CFE Heard the Call to Fight Fraud as a Teenager

MEMBER PROFILE

Samuel Martin, CFE, CPA
Partner, Brotemarkle, Davis & Co LLP

Raised in the small town of Robbins, California, Samuel Martin, CFE, CPA, was in his teens when he witnessed a family friend lose his business, home and livelihood to embezzlement. The incident sparked Martin’s passion for fighting fraud within vulnerable small businesses. “I began reading and hearing more about how much of an issue this was with businesses today,” Martin said. “That [fraud] didn’t only affect the large corporations. The small business owners were being affected, too, and the impact was much larger on them.” 

You call yourself “Inspector Gadget” on your LinkedIn profile. Why do you think that title suits what you do in your role?
I think that title fits me because I spend nearly all of my time performing compliance audits for different companies and looking for ways to help small business owners improve their controls and become successful. I always look to technology to help improve this process and help business owners strengthen their controls, especially when they lack adequate segregation of duties. 

What do you wish you knew (but didn’t) when you first contemplated this career?
This career has evolved beyond someone sitting behind a desk all day crunching numbers. You need to be able to go out and talk to a lot of different people on a regular basis and sometimes give them information that they aren’t happy to receive. This could be a tough task for an introvert like me, but it’s enjoyable to know that by developing relationships, business owners respect your thoughts and are willing to embrace your recommendations. 

Did you always plan to pursue the position that you are currently in?
I always had a desire to help people. This seemed to be a natural fit, to be a person behind the scenes helping business owners with issues they might have, but who lack someone within their organization to solve these kinds of problems.

Are there any trends (e.g. demographic, social, legal) that concern you?
I have concerns around the increased desire for companies to streamline their processes as much as possible and the increased reliance on services like online banking. Without the proper oversight and segregation of controls, I think this is going to be a huge arena for misappropriation of assets. Bookkeepers already have the ability to pay utilities, car payments and credit cards via EFT, so if the owner or someone else is not watching what’s happening they could leave themselves exposed to serious issues.

What advice do you have for those looking to become a CFE?
I have a passion to help business owners prevent fraud from occurring within their organization, so for individuals looking to become a CFE there are a lot of different opportunities out there where the education and knowledge of the CFE can be useful in their careers. Gaining an understanding of how people commit fraud and what type of frauds are currently being committed helps with the continued analysis and development of internal controls. Recently I discovered how easy it is for an employee to alter payroll after being approved by adding reimbursable expenses to their paycheck and getting paid for expenses never incurred. This bypassed any approval process and the need to have a check signed.

When you are not working, what types of things do you enjoy doing?
When I am not in the office I enjoy do it yourself projects, especially wood working and home improvements. I like these types of projects; they allow me to take a pile of raw materials and transform them into a finished project. I can take an old piece of furniture that is ready to be tossed into the trash and spend some time restoring it back to something that can be enjoyed for years to come. 

Read Martin's full profile on ACFE.com.

Data Visualization – More Than Pretty Pictures

GUEST BLOGGER

Jeremy Clopton, CFE, CPA, ACDA
Managing Consultant, Forensics and Valuation Services, BKD, LLP

With “big data” comes the desire to see and better understand it. As investigators, that is one of our main objectives. While infographics and data posters are designed as art, there are other uses of data visualization as well. We need to understand the data in our cases so we can use it to detect fraud. I can think of many instances in my career where data visualization helped me, a colleague or a court better understand the data in an investigation.

Thinking back over my career, one case that demonstrates this concept stands out. While investigating a potential conflict of interest, we looked for vendors located near an employee's residence. Naturally, we decided the best approach would be to plot all of the vendor and employee addresses on a map. What we saw was quite interesting. None of the vendors were located near the employee on which we were focused. There was, however, another employee with a vendor very near. The employee and vendor were located more than 50 miles from the company address and the vendor was a casino. A new investigation quickly followed. Data visualization helped identify this previously unknown relationship and uncover a multi-year fraud scheme.  

While this is only one example of using data visualization to detect fraud, there are many other applications of the same concept. Simple distribution charts showing checks issued by day of week or time of day identify checks issued outside of normal business hours. Trend analyses of vendor payments indicate unusual patterns of activity, such as kickbacks. Network maps show relationships between various parties (remember the pictures on a bulletin board connected by yarn in the cop shows?). The use of data visualization in investigations is limited only by available data and your imagination.

Speaking of imagination, I am a Certified Public Accountant (CPA). As such, imaginative is not the first word many use to describe me. People generally shy away from describing accountants as creative. That simply means I tend to look at what others are doing in the world of data visualization to find new ideas. And I would encourage you to do the same. Read reports, especially the exhibits. Check out websites about data visualization (I like flowingdata.com). By exploring what others are doing you will be better equipped to incorporate data visualization into your next investigation. Who knows, maybe the visualization used to break open your next big case will also end up as a work of art in your office.

Find more insight from Jeremy at BKDForensics.com.

Be a Revenue Enhancer, not an Overhead Cost

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Cora Bullock

Assistant Editor, Fraud Magazine

The recession has dramatically changed our lives, and it has undoubtedly affected internal auditing. Danny Goldberg, CPA, CIA, CISA, CGEIT, CCSA, national professional development practice director of Sunera, addressed just how much it has affected IA in his Tuesday breakout session, "Evolution of Auditing: How the Recession Is Changing the Industry." He summarized the IA changes by saying, "Don’t be an overhead cost. Be a revenue-enhancer. My CIO at my old job didn’t see the innate value in internal auditing. Once I saved him money, he did."

Internal auditors are still valuable, but not only do they need to continue to do more with less, they also must become revenue enhancers by working inside the organization to cut costs and help the company become more efficient and effective. The nattily dressed Goldberg gave many tips on how to do so, including enterprise risk management (ERM). He pointed out that ERM was very popular in the mid-2000s because we were prosperous then, and it's becoming increasingly popular so companies can cover their rears, so to speak. "If you're in IA, you need to get into ERM," said Goldberg. "ERM will raise your profile in your company."

The Sarbanes-Oxley Act (SOX) was another hot button. "We need to use our SOX knowledge to leverage into other areas of the company. If you haven’t done that, then we're wasting our SOX knowledge, guys!" he exclaimed.

Goldberg also said that there is still significant segregation between operations and IT, but he believes that audit and IT risk assessment should be combined: "You can't audit a division without knowing their IT systems." And different groups are doing different testing, but we need to learn to integrate our audits.

Read the full article here.

Preventing a "Little Something on the Side" Under the UK Bribery Act

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By Scott Patterson
ACFE Media Relations Specialist

The UK Bribery Act will go into effect on July 1, 2011. Prior to this act, the U.S. Foreign Corrupt Practices Act (FCPA) was the boldest in compliance standards. The UK Bribery Act brings stronger initiatives into the international anti-corruption arena, and it needs to be addressed by companies and their officers.

This was the thrust of the message from Kenneth Yormark, CFE, CPA, CFF, during his lively presentation of "The UK Bribery Act - Raising the Bar Above the Foreign Corrupt Practices Act" at one of Tuesday's breakout sessions. Yormark, director at Navigant Consulting in New York, used the opportunity to expand on the concept of bribery as a whole and applied an examination of the new legal measure to help companies develop compliance plans and prevention measures against this fraud threat.

"Many people think if it's an acceptable cultural practice in the company, it's not a bribe. That's not true!" he said. "According to the UK Bribery Act, it has to be a law in that country the company is doing business, and then you can do it. That's a common misconception."

Read the full article here.

Guilty Until Proven Innocent

AUTHOR'S POST

By Mandy Moody

ACFE Social Media Specialist

Did he do it? Did the investigators get the facts right? Those are just two of the many questions that Linda Saunders, CFE, CPA, CFF, CGFM, owner of Forensic Accounting Consulting, was able to answer and convey to a jury as an expert accounting witness for her first criminal defense case in Idaho. In Monday’s breakout session, “The Fraud Trial: A Case Study of the Innocent,” Saunders detailed the issues anti-fraud professionals could face when being called to provide expert testimony.

At first glance, Saunders thought she was being asked to defend a crook. The State of Idaho Attorney General, along with help from the Idaho Department of Insurance, was prosecuting an insurance agent on eight counts of insurance fraud, forgery, grand theft and racketeering. Within those counts were 134 Predicate Acts of insurance fraud, grand theft and forgery. The numbers alone would scare any possible defense witness. But, after giving due diligence, Saunders quickly realized that some mistakes had definitely been made.

“The more the case unfolded, the more I was convinced I could help unravel the journal entries and offer some sort of opinion,” Saunders said. “The prosecutor’s expert witness relied on the insurance agent’s bookkeeper’s analysis. I needed to go in and check the debits and credits myself.”

Read the full article here.