Fraud Examination Casebook with Documents

A Hands-on Approach

William H. Beecken, Clark A. Beecken

• Publisher: Wiley
• Year: 2017
• ISBN:
  9781119349877
• Edition: 1
• Topic: Business
• Subtopic: Finance
• Index: Business

A practical advantage for entry-level fraud examiners with start-to-finish casework

Fraud Examination Casebook with Documents provides critical practice for students and new CPAs; criminal and insurance investigators; and attorneys seeking additional guidance on real-world fraud investigation. With five cases that include over 100 pages of documentation, this guide helps you put your conceptual knowledge to work as you conduct full-length Fraud Examinations from predication through report. Short instructional narratives guide you through tools like horizontal and vertical analysis, report writing, and other important tasks, while Excel templates streamline the process and kick start your investigation. Multiple-choice questions help you gauge your understanding and practical mastery, while expert guidance throughout prompts you to draw on your existing knowledge and apply it to casework. With a focus on asset misappropriation and financial statement fraud, these cases provide highly relevant experience for real-world practice.

Learning concept isn't always enough to do the job effectively; "knowing" is different from "applying, " yet few practical resources exist for new and aspiring fraud examiners—until now. This book provides the much-needed practice that helps examiners polish their skills, with expert guidance every step of the way.

• Conduct actual Fraud Examinations
• Perform horizontal and vertical analyses
• Review checks and decode debit card transactions
• Examine adjustments to electronic records
• Perform simple forensic data analytics
• Vouch to/from documentation
• Write complete Fraud Examination reports

• Prepare court-ready schedules and audio-visuals

As you work your way through the cases, you'll develop the skills and instinct experienced examiners rely upon every day. You'll hone your analytical edge and master the essentials of report writing, leaving you fully equipped to conduct a thorough investigation and deliver your findings clearly, comprehensively, and authoritatively. Fraud Examination Casebook with Documents is a vital resource for students and new fraud examiners seeking a practical advantage in real-world skills.

CHAPTER 1
Case 1: Fraudulent Financial Statements

1-1 LARSEN CONVENIENCE STORE: USING ANALYTICAL PROCEDURES IN DETECTING FINANCIAL STATEMENT FRAUD

Learning Objective

After completing and discussing this case, you should be able to:

1. Review and analyze financial statement information relating to a company's balance sheet and income statement accounts using horizontal and vertical analysis method.
2. Identify potential fraudulent financial accounts for closer scrutiny.
3. Understand one method used to estimate the loss from the destruction of the out‐of‐sight (destroyed) inventory (cost of goods sold as a percent of gross receipts).
4. Be able to use one ratio (days sales of inventory) to detect potentially misstated inventory balances.

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HISTORY BEHIND THE FRAUD CASE:

In one of the author's fraud cases, an incendiary device destroyed a franchised grocery store at 3:00 a.m. on December 31. The Special Agent in Charge (SAC) of the investigation wanted the case agent to close the case because the store experienced its best year ever. Why would the owner destroy a profitable business? At the time the request was made, two cause‐and‐origin teams concluded that the torches poured over 30 gallons of gasoline that caused a massive explosion, which blew the front windows several hundred feet into the parking lot, warped huge girders, and propelled a concrete wall into the street almost killing a motorist. The case agent pleaded with the author to give the financial information a second look to avoid closing the criminal investigation.

A quick horizontal and vertical analysis of gross receipts, beginning and ending inventory, cost of goods sold, and gross receipts highlighted a potential material misstatement with the ending inventory. Ending inventory was over $300,000 higher and gross and net profits were substantially higher than in the prior three years. Telephone calls to the primary vendors revealed that the owner was delinquent and they had forced him to sign promissory notes and pay for all future shipments cash‐on‐delivery (COD). Agent interviews documented that the shelves were almost bare at the time of the fire.

A physical inventory taken at night 90 days before the fire was unusual. Instead of being taken during the day by professional inventory takers, it was allegedly taken by the owner and his tax accountant (a felon) late at night on a weekend. A handwriting analysis of the physical inventory tapes indicated that the tapes were not made by the owner or tax accountant. Thinking that the handwriting was that of the head teller, the case agent and author interviewed her. When confronted, she cried and then admitted to making up the ending inventory after the fire (and not 90 days before the fire) in the tax accountant's office a week after the fire. The fraud examination of the bank checking account and loan records revealed over 600 insufficient funds charges involving the owner and tax a...

Table of contents

• Cover
• Title Page
• Copyright
• Table of Contents
• Foreword
• Preface
• Overview of the Serial Fraud Cases (A Family of Fraudsters)
• Chapter 1: Case 1: Fraudulent Financial Statements
• Chapter 2: Case 2: Check Fraud, Debit Card Fraud, Cash Larceny
• Chapter 3: Case 3: Fraudulent Edits/Adjusting Journal Entries
• Chapter 4: Case 4: Using Data Analytics: Analyzing and Summarizing Data with Excel Pivot
• Chapter 5: Case 5: Tracing Data Analytics Red Flags Back to Source Documents Using Subpoenas
• Chapter 6: Reports, Schedules, and Audiovisuals
• Chapter 7: Documents
• About the Authors
• About the Website
• Index
• End User License Agreement