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| Certified Fraud
Examiners - Who Are They And What Do They Do? |
| A Certified
Fraud Examiner (CFE) is a specialist
in the detection and/or deterrence of fraudulent
conduct ranging from discovering employees or executives
who misappropriate company assets to assisting investors
who are defrauded in the course of commercial transactions. |
| A CFE is responsible for resolving
allegations of fraud, obtaining evidence, taking
statements and writing reports, testifying to findings,
and assisting in the prevention and detection of
fraud. Following are a few examples of some typical
CFE functions: |
| A CFE in private practice
was retained to examine evidence of fraud and to
testify in a $350 million securities fraud case.
His testimony helped recover $70 million. |
| A CFE employed in the internal audit department
of a bank headed the investigation of a $125,000
embezzlement case. They ultimately assisted authorities
in the criminal prosecution of an officer. |
| A CFE in
private practice provided litigation support to
an attorney involved in the trial of a civil fraud
case. The CFE's expertise helped the attorney win
the case. |
| A CFE employed
by the U.S. Government advised a federal agency
on ways to improve its ability to detect fraud
in contracts, which resulted in potential savings
of millions of dollars. |
| |
| Financial Auditing vs. Fraud Auditing |
| By Joel
B. Charkatz, CPA, CVA, CFE |
| During recent times, many businesses
have grown by leaps and bounds. While this growth
has
meant
prosperity
for business owners and employees, it has also
presented opportunistic individuals with temptations
to convert assets of others (employers, suppliers,
vendors, stockholders, etc.) to their own benefit. |
|
| Even when a business has
instituted good internal controls which are designed,
among other things,
to combat fraud, the corporate assets may not be
safe. As expansion occurs in the marketplace, company
resources
are many times fully devoted to servicing the new
customer, integrating the new product line, etc.
After all, we're
here to do business, aren't we? So it's not unusual
for the continued development of internal controls
to take a back seat to more immediate circumstances.
Unfortunately, this is the exact situation that is
prevalent when a fraud is discovered. |
| A fraud auditor is someone who is specially
trained in the detection of fraud and the circumstances
which allow it to occur. Utilizing an intuitive process
developed by training and experience, the fraud auditor
looks at the following: |
| What is the simplest
way to compromise the system? |
| Are deviations
from acceptable accounting practices possible? |
| What controls
are in place concerning off-line transactions? |
| The fraud auditor looks for indicators
of fraudulent transactions. These indicators do not
fit into the normal scheme of transactions because
they generally seem to reflect something that is too
ordinary, too high, too low, too frequent, too rare,
etc. Consequently, the fraud auditor looks for the
unusual circumstance, while the financial auditor operates
within a realm of the usual. The fraud auditor looks
beyond the transaction in an attempt to reconstruct
what preceded and succeeded the transaction. This enables
the aberration of the fraudulent transaction to stand
out. |
| Fraud can be directed against shareholders,
creditors or the organization itself. It can be perpetrated
by insiders or outsiders. Typical employee fraud involves
conversion of corporate assets (cash or other easily
salable assets) for personal use. Outsiders such as
vendors, consultants, suppliers and customers attempt
to obtain an organization's assets illegally through
double billing, over billing, inferior materials, etc.
Outsiders may attempt to influence insiders through
bribery. |
| Accounting frauds generally occur through
alteration, destruction, modification or falsification
of accounting information. When the fraud auditor discovers
a suspect transaction, an initial goal is to determine
if the transaction is attributable to human error.
Consequently, the improper transaction may simply point
out a weakness in internal controls; while not a fraudulent
transaction, the accounting system can be improved. |
| If a fraudulent transaction is believed
to have occurred, the fraud auditor will proceed with
an investigation the purpose of which is to discover
evidence to support the extent of the fraud, the amount,
the methodology, and the perpetrator. Legal counsel
should be consulted very early in this process to assure
the evidence gathered will be admissible in a court
of law. |
| For additional information, please contact
us. |
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