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106214Executive Roadmap to Fraud Prevention and Internal Control

by Martin T. Biegleman and Joel T. Bartow

 

Summary

Although it seems like one could as the authors say “just tell people not to commit fraud,” that approach doesn’t always work. The authors discuss how to prevent fraud by using:

  • Legislation,
  • Internal controls,
  • Information security,
  • Whistle blowers,
  • Background checks and
  • Training.

Fortunately only the first 20 pages are spent recounting the well-known frauds at World Com, Enron, Tyco and others. The rest of the book covers specific strategies to prevent mostly financial statement fraud, with lots of case studies and interviews with fraud investigators and convicted fraudsters.

The book is easy to read, with numerous subheads and has an executive summary for each chapter.

Why is this important

Fraud can cost a company money and affect morale. It can also result in criminal prosecution. By understanding the reasons someone might commit fraud, as well as the methods they might use, you can increase your chances of spotting fraud.

When this subject is applicable

The authors briefly discuss Sarbanes-Oxley public company requirements and most fraud examples are large public companies. Much of the text details fraud prevention strategies applicable to any size company and as discussed in a Certified Fraud Examiners report, “92% of all frauds perpetrated against companies are asset misappropriation.” The chapter on internal fraud covers cash misappropriation and corruption schemes involving bribery, kickbacks and bid-rigging, which are frauds that can occur at any sized company.

How to apply this

This text provides an overview of fraud rather than specific checklists or fraud prevention plans. The appendix does include two useful fraud risk factors related to

  • Misstatements arising from fraudulent financial reporting and
  • Misstatements arising from misappropriation of assets

Who this book is for

  • An executive, manager level, CEO or CFO seeking an overview of fraud
  • CPAs just starting their career needing an overview
  • Accountants looking for a new perspective on fraud prevention
  • Someone considering becoming a CFE (Certified Fraud Examiner) or a CPP (Certified Protection Professional)
  • Controllers

Recommended?

This text is an overview of fraud written in an easy-to-read format that is more interesting and entertaining than most accounting books. While this text does not have specific fraud audit program steps or checklists, it provides an insightful look at the how and why of financial fraud.

This book is recommended as a reference book to read and then keep on hand for reference.

For CPE course credit, take course 106114 "Executive Roadmap to Fraud Prevention" which uses this text.

1062Financial Statement Fraud Prevention and Detection

by Zabihollah Rezaee and Richard Riley





Summary

Everyone has heard about the major corporate fraud cases such as Enron and many people either lost money or know someone who lost money as a result of such fraud. Most CPAs are familiar with Sarbanes-Oxley, even if they haven’t worked on audits or internal control reviews.

The authors concentrate on public company financial statement fraud and its prevention, and cover:

  • the history of financial fraud,
  • how corporate structure and governance should function to prevent fraud,
  • common fraud schemes and red flags,
  • how internal and external auditors should work to prevent and detect fraud and
  • the increasing danger with hackers and electronic commerce

Although many other books have covered the same historical fraud cases covered here, these cases provide perspective and a hope that we can avoid repeating the past.


Why is this important

Financial statement fraud appears to be increasing rather than declining, with new devious approaches to fraud along with the tried and true methods. The rise in outside regulation of accountants in the form of the Public Company Accounting Oversight Board demonstrates the growing concern of the public about the reliability of audited financial statements.

When this subject is applicable

Although the text concerns fraud in larger public companies, many of the prevention, detection and correction mechanisms discussed are applicable to any size company, including small privately held companies and non-profits.

How to apply this

This book provides an overview of the types of financial statement fraud that can occur and what standard controls and procedures should be in place to prevent such fraud. Several checklists and are included such as:

  • Pressures, opportunities and attitudes/rationalizations related to risk of financial statement fraud,
  • Finanicial statement fraud red flags,
  • Audit committee attributes,
  • Internal audit roles and responsibilities and
  • Ten keys to successful fraud examination.

Specific procedures are also detailed, such as the sample protocols of how to react to fraud allegations.


Who this book is for

Although this text is overview in nature, and does not have sufficient detail to fully implement a corporate fraud program, most financial professionals would gain an understanding of the general techniques fraudsters use and steps that can be taken to reduce fraud.

A CPA could be expected to have general knowledge of typical fraud schemes and how to prevent them and this book covers these subjects. The information would also be useful for members of audit committees or boards of directors, senior management, internal auditors, independent auditors and fraud examiners.


Recommended?

Financial Statement Fraud Prevention and Detection is textbook dry. Although it lacks the intrigue found in some of the other books on fraud, it is one of the most thorough books in terms of describing:

  • Responsibilities of audit committees, boards of directors and management
  • Roles of internal and external auditors and
  • Rules and regulations related to fraud

This book is recommended as a reference book to read and then keep on hand for reference.

For CPE course credit, take course 1062 "Financial Statement Fraud" which uses this text.

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