted.
5) Take those tips: Midsized and larger businesses should set up a hot line to take anonymous tips. Publicize it to employees, customers and vendors.
6) Check background: Perform checks of criminal and employment history for each locale where the person has lived.
![Page 49: Michael G. Ueltzen CPA/CFF, CFE Partner, Ueltzen & Company, LLP 1](https://reader037.vdocuments.mx/reader037/viewer/2022103021/56649c745503460f94927081/html5/thumbnails/49.jpg)
Simple Steps YOU Can Take1) Check the checks: Always look at canceled checks to make sure that
the funds went to a legitimate account and that the signatures are authentic.
2) Tamp down tampering: Open and look at the bank statement before the bookkeeper does. Consider having it sent to your home address.
3) Look at lifestyle: Be attentive to how your key people are living. If your assistant shows up to work in a Jaguar, you might need to be a bit more attentive.
4) Separate the signers: Always split authority to sign and prepare checks between at least two people. When one person can do both, it sets him or her up to be tempted.
5) Take those tips: Midsized and larger businesses should set up a hot line to take anonymous tips. Publicize it to employees, customers and vendors.
6) Check background: Perform checks of criminal and employment history for each locale where the person has lived.