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FRAUD
SCHEME

INTRODUCTION

• Fraud prevention, detection and

investigation need understanding of
fraud schemes
• What is Fraud Schemes?
• How many fraud schemes we know?

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FRAUD SCHEME (TAXONOMY)

INTRODUCTION
• the best taxonomy is the ACFE Schemes.
Why?
– the ACFE = primary antifraud organization
– Stable over time
– has a limited number of schemes
– little overlap in the ACFE fraud tree, especially
when compared to the other taxonomies
– has unique characteristics for it’s three
– Easy to apply to fraud audits, investigations, and
fraud prevention programs

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 ACFE FRAUD TREE (2016) ACFE FRAUD TREE 2014

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ACFE FRAUD TREE: UNIQUE

CHARACTERISTICS OF EACH CATEGORY

ACFE REPORT TO THE NATION

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FRAUD TREE AND WHO AUDITS WHOM

• Financial Statement Fraud: Financial Auditors
– Financial statement fraud tends to lead to a material
misstatement of the financial reports
– Financial audits = to detect material misstatements
– Why not internal auditor?
– Because executive management is involved with financial
statement fraud, the internal auditors can be fooled or
pressured into complicity
• Asset Misappropriation: Internal Auditors
– asset misappropriation schemes tend to be immaterial,
especially individual transactions
– Difficult for financial auditors to discover doing traditional
financial audits
• Corruption: Possibly Either
– Corruption frauds tend to be larger than asset misappropriation
– the primary responsibility lies with external audit and
sometimes with internal audit

ACFE FRAUD TREE

 FINANCIAL STATEMENT FRAUD
1. Does not involve direct theft of assets
2. Often objective is to obtain higher stock price (i.e., financial
fraud)
3. Typically involves misstating financial data to gain additional
compensation, promotion, or escape penalty for poor
performance
4. Often escapes detection until irreparable harm has been
done
5. Usually, perpetrator is executive management

 ASSET MISAPPROPRIATION  CORRUPTION

1. Stealing something of value – usually 1. Bribery, etc.
cash or inventory (i.e., asset theft)
2. Converting asset to usable form
3. Concealing the crime to avoid detection
4. Usually, perpetrator is an employee

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Recent Financial Statement Frauds

 Enron
 WorldCom
 Adelphia
 Global Crossing
 Xerox
 Qwest
 HIH Insurance Australia
 OneTel Australia
 Many others (Cendant, Lincoln Savings, ESM,
Anicom, Waste Management, Sunbeam, etc.)
© 2003, 2005 by the AICPA

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Corruption
Corruption

Conflict of Illegal Economic

Bribery
Interest Gratuties Extortion

Purchases Invoice  Inti Skema Korupsi = memberi

Schemes Kicbacks
keuntungan atau manfaat
Sales Bid lainnya secara illegal kepada
Schemes Rigging dirinya dan/atau pihak lain.
 Aspek Hukum = tindak pidana
Other Other sebagaimana dimaksud dalam
UU no 31 Tahun 1999 dan UU No 20
Tahun 2001 (Tipikor).

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KORUPSI MENURUT ACFE DAN UU TPK

NO ACFE UU NO 31/1999 JO UU NO
20/2001
1. Conflict of Benturan kepentingan dalam
Interest pengadaan
2. Bribery Suap Menyuap
3. Illegal Gratuities Gratifikasi
4. Economic Pemerasan
Extortion
Kerugian Keuangan Negara
Penggelapan dalam Jabatan
Perbuatan Curang

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Skimming

 Skimming = front-end fraud (Funds are

stolen before a booking entry is made)
 Skimming schemes :
 SALES SCHEMES (unrecorded sales, understated
sales)
 RECEIVABLES SCHEMES (write-off schemes,
lapping schemes, unconcealed schemes)
 REFUND SCHEMES.
 The 2004 ACFE Survey, 28.2% of all cash
misappropriations are skimming.

Receivables: Lapping Scheme

 a form of robbing one customer’s payment to pay
another’s, because the latter’s payment was stolen by
the perpetrator.
CUSTOMER FRAUDSTER COMPANY
A Payment Stolen Unpaid

A account is
B Payment To pay A Account
paid

C Payment Stolen C and D

Account
D Payment To pay BAccount overstated
and unpaid
on te book

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a. Billing Schemes
• A shell company scheme
– using a fictitious company to generate checks from the
company’s resources
• The pass-through scheme
– The perpetrator actually buys products through the pass-
through vendor.
– The perpetrator sells the goods to his or her employer, but
at an inflated price
• The nonaccomplice vendor scheme
– involves a legitimate vendor ( an innocent party)
– The perpetrator bill or overbill the company using the
vendor’s invoices, and either intercept the check for the
invoice or send the check to the vendor and ask for a refund
from the vendor and intercept that check

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 A Forged Maker Scheme

 signing of another person’s name to a check with
fraudulent intent and the fraudulent alteration of a
genuine instrument
 A forged endorsement scheme
 intercepting a company check intended for some other
legitimate party and converting that check by signing
(forging) the other party’s name on the endorsement of the
check
 The altered payee scheme
 intercepting a check written to another party, but in this
scheme the culprit alters the payee designation so the
check can be converted to himself or an accomplice.

 The concealed check scheme :

 The perpetrator prepares a fraudulent check and
submits it along with legitimate checks to an
authorized signer, whom the perpetrator hopes will
sign it without a proper review

 An authorized maker scheme

 a perpetrator has check-signing authority and makes
out fraudulent checks to herself for her own benefit

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THANK YOU

QUESTIONS?

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