Fraud Prevention and Detection: Warning Signs and the Red by Rodney T. Stamler, Hans J. Marschdorf, Mario Possamai PDF

By Rodney T. Stamler, Hans J. Marschdorf, Mario Possamai

Lessons should be discovered from significant fraud situations. no matter if the sufferer is an organization, public business enterprise, nonprofit, starting place, or charity, there's a excessive probability that a lot of those frauds might have been avoided or detected if early pink Flag indicators were pointed out and acted upon. Fraud Prevention and Detection: symptoms and the purple Flag process will let officials and administrators, inner and exterior stakeholders, in addition to outdoor analysts to guard themselves and their corporations opposed to fraud via successfully detecting, examining, and performing on early pink Flag indications. in accordance with an empirically established method, the crimson Flag approach displays the authors’ greater than a hundred years mixed event within the research of fraud in high-profile, international instances in North the USA, Africa, Europe, and the a ways East.

Readers of this publication will:

  • Acquire a normal know-how of the character, features, and dynamics of fraud
  • Understand the method for deciding on no matter if a fraud has been committed
  • Develop an realizing of company chance administration methods for fraud chance administration, compliance possibility administration, and dealing with the danger of fraudulent monetary reporting—including an knowing of the constraints inherent in those approaches
  • Learn how to define pink Flag signs of fraud or suspicious transactions in monetary statements, budgets, and contracts
  • Know the right way to make sure that, as soon as a crimson Flag has been pointed out, applicable motion is taken

Fraud may end up in major monetary loss in addition to undesirable press and exposure with major reputational impression for officials, administrators, organizations, and their stakeholders. This book’s no-nonsense process empowers these charged with holding organisations to prevent those frauds earlier than the organization’s livelihood is jeopardized or to mitigate harm whilst fraud has occurred.

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Additional resources for Fraud Prevention and Detection: Warning Signs and the Red Flag System

Example text

Screening for Red Flags is like looking for a gold nugget in a pan full of gravel: You have to know what a gold nugget looks like and be able to distinguish it from all the other rocks in the pan. In addition to the manual screening, recent years have seen the emergence of fraud analytical software that uses complex algorithms and social network analytical tools to identify Red Flags. These tools are expensive and may be beyond the capabilities of small- and medium-­sized entities. But they are worth noting nonetheless because their benefits are significant, including: • Providing a holistic cross-­enterprise view of transactions and relationships • Uncovering previously unknown relationships between insiders and outside fraudulent agents 33 Fraud Prevention and Detection • Generating a holistic view of fraud, disclosing, for example, that a formerly trusted insider may have been involved in a number of fraudulent activities across a number of business units For example, a manufacturer may want to scan the transactions in its supply chain, as well as its own supply chain employees, for Red Flags.

At the simple end were phony consultancy contracts. On the more sophisticated side were schemes that channeled Siemens products through tax haven companies. Profits were artificially inflated and, with each transaction, a portion of the profits was left behind in the tax haven companies. To disperse the funds, fees may be paid to lawyers, accountants, and consultants by the tax haven entity. WHAT ARE FINANCIAL STATEMENTS? Before proceeding further, it is worth briefly reviewing what financial statements are.

In the case of Enron, however, the company and the many “special-­ purpose entities” it created were closely linked. But these relationships were carefully concealed, as was outlined in a 2002 report by a court-­appointed examiner, who suggested that many of the deals were shams. Partnerships, he found, were established to obtain financing. Typically, Enron would sell an asset to the partnership, but would retain control of it and would pay interest to the partnership. The examiner said: Most of the time, the assets were difficult to sell or did not have sufficient cash flow to cover the partnership’s purchase price.

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