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INTERNAL AUDITORS FORUM
2ND FEBRUARY 2018
Dr. CPA, CS. JT Nyangenya, Ph.D
JT Nyangenya & Associates.
INTERNAL AUDITORS FORUM
FEBRUARY 2018
Dr. CPA, CS. JT Nyangenya, Ph.DManaging Partner,
JT Nyangenya & Associates.
FINANCIAL STATEMENT FRAUD
OR
FRAUDULENT FINANCIAL REPORTING
FINANCIAL STATEMENT FRAUD
FRAUDULENT FINANCIAL REPORTING
PRESENATION OUTLINE
1. Fraud Tree2. Breakdown of Major Accounting3. Financial Mis - Statement Fraud4. Fraud Theory5. Recognize the most common
schemes6. Identify the red flags of financial7. Understand the fraud implications
financial reporting
PRESENATION OUTLINE
Accounting ScandalsFraud Definition
common financial statement fraud
financial statement fraudimplications of emerging issues in
ANANIAS AND SAPPHIRA New International Version (NIV)]
Now a man named Ananias, togetheralso sold a piece of property. 2 Withkept back part of the money forand put it at the apostles’ feet.
Then Peter said, “Ananias, howyour heart that you have lied to theyourself some of the money youbelong to you before it was sold?the money at your disposal? What
thing? You have not lied just to
ANANIAS AND SAPPHIRA – [Acts 5:1-11 New International Version (NIV)]
together with his wife Sapphira,With his wife’s full knowledge
for himself, but brought the rest
how is it that Satanhas so filledthe Holy Spirit and have kept forreceived for the land? 4 Didn’t
sold? And after it was sold, wasn’tWhat made you think of doing such
to human beings but to God.”
DEFINITIONSFinancial statement frauds is the
the financial conditions ofthrough the intentional misstatement
disclosures in the financial statementsstatement usersAccording to a study conductedCertified Fraud Examinersstatement accounts for approximatelyconcerning white collar crimecorruption tend to occur at a muchfinancial impact of these latter
the deliberate misrepresentationof an enterprise accomplished
misstatement or omission of amountsstatements to deceive financial
conducted by the Association(ACFE), fraudulent financial
approximately 10% of incidentscrime. Asset misappropriation and
much greater frequency, yetcrimes is much less severe.
Financial Statement Fraud Defined
Deliberate misstatements ordisclosures of financial statementsstatement users, particularly
Falsification, alteration, orfinancial records, supportingtransactions
Financial Statement Fraud Defined
or omissions of amounts orstatements to deceive financial
investors and creditors
manipulation of materialsupporting documents, or business
Defining Financial Statement Fraud
Material intentional omissionsevents, transactions, accounts,information from which financialDeliberate misapplication ofand procedures used to measure,disclose economic events andIntentional omissions of disclosuresinadequate disclosures regardingpolicies and related financial
Defining Financial Statement Fraud
omissions or misrepresentationsaccounts, or other significant
financial statements are preparedaccounting principles, policies,
measure, recognize, report, andand business transactionsdisclosures or presentation
regarding accounting principles andamounts
Costs of Financial Statement FraudMore than 50% of corporationslosses of more than $500,000Enron lost about $70 billioninvestors, employees, and pensionersEnron, WorldCom, Quest, Globalloss to shareholders was $460Other fraud costs are legalcosts, loss of productivity, adversemorale, customers’ goodwill,negative stock market reactions
Costs of Financial Statement Fraudcorporations are victims of fraud with
000 (Albrecht & Searcy 2001)billion in market capitalization to
pensionersGlobal Crossing, and Tyco’s
460 billion (Cotton 2002)legal costs, increased insurance
adverse impacts on employeegoodwill, suppliers’ trust, andreactions
WHY FINANCIAL STATEMENT FRAUD IS COMMITTED“cook the books "to “buy more
To quietly fix current problemsTo obtain or renew financingTo inflate company share pricesprofitTo obtain bonus pay linked to
WHY FINANCIAL STATEMENT FRAUD IS
more time”. The main reasonsproblems
prices or exercise stock options
to company performance
WHY FINANCIAL STATEMENT FRAUD IS COMMITTED5. To encourage investment6. To demonstrate increased
allowing increased dividend7. To cover inability to generate8. To dispel negative market9. To receive higher purchase10. To demonstrate compliance11. To meet company goals and
WHY FINANCIAL STATEMENT FRAUD IS COMMITTED
investment through the sale of stockincreased earnings per share thus
dividend payoutsgenerate cashflow
market perceptionspurchase prices for acquisitions
compliance with financing covenantsand objectives
CAUSES OF FINANCIAL STATEMENTS FRAUD
Motivation for financial fraudpersonal financial gain.The cause of financial statement
• Situational pressure on the• Opportunity to commit fraud
CAUSES OF FINANCIAL STATEMENTS FRAUDfraud does not always involve direct
statement fraud is;manager or company.
fraud.
RATIONALISATIONJustification of dishonest
actions
OPPORTUNITYAbility to carry out
misappropriation of cash or organizational assets
RATIONALISATIONJustification of dishonest
PRESSUREMotivation or
incentive to commit fraud
SITUATIONAL PRESSURES
Sudden decrease in revenueFinancial pressures resultingdepend on short-term economicUnrealistic budget pressuresresults
SITUATIONAL PRESSURES
revenue by a company or industryresulting from bonus plans thateconomic performance
pressures particularly for short term
OPPORTUNITY
Absence of a board of directorsWeak board of directorsWeak or no-existent internalIneffective internal audit staffUnusual or complex transactionsFinancial estimates thatjudgment by management
directors or audit committees
internal controlsstaff and lack of external audits
transactionsrequire significant subjective
WASTE MANAGEMENT COMPANY Company: Houston-basedmanagement companyWhat happened: ReportedMain players: Founder/CEO/Chairmanand other top executives(auditors)How they did it: Theincreased the depreciationplant and equipment on theHow they got caught: Ateam went through the books
WASTE MANAGEMENT COMPANY - 1998based publicly traded waste
Reported $1.7 billion in fake earningsFounder/CEO/Chairman Dean L. Buntrockexecutives; Arthur Andersen Company
The company allegedly falselytime length for their property,
the balance sheets.A new CEO and management
books.
ENRON SCANDAL Company: Houston-basedservice corporationWhat happened: Shareholdersthousands of employeesretirement accounts, and manyMain players: CEO Jeff SkillingHow they did it: Kept hugeHow they got caughtwhistleblower Sherron Watkinsexternal suspicions
ENRON SCANDAL - 2001based commodities, energy and
Shareholders lost $74 billion,employees and investors lost their
many employees lost their jobsSkilling and former CEO Ken Lay
huge debts off balance sheets.caught: Turned in by internal
Watkins; high stock prices fueled
Company: Houston-basedservice corporationWhat happened: Shareholdersthousands of employeesretirement accounts, and manyMain players: CEO Jeff SkillingHow they did it: Kept hugeHow they got caughtwhistleblower Sherron Watkinsexternal suspicions
WORLDCOM SCANDAL
based commodities, energy and
Shareholders lost $74 billion,employees and investors lost their
many employees lost their jobsSkilling and former CEO Ken Lay
huge debts off balance sheets.caught: Turned in by internal
Watkins; high stock prices fueled
WORLDCOM SCANDAL - 2002
TYCO SCANDAL 2002
Company: New Jersey-basedsystems.What happened: CEO andinflated company income by $Main players: CEO DennisSwartz.How they did it: Siphoned moneyand fraudulent stock sales.company disguised as executiveHow they got caught:investigations uncovered questionableincluding large loans made
TYCO SCANDAL 2002
based blue-chip Swiss security
and CFO stole $150 million$500 million.Kozlowski and former CFO
money through unapproved. Money was smuggled out
executive bonuses or benefits.: SEC and Manhattan
questionable accounting practices,made to Kozlowski that were
HEALTHSOUTH SCANDAL (2003)Company: Largest publiclycompany in the U.S.What happened: Earningsinflated $1.4 billion toexpectations.Main player: CEO RichardHow he did it: Allegedlyup numbers and transactionsHow he got caught: Soldday before the companytriggering SEC suspicions.
HEALTHSOUTH SCANDAL (2003)publicly traded health care
Earnings numbers were allegedlyto meet stockholder
Scrushy.told underlings to make
transactions from 1996-2003.Sold $75 million in stock a
company posted a huge loss,
FREDDIE MAC 2003Company: Federally backedgiant.What happened: $5 billionmisstated.Main players: President/COOChairman/CEO Leland BrendselClarke, former senior VPsDossani.How they did it: Intentionallyunderstated earnings on theHow they got caught: An
FREDDIE MAC 2003backed mortgage-financing
billion in earnings were
President/COO David Glenn,Brendsel, ex-CFO Vaughn
Robert Dean and Nazir
Intentionally misstated andthe books.An SEC investigation.
AMERICAN INTERNATIONAL GROUP (AIG) SCANDAL 2005
Company: Multinational insuranceWhat happened: Massive accounting3.9 billion was alleged, along
manipulation.Main player: CEO Hank GreenbergHow he did it: Allegedly bookedclients to insurers with whomtold traders to inflate AIG stockHow he got caught: SECtipped off by a whistleblower.
AMERICAN INTERNATIONAL GROUP (AIG) SCANDAL 2005
insurance corporation.accounting fraud to the tune
along with bid-rigging and stock
Greenberg.booked loans as revenue, steered
AIG had payoff agreements,stock price.
regulator investigations, possibly
LEHMAN BROTHERS SCANDAL 2008
Company: Global financial servicesWhat happened: Hid oversales.Main players: Lehman executivesauditors, Ernst & Young.How they did it: AllegedlyIsland banks with the understandingbought back eventually. Created50 billion more cash and $50really did.
How they got caught: Went
LEHMAN BROTHERS SCANDAL 2008
services firm.$50 billion in loans disguised
executives and the company's
Allegedly sold toxic assets to Caymanunderstanding that they wouldCreated the impression Lehman
50 billion less in toxic assets
Went bankrupt.
BERNIE MADOFF SCANDAL 2008
Company: Bernard L. MadoffWall Street investment firm
What happened: Trickedthrough the largest Ponzi schemeMain players: Bernie Madoff,and Frank DiPascalli.How they did it: Investorsown money or that of other investorsHow they got caught: Madoffscheme and they reported himthe next day.
BERNIE MADOFF SCANDAL 2008
Madoff Investment Securities LLCfounded by Madoff.investors out of $64.8 billion
scheme in history.Madoff, his accountant, David Friehling
Investors were paid returns out ofinvestors rather than from profitsMadoff told his sons abouthim to the SEC. He was arrested
SATYAM SCANDAL 2009
Company: Indian IT servicesfirm.What happened: Falsely boostedMain player: Founder/ChairmanHow he did it: Falsifiedbalances to the tune of 50 billionHow he got caught: Admittedcompany's board of directors
SATYAM SCANDAL 2009
services and back-office accounting
boosted revenue by $1.5 billionFounder/Chairman Ramalinga Raju.
Falsified revenues, margins andbillion rupees.
Admitted the fraud in a letter todirectors.
Effects of Financial Statement Fraud
• Undermines the reliability,integrity of the financial reporting
• Jeopardizes the integrity andprofession, especially auditors
• Diminishes the confidencewell as market participants,information
• Makes the capital markets less
Effects of Financial Statement Fraud
reliability, quality, transparency, andreporting processand objectivity of the auditing
auditors and auditing firmsof the capital markets, as
participants, in the reliability of financial
less efficient
Effects of Financial Statement Fraud
• Adversely affects the nation’sprosperity
• Results in huge litigation costs• Destroys careers of individualsstatement fraud.
• Causes bankruptcy or substantialthe company engaged in financial
Effects of Financial Statement Fraud
nation’s economic growth and
costsindividuals involved in financial
substantial economic losses byfinancial statement fraud
Effects of Financial Statement Fraud
• Encourages regulatory intervention• Causes devastation in theperformance of alleged companies
• Raises serious doubt aboutstatement audits
• Erodes public confidence andand auditing profession
Effects of Financial Statement Fraud
interventionthe normal operations and
companiesabout the efficacy of financial
and trust in the accounting
Who Commits Financial Statement Fraud
• Senior management• Mid- and lower-level employees• Organized criminals
Who Commits Financial Statement Fraud
employees
Why Do People Commit Financial Statement Fraud• To conceal true business performance• To preserve personal status/control• To maintain personal income/wealth
Why Do People Commit Financial
performancestatus/controlincome/wealth
Why Senior Management Will Overstate Business Performance• To meet or exceed the earningsexpectations of stock market
• To comply with loan covenants• To increase the amount ofasset-based loans
• To meet a lender’s criteriafacilities
• To meet corporate performanceparent company
Why Senior Management Will Overstate
earnings or revenue growthmarket analysts
covenantsof financing available from
for granting/extending loan
performance criteria set by the
Why Senior Management Will Overstate Business PerformanceTo defer “surplus” earnings toTo take all possible write-offsfuture earnings will be consistentlyTo reduce expectations now soperceived and rewarded.To preserve a trend of consistentresults.To reduce the value of anpurposes of a divorce settlementTo reduce the value ofmanagement is planning a buyout
Why Senior Management Will Overstate
to the next accounting period.offs in one “big bath” now so
consistently higher.so future growth will be better
consistent growth, avoiding volatile
owner-managed business forsettlement.
a corporate unit whosebuyout
How Do People Commit Financial Statement Fraud
• Playing the accounting system
• Beating the accounting system
• Going outside the accounting
How Do People Commit Financial
system
system
accounting system
Methods of Financial Statement Fraud• Fictitious revenues• Timing differences• Improper asset valuations• Concealed liabilities and expenses• Improper disclosures
Methods of Financial Statement Fraud
expenses
Financial Statement Schemes by Category
0% 10% 20%
Timing Diff.
Conceal Liab.
Fict. Rev.
Disclosures
Asset Value
Financial Statement Schemes by
25.0%
40.0%
45.0%
47.5%
52.5%
30% 40% 50% 60%
Fictitious Revenues• Recording of goods or services• Fake or phantom customers• Legitimate customers• Sales with conditions• Pressures to boost revenues
services that did not occurcustomers
revenues
Red Flags – Fictitious Revenues• Rapid growth or unusualcompared to that of otherindustry
• Recurring negative cash flowsinability to generate cash flowsreporting earnings and earnings
• Significant transactions withpurpose entities not in theor where those entities areby another firm
Fictitious Revenuesunusual profitability, especially
other companies in the same
flows from operations or anflows from operations while
earnings growthwith related parties or special
ordinary course of businessare not audited or are audited
Red Flags – Fictitious Revenues
Significant, unusual, or highlyespecially those close to period“substance over form” questionsUnusual growth in the numberreceivablesA significant volume ofsubstance and ownership is notAn unusual surge in sales bycompany, or of salesheadquarters
Fictitious Revenues
highly complex transactions,period end that pose difficult
questionsnumber of days’ sales in
sales to entities whosenot knowna minority of units within arecorded by corporate
Timing Differences• Recording revenue and/or expenses• Shifts revenues or expensesthe next, increasing or decreasing
expenses in improper periodsexpenses between one period and
decreasing earnings as desired
Red Flags – Timing DifferencesRapid growth or unusual profitability,to that of other companies inRecurring negative cash flowsinability to generate cashreporting earnings and earningsSignificant, unusual, or highlyespecially those close to period“substance over form” questionsUnusual increase in gross marginindustry peersUnusual growth in the numberUnusual decline in the numberaccounts payable
Timing Differencesprofitability, especially compared
the same industryflows from operations or an
flows from operations whileearnings growth
highly complex transactions,period end that pose difficult
questionsmargin or margin in excess of
number of days’ sales in receivablesnumber of days’ purchases in
Concealed Liabilities………..• Liability/expense omissions• Capitalized expenses• Failure to disclose warranty
Concealed Liabilities………..
costs and liabilities
Red Flags – Concealed Liabilities• Recurring negative cash flowsinability to generate cash flowsreporting earnings and earnings
• Assets, liabilities, revenues,significant estimates that involveor uncertainties that are difficult
• Non-financial management’sor preoccupation with theprinciples or the determination
Concealed Liabilitiesflows from operations or anflows from operations while
earnings growthrevenues, or expenses based on
involve subjective judgmentsdifficult to corroborate
management’s excessive participation inthe selection of accounting
determination of significant estimates
Improper Disclosures…………….• Liability omissions• Subsequent events• Management fraud• Related-party transactions• Accounting changes
Improper Disclosures…………….
Red Flags – Improper DisclosuresDomination of managementgroup (in a non-ownercompensating controlsIneffective board of directorsover the financial reporting processIneffective communication,enforcement of the entity’s valuesmanagement or the communicationor ethical standardsRapid growth or unusual profitability,to that of other companies in
Improper Disclosuresby a single person or small
managed business) without
directors or audit committee oversightprocess and internal control
implementation, support, orvalues or ethical standards by
communication of inappropriate values
profitability, especially comparedthe same industry
Red Flags – Improper Disclosures
Significant, unusual, or highlyespecially those close to period“substance over form” questionsSignificant related-party transactionscourse of business or withor audited by another firmSignificant bank accountsoperations in tax haven jurisdictionsappears to be no clear businessOverly complex organizationalunusual legal entities or managerial
Improper Disclosures
highly complex transactions,period end that pose difficult
questionstransactions not in the ordinary
related entities not audited
accounts or subsidiary or branchjurisdictions for which there
business justificationorganizational structure involving
managerial lines of authority
Red Flags – Improper Disclosures• Known history of violationslaws and regulations, or claimssenior management, or boardor violations of laws and regulations
• Recurring attempts by managementor inappropriate accounting
• Formal or informal restrictionsinappropriately limit accessthe ability to communicatedirectors or audit committee
Improper Disclosuresviolations of securities laws or other
claims against the entity, itsboard members alleging fraudregulations
management to justify marginalon the basis of materiality
restrictions on the auditor thatto people or information oreffectively with the board of
committee
Red Flags – Concealed Liabilities• Unusual increase in gross marginindustry peers
• Allowances for sales returns,that are shrinking in percentageout of line with industry peers
• Unusual reduction in the numberaccounts payable
• Reducing accounts payablestretching out payments to
Concealed Liabilitiesmargin or margin in excess of
returns, warranty claims, and so onpercentage terms or are otherwise
peersnumber of days’ purchases in
payable while competitors arevendors
Improper Asset Valuation
• Inventory valuation• Accounts receivable• Business combinations• Fixed assets
Improper Asset Valuation
Red Flags – Improper Asset ValuationRecurring negative cash flows
generate cash flows fromearnings and earnings growthSignificant declines in customerbusiness failures in either the industryAssets, liabilities, revenues, orestimates that involve subjectivethat are difficult to corroborateNon-financial management’spreoccupation with the selectionthe determination of significantUnusual increase in gross marginindustry peers
Improper Asset Valuationfrom operations or an inability
from operations while reporting
customer demand and increasingindustry or overall economy
or expenses based on significantsubjective judgments or uncertainties
corroborateexcessive participation in
selection of accounting principlessignificant estimates
margin or margin in excess
Red Flags – Improper Asset Valuation• Unusual growth in the numberreceivables
• Unusual growth in the numberinventory
• Allowances for bad debts,inventory, and so on thatterms or are otherwise out of
• Unusual change in the relationshipand depreciation
• Adding to assets while competitorstied up in assets
Improper Asset Valuationnumber of days’ sales in
number of days’ purchases in
debts, excess and obsoleteare shrinking in percentageof line with industry peers
relationship between fixed assets
competitors are reducing capital
Financial Statement Analysis• Vertical analysis
• Analyzes the relationshipson an income statement,statement of cashcomponents as percentages
• Horizontal analysis• Analyzes the percentagefinancial statement items
• Ratio analysis• Measures the relationshipdifferent financial statement
Financial Statement Analysis
relationships between the itemsstatement, balance sheet, or
flows by expressingpercentages
percentage change in individualitems
relationship between twostatement amounts
DETECTION OF FINANCIAL STATEMENT FRAUD USING - BENEISH MODEL
The Beneish model is afinancial ratios calculated withcompany in order to checkthat the reported earningsmanipulated.
The M score is basedfollowing eight different indices
DETECTION OF FINANCIAL STATEMENT BENEISH MODEL
statistical model that useswith accounting data of a specific
if it is likely (high probability)of the company have been
on a combination of theindices or ratios:
DETECTION OF FINANCIAL STATEMENT FRAUD USING - BENEISH MODEL
The M score is based on a combinationdifferent indices:
1. DSRI - Days' sales in receivable index2. GMI - Gross margin3. AQI - Asset quality index4. SGI - Sales growth index5. DEPI - Depreciation
6. SGAI - Sales and general and administrative expensesindex
7. LVGI - Leverage8. TATA - Total accruals
DETECTION OF FINANCIAL STATEMENT BENEISH MODELcombination of the following eight
Days' sales in receivable indexGross margin indexAsset quality indexSales growth indexDepreciation index
general and administrative expensesindex
Leverage indexaccruals to total assets
Deterrence of Financial Statement Fraud
Reduce pressuresstatement fraud
Reduce the opportunityfinancial statement
Reduce rationalizationstatement fraud
Deterrence of Financial Statement Fraud
to commit financial
opportunity to commitfraud
rationalization of financial
Reduce Pressures to Commit Financial Statement Fraud
Establish effective board oversightcreated by management.Avoid setting unachievable financialAvoid applying excessive pressureachieve goals.Change goals if changed marketEnsure compensation systemstoo much incentive to commitDiscourage excessive externalcorporate performance.Remove operational obstaclesperformance.
to Commit Financial
oversight of the “tone at the top”
financial goals.pressure on employees to
market conditions require itsystems are fair and do not create
fraud.external expectations of future
obstacles blocking effective
Reduce the OpportunityFinancial Statement FraudMaintain accurate and complete internalCarefully monitor the businessrelationships of suppliers, buyers,representatives, and others whobetween financial units.Establish a physical security systemincluding finished goods, cash, capitalvaluable items.Maintain accurate personnel recordson new employees.Encourage strong supervisory andgroups to ensure enforcement ofEstablish clear and uniform accountingexception clauses.
Opportunity to Commit Financial Statement Fraud
internal accounting records.business transactions and interpersonal
buyers, purchasing agents, saleswho interface in the transactions
system to secure company assets,capital equipment, tools, and other
records including background checks
and leadership relationships withinof accounting procedures.
accounting procedures with no
Reduce RationalizationStatement Fraud
• Promote strong values, basedthe organization.
• Have policies that clearlywith respect to accountingfraud.
• Provide regular training to allprohibited behavior.
Rationalization of Financial
based on integrity, throughout
define prohibited behavioraccounting and financial statement
all employees communicating
Reduce RationalizationStatement Fraud
• Have confidential advice andcommunicate inappropriate
• Have senior executives communicateintegrity takes priority andachieved through fraud.
• Ensure management practicessets an example by promotingaccounting area.
• The consequences of violatingpunishment of violators should
Rationalization of Financial
and reporting mechanisms tobehavior.
communicate to employees thatand that goals must never be
practices what it preaches andpromoting honesty in the
violating the rules and theshould be clearly communicated
These Are Interesting Times
• Number and size of financial statement frauds are increasing
• Number and size of frauds against organizations are increasing
• Some recent frauds include several people20 or 30 (seems to indicate moral decay)
• Many investors have lost confidence in credibility of financial statements and corporate reports
• More interest in fraud than ever beforeon many college campuses
These Are Interesting Times
Number and size of financial statement frauds are
Number and size of frauds against organizations are
Some recent frauds include several people—as many as 20 or 30 (seems to indicate moral decay)Many investors have lost confidence in credibility of financial statements and corporate reportsMore interest in fraud than ever before—now a course
ANANIAS AND SAPPHIRA New International Version (NIV)]When Ananias heard this, he fell down and
heard what had happened. 6 Then some young men came forward, wrapped up his body, and carried him out and buried him. came in, not knowing what had happened. price you and Ananias got for the land?” “Yes,” she said, “that is the price.”
Peter said to her, “How could you conspire to test the Spirit of the Lord? Listen! The feet of the men who buried your husband are at the door, and they will carry you out also.”
At that moment she fell down at his feet and died. Then the young men came in and, finding her dead, carried her out and buried her beside her husband. Great fear seized the whole church and all who heard about these events.
ANANIAS AND SAPPHIRA – [Acts 5:1-11 New International Version (NIV)]When Ananias heard this, he fell down and died.And great fear seized all who
Then some young men came forward, wrapped up his body, and carried him out and buried him. 7 About three hours later his wife came in, not knowing what had happened. 8 Peter asked her, “Tell me, is this the price you and Ananias got for the land?” “Yes,” she said, “that is the price.”
Peter said to her, “How could you conspire to test the Spirit of the Lord? Listen! The feet of the men who buried your husband are at the door, and they will carry
At that moment she fell down at his feet and died. Then the young men came in and, finding her dead, carried her out and buried her beside her husband. 11 Great fear seized the whole church and all who heard about these events.
What should internal auditor do?
• Assess the impact of thestatements
• Consult with legal counsel and• Report the acts to audit committee• Consider client’s remedial actions• Disciplinary actions• Controls to safeguard against• Reporting effects of the acts• Consider withdrawing from
What should internal auditor do?
the acts on the financial
and other specialistscommittee
actions
against recurrenceacts
engagement
What we should learn from these scandals……………………………
First, if you commit excessivenot matter who you are, incaught.Cooking the books as it is sometimes
Most Important Lesson……Always diversify. Greed Killstheir life savings in Enron lostthey deserve it for being greedyDiversification protects usscandals.
What we should learn from these scandals……………………………
excessive corporate fraud, it doesin the long run you will get
sometimes referred is illegal.
……. “COOKERS”Kills. People that invested alllost everything and the truth is
greedy and not diversifying.us from these corporate