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Web Page LinksAudimation Services, Inc. - The distributors of Idea™ Data Analysis software, which is essential for departments that want to seek fraud and error within their company. Behind Wave of Corporate Fraud: A Change in How Auditors Work - This Wall Street Journal piece discusses the fraud-finding origins of auditing and its evolution to a profession that not only has difficulty finding fraud but is sometimes complicit. Loudon v. Archer-Daniels-Midland Co. - Supreme Court of Delaware legal brief discussing the Archer Daniels Midland fraud case, which is a bizarre story that exemplifies the quote, truth is stranger than fiction, and ultimately became the subject for Kurt Eichenwald’s terrific book, The Informant. This fraud is a case study for many fundamental frauds: international price-fixing, anti-trust violations, the Nigerian bank account fraud, false vendors, ghost employees, illegitimate bonuses, and conflict of interest at the Board level. SEC Sues Former Top Officers of Sunbeam Corporation and Arthur Andersen Auditor in Connection with Massive Financial Fraud - Securities and Exchange document discussing the Sunbeam financial statement fraud, which led to the blacklisting of “Chainsaw Al” Dunlap. This is a classic case of reporting superior short-term earnings at the expense of long-term results through accounting shenanigans. Waste Management, Inc. Founder and Five Other Former Top Officers Sued for Massive Earnings Management Fraud - This SEC brief on Waste Management describes how the company was able to perpetrate a fraud of over $1 billion by manipulating fixed assets and depreciation to lower expenses. The brief also discusses how Arthur Andersen aided the fraud. Report of Ivestigation by the Special Investigative Committee if the Board of Directors of Worldcom, Inc. - The report detailing the WorldCom fraud from the investigative committee of the Board of Directors of WorldCom. Although this report is ponderous at 345 pages, the 30-page summary provides insights into the nature of the fraud, describes the corporate culture that enabled fraudulent financial reporting, and discusses the reasons why the auditors, both internal and external, failed to discover the fraud. Report of Findings to Date Special Examination of Fannie Mae - This is another large investigative report, from the Office of Federal Housing Enterprise Oversight, on the accounting improprieties at Fannie Mae. This report also has an insightful Introduction and Executive Summary.
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Suggested ReadingThe Informant by Kurt Eichenwald - The Archer Daniels Midland Whistleblower case. Provides insight into successful FBI investigation and several types of fraud. Reads like a novel – very highly recommended. Cuckoo’s Egg by Cliff Stoll - Tracking a spy through the maze of computer espionage. Also a highly recommended read – well written and interesting. Conspiracy of Fools by Kurt Eichenwald - The story of Enron from the mid-eighties to the company’s downfall, researched in meticulous detail and written in Mr. Eichenwald’s engaging style of presenting a non-fiction account into the form of a suspense novel. Hard Facts, Dangerous Half-Truths, and Total Nonsense by Jeffrey Pfeffer and Robert I. Sutton – a look at the importance of basing decisions on hard evidence rather than ingrained beliefs or the acts of other companies. Influence: The Psychology of Persuasion by Robert B. Cialdini, Ph.D. – contains evidence on the power of authority and social proof to influence behavior. Benford’s Law by Mark J. Nigrini - From the man who first applied Benford’s Law to auditing, a discussion of the many applications of this data analysis tool. The Financial Numbers Game Detecting Creative Accounting Practices by Charles W. Mulford & Eugene Comiskey - Offers great in-depth insight into common earnings management as well as fraudulent financial reporting. Daisy Chain by James O’Shea - Insight into the Savings & Loan crisis of the late ‘80’s. The Smartest Guys in the Room by Bethany McLean & Peter Elkind - Explores Enron, providing insight into the business, the personalities and arrogance. 24 Days: How Two Wall Street Journal Reporters Uncovered the Lies that Destroyed Faith in Corporate America by Rebecca Smith & John R. Emshwiller - Tells the story of two reporters following up on the California energy crisis and Skilling’s resignation. Hidden Financial Risks Understanding Off-Balance Sheet Accounting by J. Edward Ketz - Explores deception using the equity method, lease accounting, pension accounting and special purpose entities. Extraordinary Popular Delusions & the Madness of Crowds by Charles MacKay - The first three chapters are the definitive work describing Tulipomania, the South Sea Bubble, The Mississippi Scheme. Published originally in the mid 1800’s and still in print. A Short History of Financial Euphoria (out of print) by John Kenneth Galbraith - Enlightening description of the recurring nature of speculative euphoria, how it manifests, and the characteristics and results. Great Business Disasters (out of print) by Isadore Barmash, editor - Includes insightful articles into a number of historic cases. |
Articles Written for IRMI.comHigh Integrity Management and Fraud Prevention Creating a Culture Hostile to Fraud Building a Process to Detect Fraud Importance of a Strong Fraud Policy |
CoursesFighting Fraud with Data Mining TechniquesProgram Agenda and Registration Fraud Detection and InvestigationOffered through Courtenay Thompson and Associates Fraud Awareness for ManagersOffered through Courtenay Thompson and Associates DocumentsThe first step to finding fraud is to understand the exposures in the area you're auditing. The following documents give you some ideas about what can go wrong in particular financial statement and operational areas, and they will help you brainstorm exposures in your own environment. Accounts Payable, Procurement, and Expense Reports What Can Go Wrong in Fixed Assets and Inventory What Can Go Wrong in Payroll What Can Go Wrong in Revenues and Accounts Receivable
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