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Catch Them When You Can

Catch me if you can frank abagnaleIt seems that the corporate world is rife with fraud these days, and as CPAs on the financial front lines, it’s up to us to protect the public from these crimes.

Just last week prosecutors in the high-profile fraud case against former Nortel executives gave closing arguments, telling a Toronto courtroom three former Nortel executives knowingly breached accounting rules to manipulate financial records and reap millions in bonuses, keeping the now-insolvent tech firm's investors and the public in the dark.

You think it won’t happen to you.

Many years ago, as a first year staff auditor, I was assigned to the audit team of a not-for-profit organization. One of my areas was cash, but after going over budget by many hours, I still couldn’t get the general ledger balance to reconcile to the bank statements. I was convinced that I just didn’t know how to do a proper bank reconciliation, but if they just gave me some more time, I would figure it out.

The audit partner was smarter. She didn’t think it was me. She instructed the client to order copies of all the checks that had been written over the past year. Once we looked at those, we learned the real reason the checkbook didn’t balance. The bookkeeper had been committing fraud, writing tens of thousands of dollars in checks to herself. Never in a million years would I have thought she was stealing.

To catch a thief…

If you are going to prevent and detect fraud successfully, you must know how it’s committed and how to recognize the warning signs. Sometimes, opening your mind to the possibilities can be a challenge. The more you understand how a fraudster thinks, the better equipped you will be at detecting fraud and developing controls to prevent it.

The need to understand how fraud works is more critical than ever, as employee fraud is on the rise. According to the Corporate Fraud Index, fraud reported as a percentage of compliance-related reports has been steadily increasing since it started in 2005. This statistic measures fraud reporting in comparison to all compliance reporting activity from more than 1,400 organizations worldwide, including nearly half of the Fortune 500. The rise is attributed, in part, to greater awareness of compliance issues and willingness to report deviations.

CPAs who want to prevent fraud and gain insight into the minds of fraudsters now have a unique opportunity to turn to the man the FBI uses to train investigators: Frank Abagnale, whose exploits as a young swindler were portrayed in the memoir, Hollywood film and Broadway musical, Catch Me If You Can. Abagnale will lead an upcoming AICPA webcast, The Art of the Steal: An Interview with Frank Abagnale. Keith Slotter, CPA/CFF, a fraud prevention expert and former assistant director of the FBI Training Academy, will also speak during the two-hour online event. We encourage attendees to take the conversation online by tweeting during and after the event with the hashtag #AICPAcatchme. This webcast is just one of the many fraud resources available from the AICPA. 

Michael Ramos, Director of CPE and Training, American Institute of CPAs. Mike sets the strategic direction and manages operations of the professional development business unit at the AICPA. He combines his understanding of technical audit and accounting issues with his communication skills and experience to advance AICPA CPE offerings. He is the author of many books and training courses on SOX 404, internal control and other auditing matters.

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