acfe fraud prevention check-up - BKD

- Invoices for goods not received or services not performed.- Theft of inventory or use of business assets for personal gain.- False or inflated expense claims.- Theft or use of customer lists and proprietary information.• Employees in collusion with vendors, customers, or third parties.- Payment of inflated or fictitious invoices.- Issuance of inflated or fictitious credit notes.- Invoices for goods not received or services not performed.- Preferred pricing or delivery.- Contract bid rigging.- Theft or use of customer lists and proprietary information.• Vendors.- Inflated or fictitious invoices.- Short shipments or substitution of lower quality goods.- Invoices for goods not received or services not preformed.• Customers.- False claims for damaged or returned goods or short shipments.Protecting against these risks requires not only physical safeguarding controls, but also periodic detective controlssuch as physical counts of inventory with reconciliations to the general ledger. Remember, a smart perpetrator maybe thinking about such controls and design the fraud to circumvent or be concealed from those controls. Thoseconducting the risk assessment should keep this in mind when deliberating misappropriation of asset schemes andtheir impact to the organization.CorruptionCorruption is operationally defined as the misuse of entrusted power for private gain. In the United States, theFCPA prohibits U.S. entities, their foreign subsidiaries, and others from bribing foreign government officials,either directly or indirectly, to obtain or retain business. There are similar anti-corruption laws in other countriesas well as guidelines established by the United Nations Convention Against Corruption, to which more than 100countries are signatories.Organizations that have operations outside their home countries need to consider other relevant anti-corruptionlaws when establishing a fraud risk management program. Transparency International, a multinational organizationfocused on anti-corruption and transparency in business and government, issues an annual Corruption PerceptionIndex, which ranks countries on their perceived levels of corruption. The Corruption Perception Index canassist organizations in prioritizing their anti-corruption efforts in areas of the world at greatest risk. It must beremembered, of course, that corruption can also occur in an organization’s home country.A common form of corruption is aiding and abetting. Law enforcement authorities worldwide have prosecutednumerous cases where organizations were not misstating their financial statements, but were knowingly structuringtransactions or making representations that enabled other organizations to fraudulently misstate their financialstatements. A thorough risk assessment will consider the risk that someone may be engaging in such behavior aswell as other types of corruption that may be applicable to the organization.26