You Discovered Fraud — Now What?: A #fraudweekchat Recap

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Courtney Howell
ACFE Community Manager

This year during International Fraud Awareness Week, we hosted our first ever Twitter chat with the topic “You discovered fraud — now what?” Participants shared excellent advice on what to do if you or someone you know discovers a potential fraud. A few discussion contributors even shared real-life experiences they have learned from.

Read on to discover some of the top insights shared during the chat, and be sure to follow us on Twitter!

See all the responses to Q6 here. 

Thank you so much to everyone who participated, liked and shared our #fraudweekchat tweets. If you’re interested in seeing more Twitter chats hosted by the ACFE, please let us know in the comments or, of course, you can always tweet at us.

Robocop – Not Just an ‘80s Movie Icon

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

Yet another 1980s movie icon is making a comeback. However, this is not your typical remake. Robocop is back, and geekier than ever. You read that correctly, Robocop has gone geek. In a recent Fortune article, the SEC’s new accounting quality model, Robocop, takes center stage. The SEC is going to begin using data mining procedures to identify companies with accounting records deserving a closer look. As a data mining professional, I found a few things in this article surprising, noticed some items not discussed and saw positive news for companies that may encounter Robocop in the coming years.

First, I don’t find the fact the SEC will be using data mining surprising. In fact, this is something I expected. What is surprising is the list of atypical parties encouraged to use data mining now that the SEC has unveiled its model. These include:

  • Employees questioning their employer’s behavior are encouraged to use data mining to see if they are “on the right track.” 
  • Investors looking to analyze the financials of potential investments and make decisions that are more informed. 
  • Companies wanting to analyze the financials of the vendors and customers with which they do business. 

Next, here are a couple of useful items to supplement this article. First, internal audit departments of organizations should also be users of data mining. The principles discussed in this article can help internal audit departments take a proactive approach to fraud detection and increase their effectiveness. If they are not already using data mining, the SEC’s use is a good reason to begin. Also, there is data analysis software available that does not require programming language or experience. Many organizations may already use these tools within their governance, risk and compliance program, possibly within the internal audit department.

Finally, there is good news for companies subject to Robocop’s review. Data mining is not a new concept; it has been around for quite a while. Fraud investigators have been developing data mining procedures for years and regularly implement these procedures within investigations. As a result, there are many resources available to companies looking to incorporate data mining into their testing and ease the learning curve. These resources can help companies implement their own data mining procedures and take a proactive approach to detecting potential issues in their financials.

If you have not been reading about Robocop and the new accounting quality model, I would encourage you to do so. The Fortune article is a great place to start, with many other articles out there to provide other insights.

CFE Works With Technology, Not Around It

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Jeffrey Meyer, CFE
Vice President, Internal Audit, CBS Corporation
New York, N.Y.

Mining data doesn’t just mean going through boxes of paperwork anymore. Much of an investigation’s evidence is collected online via data that could be hidden away on a hard drive or in plain sight on Excel spreadsheets. Jeffrey Meyer, CFE and VP of Internal Audit at CBS, knows the value of making technology work for him. “One of the challenges I see is embracing technology so that we are working through and with it, rather than around it,” Meyer said. “I spend a lot of time with data mining software so that I’m working with the full population, looking for anomalies that might lead me to answers, as well as more questions to be answered.”

What made you decide to become a Certified Fraud Examiner (CFE)?

In 2009, I attended the ACFE Global Fraud Conference in Las Vegas at the last minute after the only CFE was transferred out of our department. While I was initially skeptical of a fraud conference in Las Vegas, I was impressed by the seminars I attended and the people with whom I networked, so I decided to get my CFE credential and fill the gap in our department.

What ACFE training has benefited you most in your role?

While the benefits have been many, I have specifically benefited from interviewing skills training, which has broader implications beyond just fraud investigations. When I’m wearing my “auditor hat,” I spend a lot of time talking to others and gathering information. If I’m better at interviewing, I can spend less time and get better results.

What were some of the more challenging tasks you’ve personally faced as a CFE?

I’ve had several investigations where local finance and management has tried to do some investigating, including interviewing the suspected fraudster. These cases are challenging in that the “first bite of the apple” has already been taken and therefore removed any element of surprise we might have had. We’re working with our divisions to get us involved at the first signs of suspicion, and that’s reaping benefits for us.

What are some of the benefits/advantages to a company or government agency employing CFEs on its staff?

CFEs bring a different skill set and mindset to an internal investigation that can be critical to a successful outcome. You wouldn’t go to a tax accountant for your annual audit or to a dermatologist if you needed anesthesia for a surgery. These fields, while tangentially related, are not the experts in your true need, so why wouldn’t a company or agency choose the expert in the investigation field?

Please describe your most memorable case and its resolution (to-date if it’s a fresh case). Feel free to use pseudonyms for suspects if the case is ongoing and no judgment has yet been made.

My most memorable case wasn’t glamorous or high profile, but to me it was memorable because the business process worked as it should in identifying a potential fraud. While we prepared for a normal audit of one of our local markets, we got a call from the market’s credit manager, whom I’ll name “Bonnie.” As part of her normal controls, Bonnie was reviewing the accounts receivable aging and making telephone calls to follow up on delinquent accounts. With one small, local business account, the owner told Bonnie that he had paid the invoice, and he even had his cancelled check. Bonnie apologized for the mistake and asked if the owner wouldn’t mind faxing a copy of both sides of the cancelled check so she could correct the error. When she looked at the check, she called for our assistance. The sales person on this account, Henry, had added his name to the payee line of the check, had endorsed it and deposited in his bank account.

Working with our Security Department, I began investigating Henry’s accounts to see if any evidence existed for similar activity, but none did. Henry had started with this market less than two years ago, his first position out of college, so his activity was finite and readily available. When we confronted Henry with our evidence, he broke down and admitted he had taken the check. Through tears as he wrote out his confession, he realized that he might have jeopardized the rest of his career for about $800 of short-term cash, which he had already begun to repay before we questioned him.