Findings On Fraud and Error in Financial Statements

INTERNAL AUDIT &
FRAUD PREVENTION.
Real-life case studies of prevention and detection.
ABOUT THE AUTHORS

JOHN MILNER
CO-AUTHOR
John is an Irish Chartered Accountant and a partner of Kreston CSM. He has expertise in the areas
of internal audit, due diligence, financial strategy
and mergers and acquisitions. He specializes in
internal control, risk evaluation and fraud prevention and detection.
He has managed the Internal Audit departments
both internationally and in Mexico for companies
such as Unisys and Waldos. He has held Finance
Director positions for other companies such as
AstraZeneca, where he successfully managed the
finance, tax and legal merger as Corporate CFO.
He has worked extensively in Europe, Mexico and
the United States and is financial advisor and a
board member for a number of different companies. He has successfully raised capital and performed due diligence for companies such as
Masisa and Qualita.
INTERNAL AUDIT & FRAUD PREVENTION
ABOUT THE AUTHORS

MARTN GHIRARDOTTI
CO-AUTHOR
Martin Ghirardotti a partner with Lisicki, Litvin &

Associates, a member firm of Kreston International,
CEO of Resguarda (a whistleblower hotline),
member of the Executive Committee of the Institute
of Internal Auditors in Argentina, Vice President of
INICA and a member of ACFE (Association of Certified Fraud Examiners U.S.)
He has participated as a guest speaker and panelist
on numerous forums regarding money laundering,
fraud, whistleblower techniques and internal audit
for universities, private industry and government
agencies in Argentina and throughout Latin America.
He has written many articles in Argentina for both
business magazines and newspapers, such as La
Nacion, Clarin, Ambito Financiero, Revista IDEA
etc.
ABOUT THE AUTHORS

ENRIQUE PASTOR
INTRODUCTION AND PERFACE

Enrique is a member of both the Institute and College of Public Accountants in Mexico.
He is a Certified Public Accountant and Tax Specialist from both of these bodies, is a Certified Auditor and qualified to perform tax and social security audits at a federal level and also at state level in
Mexico City, State of Mexico and Veracruz.
He has participated as a speaker at many different
tax forums throughout Mexico.
He is a Board member for many different companies in Mexico and often acts as their commissary
or auditor as required by law. He is the Treasurer
for CANIETI (the Electronics, Telecommunications
and Information Technologies Chamber) and is a
member of the Swedish-Mexican Chamber of
Commerce.
He was a recognized consultant for JICA (the
Japan International Cooperation Agency) in 2009
and is a partner of Kreston CSM.
ABOUT THE AUTHORS

MIGUEL DEL OLMO
CONCLUSIONS
Miguel is an Audit and Corporate Governance

Partner of Kreston CSM. He is member of the
Audit Committee for Kreston International for the
Latin American region.
He has over 25 years experience, both international and in Mexico, as a financial and tax auditor. He has worked and given seminars in the
United States, South Africa, Argentina, Brazil,
Panama, Nicaragua and Guatemala.
He has particular expertise in Sarbanes-Oxley and
Mexican Bankruptcy law. He is a certified Internal
Auditor under ISO 9001 as stipulated by INLAC,
the Latin American Quality Institute.
Miguel sits on the Audit Committee for many companies in Mexico.
CONTENTS
INTRODUCTION:
...............................
PREFACE:
...............................
CASE STUDY 1
FREIGHT OVERCHARGING:
...............................
10
CASE STUDY 2
MISAPPROPRIATION OF CASH AND CHEQUES:
...............................
13
CASE STUDY 3
MANIPULATION OF ACCOUNTING RECORDS:
...............................
15
CASE STUDY 4
ABUSE OF POWER BY CEO:
...............................
18
CASE STUDY 5
TAMPERING OF CHECKS:
...............................
20
CASE STUDY 6
GHOST VENDOR AND PERSONAL LIFESTYLE:
...............................
22
CONTENTS
CASE STUDY 7
MANAGEMENT FRAUD:
...............................
24
CASE STUDY 8
FALSIFICATION OF REVENUES:
...............................
26
CASE STUDY 9
USE OF ANALYTICAL TECHNIQUES TO DETECT
FRAUD:
...............................
28
CASE STUDY 10
VENDOR DUE DILIGENCE:
...............................
31
CASE STUDY 11
FICTITIOUS MAINTENANCE AND
WHISTLEBLOWER HOTLINE:
...............................
34
CASE STUDY 12
GHOST EMPLOYEES:
...............................
36
CASE STUDY 13
MISAPPROPRIATION OF COLLECTIONS
(TEEMING AND LADING):
...............................
38
CONTENTS
CASE STUDY 14
DISCOUNTS TO FAMILY AND FRIENDS AND
WHISTLEBLOWER:
...............................
40
CASE STUDY 15
MANIPULATION OF CASH RECEIPTS:
...............................
42
CASE STUDY 16
GHOST VENDOR:
...............................
44
CASE STUDY 17
MISAPPROPRIATION OF CASH:
...............................
47
CASE STUDY 18
MISAPPROPRIATION OF CASH SALES AND
WHISTLEBLOWER:
...............................
49
CONCLUSIONS:
...............................
52
INTRODUCTION
We are pleased to share a collection of fraud case studies with our readers.
These are based on real-life experiences which we have accumulated over

the years, some from past experiences of having worked in different organizations and others from situations which we encountered with our clients in
Kreston . It is likely that our readers will be able to draw comparisons from
similar situations in their own particular environment and hopefully they will
serve as a preventative mechanism within their organization. In any environment, good controls, documented procedures and robust vigilance to ensure
compliance will help preserve the organizations assets and help save money.
This is a joint collaboration between the Kreston offices in Mexico and Argentina and the cases are based on real-life experiences whereby names of
countries, amounts of monies and industries have been amended to ensure
that the organizations involved are not compromised. The names of the
organizations have been excluded.
Kreston has a global practice in Internal Audit and Risk Management whereby it helps its clients in measuring risks, defining and implementing controls
and implementing mechanisms to ensure compliance and reduce the risk of
fraud occurring.
Co-Authors
Dr. Martin Ghirardotti & John Milner
Editing, Introduction and Conclusion
Enrique Pastor & Miguel del Olmo
Published by Kreston CSM
All rights reserved 2013 Kreston CSM. The partial or complete reproduction is prohibited without the prior written permission of the authors.
PREFACE
Since time began, the risk of fraud has existed in all organizations created by man. No matter
how big or small the organization, corporation or government, whether it is a group of ten
people or ten thousand, the potential exists for fraud to occur.
One person alone can commit a fraud. Where the group is more than one and collusion exists,
the fraud is easier to perpetrate and has the capacity of being of greater magnitude. In bygone
times, the fraud tended to be more rudimentary and usually involved the misappropriation of
cash or tangible items, such as inventory, cars or other assets. As society and commerce developed, frauds became more sophisticated and involved banks and check fraud. In recent times,
with the spread of e-commerce, electronic banking and the widespread adoption of ERP (Enterpise Resource Planning) systems across governments and corporations, the variety, complexity
and magnitude of frauds has increased dramatically. Whereas collusion between personnel
internal and external to the organization was necessary in the past, today it is possible for personnel external to the organization to perpetrate the fraud without help internally. This can be
done by the ability to access and hack the organizations systems.
The fact that fraud continues to be a factor with which modern business needs to cope, the need
to design and implement control, prevention and detection mechanisms is all the more necessary. The controls need to be as sophisticated and as robust as the intelligence and planning
that goes behind the intention to commit a fraud. Auditors need to be as familiar and as capable in terms of using technology as their perpetrators in both preventing and detecting frauds.
Organizations need to continually invest in structures, processes and controls at all levels from
the Internal Audit Committee to the cashier at the store level. Neither should we lose sight of the
desire to have a capable and motivated workforce which is focused on achieving the goals of
the organization and has no wish to cause harm.
We have put together 18 case studies which share real-life experiences in a number of different
countries, where we realize that human nature can always fall to temptation, regardless of the
culture. These case studies bring home the realization that sometimes the fraud is much closer
to us than we may have imagined. We should always be conscious of maintaining and upgrading controls and procedures to ensure that the organizations assets and financial records are
safeguarded and not in danger. It is important that we raise the necessary flags and ensure that
protective steps are taken, even if only a doubt exists that a fraud may take place.
Kreston has a global practice in Internal Audit and Risk Management whereby it helps its clients
in measuring risks, defining and implementing controls and implementing mechanisms to
ensure compliance and reduce the risk of fraud occurring.
Note: all amounts of monies in the case studies are denominated in US dollars.
CASE STUDY 1. FREIGHT OVERCHARGING

COMPANY BACKGROUND
Argentinian subsidiary of a German parent manufactures and distributes industrial machinery
products with annual revenues of $84 million.
FINDINGS
Operations had requested that Internal Audit make a detailed review of Transport charges.
Internal Audit performed a detailed review of the Companys database including an analysis of
the charges paid with deal by customer, volume and route of the machinery which was transported. The review resulted in the discovery of significant variations in the expenses incurred by the
Company in freight. The review revealed the following:
The excessive amount of kilometers charged. The freight supplier was billing distances in
accordance with a pre-determined table. The amounts charged per kilometer and distance
coincided with the table. Company personnel satisfactorily reconciled vendor invoices with the
amount of kilometers charged as per the table. Internal Audit checked the distances with
amounts as per guidelines issued by the government. These revealed distances as per the table
far in excess of those set out in the governmental guidelines. For example, the driving distance
according to the table for the journey from Buenos Aires to Rosario was 645 km, whereas the
actual distance was 298km, a difference which represented an overcharge of 116%.
The freight vendor was charging for additional routes. For example, the vendor had 2
deliveries on the route which started at point A and had drop-offs at points B and C, but he
charged the full routes from A to B and A to C, even though he had made only one trip. This
was in violation of the contractual agreement between the vendor and the Company.
The vendor was charging round trips, even though the vehicles returned empty, also in
violation of the agreement between the vendor and the Company.
10

IMPACT
Total misappropriation of funds amounted to $1,243,298.
As a result of the review, a significant overcharge on most of the invoices issued by the vendor to the
Company was detected.
A comparison was made between the kilometers charged by the vendor and the actual distances.
This analysis revealed that the kilometers charged were in excess of the actual distances, in the majority of cases. The amounts overcharged are set out as follows:
YEAR 1
YEAR 2
TOTAL
Kilometers charged by the vendor
$1,973,828
$1,376,884
$3,350,712
Actual kilometers
$1,088,443
$750,412
$1,838,855
Excess kilometers
$885,385
$626,472
$1,511,857
Amount overcharged
$717,162
$526,236
$1,243,398
The above misappropriation of funds was allowed to happen for the following reasons:
Failure by Operations personnel to review the route distances.
Failure by Operations to compare the vendors invoices with the documental support
such as shipping documents, driver and customer signatures etc.
Failure by the CFO and the Operations Directors to properly review and detect adverse
variations in Freight Expenses.
11

ACTIONS AND FOLLOW-UP
The Company suspended payments to the freight vendor and began negotiations to recover the overcharged amounts. It began to reduce its freight business with the vendor, and once it had recovered
the negotiated amount, terminated its relationship.
The Company decided not to terminate the employment of the Operations personnel, concluding that
it was innocent oversight on their part. A number of corrective measures were implemented including
a more detailed review of the distances, rates charged and volumes shipped, for all vendors.
12
CASE STUDY 2.
MISAPPROPRIATION OF CASH
AND CHECKS
COMPANY BACKGROUND
A Chilean company imports and manufactures raw materials for the electrical industry in the
construction sector with annual revenues of $150 million.
FINDINGS
The Treasurer was misappropriating funds from the Company. Upon receipt of collections in the
form of cash and checks from the collectors, the Treasurer would deposit part of these funds to
her own personal account and to the accounts of third parties who had no relationship with the
Company. This was possible due to:
Lack of controls
Conflict between Treasury and Credit & Collections and
Little or no review by Internal Audit.
The Treasurer maintained the misappropriated balances in accounts receivable balances.
When Internal Audit performed bank reconciliations, the Treasurer would request loan balances
from a financial institution and return these loans once the audit was completed (the reconciliations were not performed on a surprise basis). At the same time, Credit & Collections was not
performing adequate controls over the receivable balances and was not circulating customers
in order to verify balances.
13
CASE STUDY 2.
MISAPPROPRIATION OF CASH
AND CHECKS
IMPACT
The misappropriation of funds amounted to $230,000.
This fraud was allowed to occur due to the following:
o
Lack of adequate control procedures. The reviews performed by Internal Audit were notified and planned in conjunction with the Treasurer.
o
Credit & Collections was not performing customer circularization in order to verify
account balances. Whenever an error was detected, a detailed review was not performed and
Credit & Collections would request an explanation of the Treasurer who would quickly cover up
any impropriety.
o
Subsequent investigation revealed anomalies in the behavior of the Treasurer. Upon
reviewing certain account movements, it was discovered that the Treasurer was addicted to gambling. A history of online betting and gambling was found in her computer during working
hours. This lead management to conclude that the hiring and selection process was deficient in
that these character traits in her personality had not been detected.

The Treasurer was fired and a criminal law suit was taken against her in order to recover the
monies stolen. Controls were reviewed and tightened in the areas of Treasury, Credit & Collections and Personnel Selection. A Financial Dashboard was also updated to help prevent the
reoccurrence of such a fraud. The Manager of Internal Audit was also fired for not performing
surprise audits of the Treasurer.
14
CASE STUDY 3.
MANIPULATION OF ACCOUNTING
RECORDS
COMPANY BACKGROUND
Chilean subsidiary of a Canadian parent imports specialized industrial machinery, with annual
revenues of $110 million.
FINDINGS
Internal Audit discovered a reimbursement to the local CEO for the amount of $45,456, arising
from the return of a vehicle which he had acquired from the Company on October 31, 2012, via
a deduction from payroll. On October 31, 2012, the vehicle, which was the property of the Company, was sold to the CEO at a price of $38,781. (The CEO had the option to acquire the vehicle
at a pre-determined price).
The CEO returned the vehicle and sold it to the Company in November 2012 at the higher price
of $45,456. A check for this amount was issued by the Company to the CEO on the same day
(November 11, 2012).
Upon the review of the supporting documentation, it was revealed that the accounting entry of
November 11, 2012 was made in December 2012. The journal entry for the check was booked
in the SAP system on December 16, 2012 and the CEO signed as having received the check on
December 23, 2012. This was the only check dated in the month of November in this period. All
prior and subsequent checks were dated in December. The check was issued in December but
booked to the accounting system with a November date. The date on the check was deliberately
manipulated so as to give the impression that the vehicle was reacquired by the Company on
November 11, 2012, when in fact this took place a month later.
During the time that the vehicle was the property of the CEO, it was involved in an accident and it
was resold to the Company in a damaged state. This apparently was the reason that the local
Chilean CEO did not want to retain the ownership of the vehicle.
Internal Audit had also observed that the check was prepared by an employee who worked in the
Accounting Department. Corporate Policy requires that Treasury was solely responsible for the
custody and emission of all checks, a breach of which occurred in this case. Segregation of duties
was not applied in the emission of the check and the date and the accounting records were deliberately altered.
15
CASE STUDY 3.
RECORDS
FINDINGS
The transaction was registered in the system in November, when in fact the check was prepared in
December.
At the date of the publication of Internal Audits report, the Company was unaware as to the location of the vehicle.
IMPACT
The Chilean CEO did not have the authority to act on behalf of the Company in the purchase
and sale of Fixed Assets with himself, without written approval from Corporate Head Office in
Toronto.
The above situation was allowed to take place due to the following:
Lack of segregation of functions. Accounting had access to checks and was also responsible for the accounting records. Treasury did not have total control over the custody and emission of checks.
Deliberate alteration of the date on a check. Accounting issued the check with a November date, when in fact the check was issued in December.
Lack of control in the system. A document was allowed to be booked in December, with
a November date.
Abuse of power by the local CEO, who was not authorized to purchase and sell vehicles
with himself.
Lack of internal control. Controlling performed an incorrect transaction upon the verbal
instructions of the CEO. Controlling should have received written approval from Head Office.
16
CASE STUDY 3.
RECORDS

Both the CEO and the Controller were fired by Corporate Head Office. Treasury took complete
control of the checkbooks and modifications were made in the SAP system such that transactions
could not be booked with any date other than the date of the transaction.
17
CASE STUDY 4. ABUSE OF POWER BY CEO

COMPANY BACKGROUND
Company manufactures ships, with operations in Mexico, Colombia and Brazil, has over 5,000
employees and annual revenues of $280 million.
FINDINGS
As part of its expansion plan, the Company acquired a company in Brazil, for a price of $45
million, in order to initiate operations in that market.
As part of the integration of the Brazilian acquisition into the existing operations, two cars which
formed part of the Fixed Assets of the new company could not be located.
An investigation revealed that, as part of the acquisition process, the CEO of the acquired company had sold these vehicles to himself at a price of ten cents each. These vehicles had a market
value of $70,000 and $65,000 each, both having been acquired by the Company in the previous
six months. The CEO was able to perform these transactions on behalf of the Company as in prior
years Corporate Head Office had assigned wide legal powers to him. The Company had transferred the legal ownership of the cars to the CEO.
Meetings were held subsequent to the acquisition whereby requests were made of the CEO to
return the cars.
18
CASE STUDY 4. ABUSE OF POWER BY CEO

IMPACT
The abuse of power by the CEO resulted in the Company suffering a financial loss of $135,000.
This loss was caused by an abuse of power by the CEO. The powers in the organization were
clearly established in the Delegation of Authority Policy and in the Company Vehicle Policy, in
which it was established that the CEO had the option to acquire vehicles which had been
assigned to him at a pre-established preferential price once a period of three years employment
had been reached.

The Company appointed a new CEO from within its own organization rather than award the
position to the CEO from the acquired company. It also initiated a criminal lawsuit against the
CEO on the basis of fraud in order to recover the two vehicles.
19
CASE STUDY 5. TAMPERING WITH CHECKS

COMPANY BACKGROUND
Company sells auto parts with over 335 branches in over 20 cities in the United States and
annual revenues of over $115 million.
FINDINGS
The Company used to pay vendors by preparing and mailing checks manually as a means of
paying its outstanding invoices. It had sent two checks for $145,000 and $183,000, respectively, to two separate vendors in order to pay outstanding invoices.
When performing the monthly bank reconciliation statement, the issued checks were identified
on the bank statement as having been cashed.
Within the following sixty days, the Company was contacted by the vendors requesting the payment of their outstanding invoices, which they claimed had been past due by over sixty days. The
Company checked their accounting records and confirmed that the invoices had been paid in
full.
The Company requested copies of the cashed checks from the bank, which revealed that the
payee on both checks had been altered falsely so that they were cashed by unidentified third
parties in a fraudulent manner.
20
CASE STUDY 5. TAMPERING WITH CHECKS

IMPACT
The Company suffered a loss of $328,000 as a result of the fraudulent alteration of two
checks in the payment of vendors invoices.

Best practice recommends using printed checks generated from computer systems to pay vendors, rather than prepare them manually, and have them collected in the offices of the paying
company by authorized representatives of the vendor. Electronic wire transfers are considered
an even more secure form of paying vendors assuming that required control procedures are
implemented.
The Company changed its policy on paying vendors by restricting the use of checks to exceptional cases only and moved to electronic wire transfers, the required controls being implemented in
the process.
The Company informed the Police of the check fraud. An investigation to find the culprits was
initiated but was unsuccessful.
21
CASE STUDY 6.
GHOST VENDOR AND PERSONAL

LIFESTYLE
COMPANY BACKGROUND
Colombian company provides Information Technology services with annual revenues of over
$48 million.
FINDINGS
An Accounts Payable Associate entered a false new vendor in the Master File in the computer
system, under the concept of systems development. Each week he would register fictitious
invoices with the forged signatory of the Systems Development Director. At the same time, due
to the lack of segregation of duties and inadequate supervision in the Treasury Department, the
same associate would prepare checks for amounts of between $500 and $600 each. The associate worked on the eight floor of the building. The procedure to pay vendors was such that
another person in Treasury would bring the checks to the ground floor, to the Cashiers office,
where vendors would arrive to collect these checks.
The AP Associate intervened and modified the process whereby he personally delivered the
checks to the Cashier. Instead of delivering the checks for the ghost vendor, he would keep the
respective checks and subsequently cash them at the bank. This did not arouse any suspicion
due to the low value of the amounts of the checks.
Over time the Company noted a distinct change in the associates lifestyle whereby his clothes,
car and personal trips did not correspond with the salary which he received from the Company.
This resulted in the Company ordering an investigation.
IMPACT
The Company suffered financial losses of up to $90,000 over a period of two years, as a result
of the fictitious invoices generated by the AP associate. This fraud was allowed to occur due to
the following:
22
CASE STUDY 6.
GHOST VENDOR AND PERSONAL

LIFESTYLE
IMPACT
Lack of segregation of functions in that IT had no control over new vendors in the system.
Accounts Payable was able to add new vendors to the system.
Lack of control in that the Company allowed such a large volume of manual checks to be
generated.
Inadequate supervision by the Treasurer and the Manager of Accounts Payable.
Lack of segregation of duties which allowed the associate to take physical control of the
checks whereby he pretended to personally deliver the checks to the Cashier.

The Company fired the AP Associate and proceeded to recover the majority of the funds which
had been stolen from the Company. It also implemented the following changes:
Greater supervision by the Treasurer and the Manager of AP.
The procedure for adding new vendors was modified such that all new vendors could be
added only by IT with the approval of Purchasing.
Significant reduction in the use of checks.
Increase in compliance with Internal Control.
More reviews by Internal Audit
23
CASE STUDY 7. MANAGEMENT FRAUD

COMPANY BACKGROUND
An Argentinian subsidiary of an English company imports and distributes parts for the automobile industry with annual revenues of $223 million.
FINDINGS
Management manipulated the financial results of the subsidiary by booking the following entries
in the local accounting records:
Freight charges from third party vendors were deferred and booked to the Income Statement over a period of 6 months, rather than charging them directly to expense, as required by
accounting best practices. This resulted in profits being inflated by $3.6 million.
Importation Costs. The Companys normal carrying period for inventory was 60 days,
during which time it should have expensed the corresponding importation costs related to this
product. Rather than book the importation costs to cost of goods sold over 60 days, it booked
them over 180 days, resulting in the asset value of inventory being overstated by the amount of
$6.4 million.
Deferred Advertising Expenses. The Company deferred advertising expenses on the basis
that it expected to have higher sales and improved financial results in a later period, at which
time it planned to book the corresponding expense. This resulted in profits being overstated by
a total of $2.8 million.
Inventory Shrinkage. The Company had a historical shrinkage rate of 3.2% of sales,
resulting from product being stolen, damaged or lost due to poor controls. Rather than book
the 3.2% to cost of sales, the Company decided to understate costs and overstate profits by
booking a lower amount of 0.8% to cost of sales. This resulted in profits being overstated by
$5.8 million.
24
CASE STUDY 7. MANAGEMENT FRAUD

All of the above was revealed by the Internal Audit Department as part of their detailed reviews.
In order to comply with best accounting practice, a negative adjustment totaling $18.6 million
was booked to account for all of the above, resulting in the subsidiary recording a loss for the
fiscal year, rather than a profit. These adjustments were reviewed and approved by the external
auditor as part of its statutory review.
IMPACT
The Company negatively impacted the results for the year to the amount of $18.6 million, due
to the deliberate manipulation of the financial records. This practice is known as management
fraud. The situation was caused by the following:
Failure to follow Generally Accepted Accounting Principles.
Failure to follow Companys Policies and Procedures.
Collusion between the CEO and the CFO to allow the adjustments to take place.
Deliberate manipulation of the financial results of the Company.

Corporate Office in England decided to terminate the employment of both the CEO and CFO,
on the grounds of deliberate manipulation of the financial statements.
The new management team reviewed Accounting Policies and implemented workshops with personnel to ensure that Policy would be strictly followed going forward.
25
CASE STUDY 8. FALSIFICATION OF REVENUES

COMPANY BACKGROUND
A U.S. subsidiary of a Swiss corporation imports and manufactures chemical products with
annual revenues of $418 million.
FINDINGS
The CEO of the subsidiary attempted to falsely inflate revenues by the amount of $18 million in
a specific month. The operation was detected and detained by the Finance Director of the Company. The detailed findings are set out as follows:
As part of the monthly operational and financial review, the CEO realized that the subsidiary was not going to achieve its monthly goal for revenues or profits.
The Company had customer orders for the amount of $18 million. The manufacturing
production of the products in these orders had not yet commenced.
A few days prior to the month-end close, it was determined that the production of the
above-mentioned products was to begin 15 days into the following month. It was unclear as to
whether the Company would have been able to successfully ship the products to the customers
during the following month.
The CEO instructed the Finance Director to create a revenue provision of $18 million, the
value of the orders.
The Finance Director clarified that the revenue did not comply with the revenue recognition requirements under U.S. or international GAAP (generally accepted accounting principles).
A telephone conversation was held with the regional Finance Director for NAFTA, whose
position was in agreement with that of the U.S. CEO.
26
CASE STUDY 8. FALSIFICATION OF REVENUES

FINDINGS
The following day the U.S. Finance Director sent an email to his regional counterpart
(copying the U.S. CEO) requesting written authorization in order to book the revenue provision
of $18 million.
He received an immediate response from the regional Finance Director denying any
knowledge of the operation and instructing him not to book the revenue provision.
The revenue provision was not booked.
The relationship between the U.S. CEO and his Finance Director became tense, the
former claiming that the Finance Director was not working as a team player in order to achieve
the goals of the Company.
IMPACT
There was no impact, financial or otherwise, for the Company as the transaction was not
booked.
The attempt by the CEO to falsify the financial statements with the support of the regional
Finance Director (commonly known as management fraud), was unsuccessful due to the professionalism and integrity of the Finance Director of the business unit.

The above incident was the first and only attempt by management to falsify the financial results
of the business unit. Although the relationship was strained, the CEO and Finance Director subsequently managed to work in harmony, both working within the standards of the Company and
according to best practices.
27
CASE STUDY 9.
USE OF ANALYTICAL TECHNIQUES

TO DETECT FRAUD
COMPANY BACKGROUND
A Canadian subsidiary, with a French parent, distributes and markets soft drinks products with
annual revenues of $214 million.
FINDINGS
Internal Audit was using financial reports to detect trends in costs and expenses which lead to the
detection of a fraud. The details are explained as follows:
Internal Audit was using an application to access the date bases and financial systems of
the Company.
As part of a purchasing and procurement review, Internal Audit applied its IT tool to access
the historical data base of purchases of packaging material: labels, bottles, bottletops, cardboard
boxes, etc. This tool helped in revealing a number of significant variations in cost of sales for these
products over a period of time. The application generated a graph which illustrated the tendencies and increase in costs as a percentage of sales over a period of time.
Internal Audit requested and received detailed information of product cost details from
other plants throughout the world, from Corporate Head office in Paris, together with the corresponding variations from standard or normal cost.
The comparison of the prices for the Canadian subsidiary versus standard costs for a
sample of some of the products is set out as follows:
STANDARD
PRICE
ACTUAL
PRICE
LABELS
0.87
1.14
31
BOTTLES
1.21
1.46
21
CARDBOARD BOXES
15.41
23.47
52
0.42
0.66
57
BOTTLETOPS
28
CASE STUDY 9.

TO DETECT FRAUD
FINDINGS
With the help of this information, Internal Audit performed a more detailed review,
increased its testing and found the following:
A number of the vendors had common owners even though they came from different sectors.
Family relationship between some of the purchasing personnel and the vendors.
Lack of transparency in the selection process of vendors.
The failure to seek alternative quotations from other vendors, as required by Company Policy.
Internal Audit concluded that the overcharging in prices by vendors resulted in a misappropriation of funds of the Company to the amount of $3.6 million.
Collusion between the Purchasing Director, 2 members of the Purchasing Department and
vendors.
The Company suffered a loss of $3.6 million for the following reasons:
The lack of transparency in the Purchasing Department.
The failure to comply with Company Policy by not obtaining alternative quotations from other
vendors.
The failure to comply with the Code of Ethics which prohibits family relationships between
employees and vendors of the Company.
The inability of local management to detect significant variations from standard costs.
29
CASE STUDY 9.

TO DETECT FRAUD

The Company took the following actions:
Termination of employment of the Purchasing Director and two buyers.
Termination of the relationship with five vendors.
Revision, update and publication of a new Purchasing manual, whereby controls and
transparency were strengthened as part of the process.
The Company succeeded in reducing its annual product costs by more than $5 million
as a result of the selection and appointment of new vendors.
30
CASE STUDY 10. VENDOR DUE DILIGENCE

COMPANY BACKGORUND
A Mexican company provides food services to the corporate sector with annual
revenues of $63 million.
FINDINGS
The Company provided food services to corporate clients
throughout Mexico, whereby it was responsible for providing meals to the employees of these companies in
plants and other large installations. It hired an external
firm to perform a due diligence of its vendors, which
resulted in the discovery of the failure to comply with
Company Policy in the following instances:
In a number of instances, chicken was being stored without refrigeration by vendors in their facilities.
The Company hired vendors in Reynosa 210km in
distance from the customers facilities in Monterrey,
where it had a considerable number of suitable alternatives within a short proximity of 5km. The vendor in
Reynosa was transporting food products by road in trucks
without refrigeration.
The external vendor witnessed food deliveries at 10pm
and 2am at the customers facilities, delivery times which
were neither normal nor permitted by the Company.
The Company was buying food products from agents
and brokers rather than going direct to producers
.
The Company did not have clear documented quality
standards.
31

FINDINGS
It was more common to use small rather than large institutional vendors. The Companys
level of purchasing was sufficient to be able to obtain large volume discounts.
The external firm hired to perform the due diligence obtained alternative external quotations
which revealed that current vendors were overcharging significantly. The percentage overcharged
by food category are listed as follows:
MEAT
22%
CHICKEN
27%
COLD MEAT
17%
GROCERIES
15%
As a result of the above findings, the external firm performed a lifestyle check on the
Purchasing Manager, as requested by the Company:
The external firm interviewed the Purchasing Manager, who explained that he lived in a
home of modest standards and which he had financed mainly by a bank mortgage.
A credit check was performed on the Purchasing Manager, upon his written authorization.
This credit check revealed that a bank loan had not been obtained.
The title of the house where he lived was in his name and had a value which was
significantly higher and disproportionate to his level of income.
The Purchasing Manager agreed to hand over to the external firm his bank statements to
prove his income and expenditure but this didnt occur.
The external firm concluded that the Company was overcharged by its vendors by the
amount of $2.4 million.
32

IMPACT
The misappropriation of funds to the amount of $2.4 million was allowed to take place due to
the following:
The lack of a process to monitor the moral integrity of employees in positions of confidence, especially those in procurement.
The lack of quality standards for food vendors.
Negligence on the part of Internal Audit.
The Company put itself and its customers at a health risk by using small and non-institutional vendors.

The Company implemented the following:
It implemented a Transparency Policy whereby employees in positions of trust (including
its buyers) were obliged to deliver a list of their patrimony (assets and debts) to the Company
once a year.
All managers, directors and buyers were required to sign a new Code of Conduct once a
year, declaring in writing that they were not participating in any fraud or illegal acts.
The Company implemented a Quality Program with its vendors, whereby periodic audits
of its vendors, their installations and transport vehicles were performed using strict guidelines.
The Purchasing Manager resigned from the Company, without receiving any compensation, on the basis that the Company would not take any legal action against him.
33
CASE STUDY 11.

WHISTLEBLOWER HOTLINE
COMPANY BACKGROUND
A Chilean company provides ambulance emergency services. It has annual revenues of $80
million with over 700 ambulances and 3,000 employees.
FINDINGS
Repairs and spare parts represented one of the principal costs of the operation of the ambulances. The company used a software application to control the maintenance and repairs, by means
of which each vehicle is assigned a unique number to which all repairs and costs are charged.
Each part taken from the warehouse had to be charged to a specific ambulance. Where this
was not the case, the written authorization of the Spare Parts Warehouse Manager was required.
Internal Audit used to perform periodic physical cycle counts with the objective of verifying the
inventory balances. The results of these cycle counts were satisfactory in that the physical balances always coincided with the system.
Even though the cycle counts did not present any variations, a group of mechanics decided to
repeat the same repair work on the same vehicle a number of times in the same year. This was
done by means of collusion between the drivers and the mechanics whereby the drivers would
request a fictitious service or mechanical repair work in order to ensure that the corresponding
spare part was requested from the warehouse. This was performed successfully as the Company
did not have a mechanism in place to check the reasonableness of the work performed. The
drivers would subsequently sell the spare parts in the black market and share the proceeds with
the mechanics. The situation was discovered as a result of a whistleblower who filed an anonymous report via the Companys hotline.
34
CASE STUDY 11.

WHISTLEBLOWER HOTLINE
IMPACT
Once the above situation was determined a full audit was performed of all spare parts utilized
with a value higher than $200 and the use of the part was compared to the useful life of each
ambulance. Also it was determined that spare parts had left the warehouse without the required
signature of the Warehouse Manager.
The estimated loss to the Company from stolen spare parts was calculated at $430,000 and
was allowed to take place due to the following:
The lack of adequate controls to control the issuance of spare parts from the warehouse
and the lack of supervision by the Spare Parts Warehouse Supervisor.
The lack of reasonableness checks to ensure that the use of spare parts and the cost of
maintaining each vehicle were reasonable.
Poor control environment in the Company resulting in the ambulance drivers being able
to realize the ease with which they could steal the spare parts.

The Company implemented the following control measures:
It terminated the employment of 5 mechanics and 16 drivers.
All spare parts repair requests with a value above $300 had to be approved by the Maintenance Manager.
Modifications were made to the system such that all unusual repairs would produce an
alert and allow the maintenance request to be fully checked to ensure that the request was
authentic.
35
CASE STUDY 12. GHOST EMPLOYEES

COMPANY BACKGROUND
A Mexican company provides medical emergency services with annual revenues of $200 million
and over 700 employees.
FINDINGS
The external auditors of the Company discovered that salaries had continued to be paid in the
name of employees long after their employment had been terminated by the Company. In the
case of one employee who had resigned from the Company in April, salary deposits had been
made for each one of the subsequent months of the calendar year. This was determined by
comparing payroll records with the bank accounts of the Company. By reviewing the payroll
records, it was revealed that the payroll deposits were being made to the bank account of the
same individual, who worked in the payroll department. This individual had access to the payroll modifications in the system and was able to access the employee bank account details and
modify them to include his own bank account details, in the case where employees were leaving
the Company. In this way, the corresponding employee was able to continue receiving payroll
deposits for former employees.
The investigation was extended to the previous five years and a total of 23 cases were identified,
all in the name of the same individual, who would keep the payments to his account (in the
name of the former employee) alive for a few months and then remove the employee from the
system. This individual worked in Human Resources and had access to the magnetic cards
which controlled the access of all employees to the facilities. In the case of these 23 cases, he
ensured that the respective magnetic cards were not destroyed and he would continue to register
the entry and departure of these former employees so as to maintain their employment alive
in the system.
IMPACT
The total losses were estimated at $621,000, which included both the salary amounts deposited
to the above payroll employee and also the social security payments made by the Company to
the respective authorities.
36
CASE STUDY 12. GHOST EMPLOYEES

The guilty partys employment was terminated by the Company and criminal action was taken
against the employee. The following corrective actions were taken by the Company:
1 The assignment of a new employee responsible for updating employee hires, terminations
and payroll changes in the system.
2 All employee terminations were checked against subsequent payroll payments, by
Accounting.
3 Surprise checks of employee assistance were performed subsequently by Accounting and
compared to the system assistance log-in.
37
CASE STUDY 13.
(TEEMING AND LADING)
COMPANY BACKGROUND
An Argentinian company distributes and sells books through a chain of 20 bookstores with
annual revenues of over $100 million.
FINDINGS
The Treasurer of the Company was able to perpetrate a fraud due to the lack of internal controls
in the organization. The responsibilities of the Treasurer included collections and the corresponding updating of the accounting records, which represented a lack of segregation of functions. The Company had the practice of having a large number of unidentified collections from
customers. These amounts represented deposits from different bookstores and would remain as
unidentified deposits on the bank reconciliation statements for a number of months. When new
deposits were received by means of cash or bearer checks, he would steal these amounts and
replace them with the old unidentified deposits, destroying the most recent receipt. This practice
is referred to as teeming and lading. The Treasurer was able to perform these defalcations
due to his ability to access collections and the accounting records and to the weak controls over
bank reconciliations.
IMPACT
The total defalcation amounted to $120,000 and was allowed to take place due to the following:
Lack of segregation of duties between the control over collections and the accounting
records.
The failure by Credit & Collections to pursue old past due accounts receivable balances.
The Treasurer was able to apply recent collections to these balances. These were often minor
balances outstanding from customers who were no longer doing business with the Company.
38
CASE STUDY 13.
(TEEMING AND LADING)
IMPACT
Lack of control. The most recent receipts relating to deposits which were misappropriated
by the Treasurer were also cancelled by him. These cancellations went undetected by Internal
Audit.
Lax internal controls and reasonableness checks as the Finance Manager was unaware
as to the accumulation of past due receivable balances which were above average for the industry.
ACTIONS AND FOLLOW UP

The Treasurers employment was terminated by the Company and a criminal lawsuit was initiated against him in order to recover the misappropriated funds. Access to the accounting records
by the new Treasurer was not permitted. A full review and overhaul of Policies and Procedures
for Treasury, Collections and Accounting took place resulting in a new Finance Dashboard being
implemented, to allow the Company the ability to monitor all financial ratios and metrics going
forward.
39
CASE STUDY 14.
DISCOUNTS TO FAMILY AND

FRIENDS AND WHISTLEBLOWER
COMPANY BACKGROUND
A U.S. company sells electro domestic products through a chain of 100 retail outlets with annual
revenues of over $1,000 million.
FINDINGS
The manager of one of the retail outlets was applying discounts above the amounts established
for purchases by family and friends. The manager had been applying these discounts for the
previous five years but in the last year both the amount and frequency of the discounts increased
substantially. This defalcation went undetected until another employee in the same retail outlet
filed an anonymous report via the Companys whistleblower hotline.
IMPACT
The discounts resulted in total losses of $50,000 to the Company.
The fraud was allowed to happen due to the following:
Lax control environment and lack of reasonableness controls. The Finance Manager had
not realized that the average discounts for that retail outlet were higher than the normal average,
especially in the previous year. Neither had he detected the cases of sales at below cost generated by the discounts.
Lack of supervisory controls. The Store Manager was able to authorize the discounts with
out any review or approval by a higher authority within the organization.
Having discovered the defalcation the Company analyzed the behavior of the Store Manager and discovered that he had been offering and selling the stolen products online at levels
below normal retail prices.
40
CASE STUDY 14.
DISCOUNTS TO FAMILY AND

FRIENDS AND WHISTLEBLOWER

The Store Managers employment was terminated by the Company and criminal action was initiated by the Company to recover the misappropriated funds. The procedures for granting
employee discounts on products at the store level were revised and the IT system was amended
to control the maximum amounts that could be approved by managers.
The Internal Audit Managers employment was also terminated by the Company due to his
inability to detect the fraud.
41
CASE STUDY 15.
MANIPULATION OF CASH
RECEIPTS
COMPANY BACKGROUND
A Spanish subsidiary of a German holding manufactures and sells chemical products with
annual sales of $40 million.
FINDINGS
The Sales Manager was authorizing sales to a customer, one of whose shareholders was an
ex-employee of the Company. The sales to this customer were correctly registered in the books.
In collusion with another employee of the Company, the Sales Manager falsely inflated the cash
receipts such that the amount recorded was higher than the actual payment. This resulted in a
liability being generated for this customer. This liability was settled by the shipping of additional
product to the customer.
As the customer was suffering financial difficulties, the Company accepted deferred payments
for its invoices. The Company was allowed to discount these deferred payments with the bank,
before their maturity, resulting in a financial cost.
42
CASE STUDY 15.
MANIPULATION OF CASH
RECEIPTS
IMPACT
The falsification of the cash receipts resulted in product to a value of $130,000 being shipped
to the customer. The Company also incurred financial costs of $20,000 due to the discounting
of the documents.
The above losses were allowed to take place due to the following:
Lack of control procedures, including the fact that the Company did not have an Internal
Audit function.
Credit & Collections failed to circularize customers on a regular basis to reconcile balances.
Failure by the Finance Manager to detect a credit balance with the customer, which of its
own was quite unusual.
The Finance Manager also failed to escalate the fact that the Company was receiving
documents from the customer with deferred payment dates. This was not an accepted practice
for other customers.
The failure to perform regular physical cycle counts in the plant. By performing a physical
inventory just once a year, all differences were booked to cost of sales, resulting in the inability
of the Company to detect the above defalcation.
ACTIONS AND FOLLOW UP

The employments of both the Sales Manager and the individual responsible for modifying the
cash receipts were terminated by the Company. Procedures were modified to ensure greater
control over sales, cash receipts and collections.
43
CASE STUDY 16. GHOST VENDOR

COMPANY BACKGROUND
A Mexican subsidiary of a French holding distributes pharmaceutical products with annual sales
of $300 million.
FINDINGS
Two years previously the Company had performed a restructuring of its Accounts Payable
function by automating payments to vendors to ensure a speedier fulfillment of its orders from
vendors
A new wire transfer system was implemented allowing automated electronic transfers to
be made to the Companys vendors.
The new system caused quite a number of problems, as the Accounts Payable personnel
was not properly trained on how to use the new system.
One of the employees in Accounts Payable registered an anonymous complaint via the
whistleblower hotline complaining about the new system and requesting an improvement in the
process. This resulted in the Company deciding to initiate a special audit of the process with
particular emphasis on bottlenecks and the whole implementation process.
The auditor discovered a number of segregation of duties issues with personnel in
Accounts Payable. He also discovered a number of invoices with unusual services and for round
sum amounts ($4,000, $5,000 etc.) on a monthly basis.
Upon further investigation by the auditor, he discovered that the bank account to which
the monies were being deposited corresponded with the bank account of one of the employees
in Accounts Payable.
The Accounts Payable employee that was perpetrating the fraud had generated a ghost
vendor in the system, together with fictitious invoices and had set up the bank account such that
all payments were made on a monthly basis by wire transfer.
44
CASE STUDY 16. GHOST VENDOR

IMPACT
The above resulted in the misappropriation of funds to the amount of $60,000 in one year. The
following breakdown in controls allowed the fraud to occur:
The configuration of the system profiles of personnel in Accounts Payable was not properly set up and did not have a correct segregation of functions. For example, the same individual
was able to add a new vendor, register invoices and process the payment.
Internal Audit did not participate in the implementation of the new vendor payments
system.
The new vendor payments system did not contemplate any delegation or escalation process based on the amounts of the payments.

A full documentation of all the invoices related to the fraud was performed in the presence of a
notary public. The evidence was presented to the employee, who made a full confession accepting culpability for the fraud. The employee resigned from the Company and subsequently
returned the stolen funds.
45
CASE STUDY 17. MISAPPROPRIATION OF CASH

COMPANY BACKGROUND
An Argentinian company sells cars and agricultural machinery with annual sales of $120
million.
FINDINGS
Due to a lack of controls and dishonesty, the Treasurer was able to perpetrate a fraud
resulting in a loss to the Company of $80,000. The details are set out as follows:
The Treasurer was responsible for receiving cash from the sales of cars and agricultural
machinery in certain cases. It was common for some customers to pay in cash in the
rural parts of Argentina.
He was responsible for controlling these cash receipts and delivering them to the
transport company, whose responsibility was to deposit these monies to the Companys
bank account.
The Treasurer would take monies from the cash receipts and keep them for his personal
use with the balance being handed over to the cash transport company. He would
subsequently register the full sale in the Companys accounting system, triggering a
difference between the monies deposited and the amount of the full sale.
The Treasurer was able to cover up the fraud as he was also responsible for preparing
the bank reconciliation statements and did not perform any follow-up on the
outstanding differences caused by his own dishonesty.
The Treasury liked to gamble and was seen (by an anonymous individual) betting large
amounts of money in a casino. This person informed the CEO of the Company, who in turn
instructed that a full audit be carried out.
47
CASE STUDY 17. MISAPPROPRIATION OF CASH

IMPACT
The total amount of money stolen by the Treasurer amounted to $80,000. The following
circumstances permitted the fraud to occur:
Lack of segregation of functions in that the Treasurer was responsible for receiving cash
and updating the system. A correct segregation of functions would ensure that one
person is responsible for receiving cash and another for updating the accounting
system.
The Accounting Department did not perform the bank reconciliation statements, as
should be their responsibility to ensure a correct segregation of functions. This would
help ensure vigilance over the control of cash and the booking of the sale in the system.
The Company also maintained Petty Cash balances. These were checked periodically
by Accounting, who used to perform surprise cash counts. This is a correct control but
should have been extended to control over the cash sales performed by the Company.

The Companys lawyers documented the fraud together with the support of an accounting
fraud expert. They reviewed the documentation and prepared a file detailing the misappropriation of funds with dates and amounts.
The Treasurers employment was terminated and a criminal lawsuit was initiated against him.
The Company made a complete review of its internal controls and made changes to ensure
that the correct segregation of functions and control and supervisory mechanisms were put in
place to safeguard the assets and accounting records of the Company.
48
CASE STUDY 18.
MISAPPROPRIATION OF CASH SALES

AND WHISTLEBLOWER
COMPANY BACKGROUND
Grupo gastronmico con 50 locales a la calle. Facturacin anual estimada 72 M USD anual.
FINDINGS
The manager of a restaurant in Buenos Aires with one of the highest sales was able to misappropriate funds by working in collusion with the cashier and another employee of the restaurant:
The restaurant is located in a shopping mall close to an area with a high concentration
of secondary schools. The students were regular customers of the restaurant, paid by
cash and did not request receipts for their meals.
During peak hours, the cashier, manager and other employee colluded to exclude
approximately one out of every four sales from the accounting system used to record the
sale. The cash was safeguarded in the cash register at the time of the sale and was
removed later at the end of the shift.
The cashier was the sole person with access to the cash register, which could be opened
only by registering a sale. The cashier would book the sale at a very low price, being a
fraction of the real value of the meal (at a unit price of $0.02, for example, instead of
$8.63). In this way, he was able to open the cash register, book the sale (at a very low
value), give the change to the customer and leave the excess in the cash register. This
was applied in the case of cash sales, which represented a high percentage of business.
It was possible for the cashier to cover up the fraud by not issuing a receipt to the
customer, which, as already mentioned, the customer did not require.
At the end of the shift or working day, the manager and the cashier would reconcile
cash receipts with the system and ensure that the excess was taken by them. They would
then proceed to perform a closing of sales and cash for the day.
49
CASE STUDY 18.

AND WHISTLEBLOWER
HALLAZGOS
The manager was responsible for preparing and submitting a weekly report to the
Inventory Control Department. This report was falsely manipulated by the manager to
ensure that any shrinkage was disguised to cover up the missing sales.
An Internal Audit Department existed but they were negligent in that they did not perform any
surprise visits to verify cash sales or an inventory of stock.
The fraud was detected by means of an anonymous report filed by another employee of the
restaurant via the Companys whistleblower hotline.
IMPACT
The total fraud perpetrated by the employees in the restaurant was estimated at $360,000.
The following breakdowns in the Companys internal control system allowed the fraud to take
place:
The system allowed changes to be made to the unit values such that meal items were
booked at a fraction of their normal retail price.
Internal Audit was not reviewing the value of the unit items which were sold. This could
have been easily checked against the menu prices. Neither was this detected by
Operations, whose job it was to control the operation of the restaurants.
Internal Audit did not perform surprise cash counts or inventory cycle counts.
The three restaurant personnel who colluded to perpetrate the fraud had not taken
vacation in over 24 months, a situation which should have been detected by Human
Resources and Internal Audit.
Operations did not properly control shrinkage for the restaurant.
50
CASE STUDY 18.

AND WHISTLEBLOWER

Once the whistleblower filed his report, a full investigation took place, with the participation of
Legal, Internal Audit and Human Resources.
An auditor was sent to the restaurant as a mystery shopper and did not receive a receipt for his
meal, as required by Company Policy. A surprise cash count was performed and this revealed
a large excess of cash in the cash register.
The fraudulent activities were documented, the three employees employment was terminated
by the Company and a criminal lawsuit was initiated with the objective of recovering the
monies stolen. The system was modified to prevent any future alteration of the unit prices.
51
CONCLUSIONS
We have witnessed some of the most creative and imaginative schemes to perpetrate frauds,
within organizations; in these cases corporations. Even though these have involved some of
the most devious and selfish mechanisms, we are firm believers in that most of human behavior
is focused on being creative and on growing value for the organization. Often the discontented and demotivated seek their reward with a self-justification as a means of getting back at the
promotion or pay rise which never took place. They feel that the monies gained by the fraud
are just desserts for opportunities which did not come their way or compensation for the
rewards earned by others.
It becomes our responsibility to learn from these frauds and ensure that the adequate controls,
structures and risk minimization techniques are implemented to prevent re-occurrence. We
need to keep abreast of latest techniques and technologies to ensure that the organization is
best prepared for the least expected. Training and staff development are key elements at all
levels.
As external consultants and specialists in internal audit, corporate governance and promoters
of best practices, our job is to stay close to our clients and help them design and implement the
best controls and standards available, at all times. We also need to ensure that the tone at
the top is established by adopting the highest ethical standards in the organization. This
example from the top is probably the most effective and least expensive method in achieving a
fraud-free environment.
In Kreston we are always striving to achieve the highest standards by developing technologies
such as whistleblower hotlines, business analytical tools and data mining techniques all focused
on improving our clients controls and profitability.
We hope that these case studies will be a useful tool in terms of allowing us to stand back and
take a second look within our organization to prevent these frauds from taking place.
Unless.they have already occurred?
INTERNAL AUDIT AND FRAUD PREVENTION
Kreston CSM.
52
KRESTON INTERNATIONAL:
jon@kreston.com
KRESTON MXICO:
John Milner
jmilner@krestoncsm.com
KRESTON ARGENTINA:
Martn Ghirardotti
mghirardotti@llyasoc.com.ar
AUTHORS:
John Milner
Martin Ghirardotti
COPY STYLE:
Enrique Pastor
Miguel del Olmo
CONCLUSIONS:
Miguel del Olmo
DESIGN:
Alejandra Jimnez.
POSTED BY:
Digital Army.
Legal:
Kreston International (Kreston) is a worldwide
network of experienced, independent accounting
firms, each with its own established client base. Each
firm is a member of Kreston International , a company registered in the UK and limited by guarantee
and does not provide services to the clients of its
member firms.
Each firm is a separate entity, and as such has no
liability for the acts or omissions of any other member
firm.
Kreston CSM, S.C. is a firm of accountants and business consultants belonging to Kreston International
.
Kreston International (Kreston) is a worldwide
network of experienced, independent accounting
firms, each with its own established client base. Each
firm is a member of Kreston International , a company registered in the UK and limited by guarantee
and does not provide services to the clients of its
member firms.
Each firm is a separate entity, and as such has no
liability for the acts or omissions of any other member
firm.

Findings On Fraud and Error in Financial Statements

Transféré par

Informations du document

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Findings On Fraud and Error in Financial Statements

Transféré par

Droits d'auteur :

Formats disponibles

INTERNAL AUDIT &

ABOUT THE AUTHORS

INTERNAL AUDIT & FRAUD PREVENTION

ABOUT THE AUTHORS

Martin Ghirardotti a partner with Lisicki, Litvin &

INTERNAL AUDIT & FRAUD PREVENTION

ABOUT THE AUTHORS

INTRODUCTION AND PERFACE

INTERNAL AUDIT & FRAUD PREVENTION

ABOUT THE AUTHORS

Miguel is an Audit and Corporate Governance

INTERNAL AUDIT & FRAUD PREVENTION

INTERNAL AUDIT & FRAUD PREVENTION

INTERNAL AUDIT & FRAUD PREVENTION

INTERNAL AUDIT & FRAUD PREVENTION

These are based on real-life experiences which we have accumulated over

INTERNAL AUDIT & FRAUD PREVENTION

INTERNAL AUDIT & FRAUD PREVENTION

CASE STUDY 1. FREIGHT OVERCHARGING

INTERNAL AUDIT & FRAUD PREVENTION

CASE STUDY 1. FREIGHT OVERCHARGING

Kilometers charged by the vendor

INTERNAL AUDIT & FRAUD PREVENTION

CASE STUDY 1. FREIGHT OVERCHARGING

INTERNAL AUDIT & FRAUD PREVENTION

INTERNAL AUDIT & FRAUD PREVENTION

ACTIONS AND FOLLOW-UP

INTERNAL AUDIT & FRAUD PREVENTION

INTERNAL AUDIT & FRAUD PREVENTION

INTERNAL AUDIT & FRAUD PREVENTION

ACTIONS AND FOLLOW-UP

INTERNAL AUDIT & FRAUD PREVENTION

CASE STUDY 4. ABUSE OF POWER BY CEO

INTERNAL AUDIT & FRAUD PREVENTION

CASE STUDY 4. ABUSE OF POWER BY CEO

ACTIONS AND FOLLOW-UP

INTERNAL AUDIT & FRAUD PREVENTION

CASE STUDY 5. TAMPERING WITH CHECKS

INTERNAL AUDIT & FRAUD PREVENTION

CASE STUDY 5. TAMPERING WITH CHECKS

ACTIONS AND FOLLOW-UP

INTERNAL AUDIT & FRAUD PREVENTION

GHOST VENDOR AND PERSONAL

INTERNAL AUDIT & FRAUD PREVENTION

GHOST VENDOR AND PERSONAL

ACTIONS AND FOLLOW-UP

INTERNAL AUDIT & FRAUD PREVENTION

CASE STUDY 7. MANAGEMENT FRAUD

INTERNAL AUDIT & FRAUD PREVENTION

CASE STUDY 7. MANAGEMENT FRAUD

ACTIONS AND FOLLOW-UP

INTERNAL AUDIT & FRAUD PREVENTION

CASE STUDY 8. FALSIFICATION OF REVENUES

INTERNAL AUDIT & FRAUD PREVENTION

CASE STUDY 8. FALSIFICATION OF REVENUES

ACTIONS AND FOLLOW-UP

INTERNAL AUDIT & FRAUD PREVENTION

USE OF ANALYTICAL TECHNIQUES

INTERNAL AUDIT & FRAUD PREVENTION

USE OF ANALYTICAL TECHNIQUES

INTERNAL AUDIT & FRAUD PREVENTION

USE OF ANALYTICAL TECHNIQUES

ACTIONS AND FOLLOW-UP