Fraud examination casebook with documents : a hands-on approach

246 Pages·2017·51.44 MB·English

by  Beecken

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Fraud Examination
Casebook with Documents
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Fraud Examination
Casebook with
Documents
A Hands-on Approach
WILLIAM H. BEECKEN, CFE, CPA
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CLARK A. BEECKEN, CFE
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Contents
Foreword ix
Preface xi
OverviewoftheSerialFraudCases(AFamily
ofFraudsters) 1
FraudulentFinancialStatements 2
CheckFraud,DebitCardFraud,CashLarceny 2
FraudulentEdits/AdjustingJournalEntriestoCash
Receipts 3
(cid:2) ExcelPivotAnalyzesandSummarizesaHugeAmountof (cid:2)
Data 3
TracingExcelPivotRedFlagsBacktoSourceDocuments
andDocumentingtheFlowofMoney 3
Chapter1:Case1:FraudulentFinancialStatements 5
1-1 LarsenConvenienceStore:UsingAnalyticalProceduresin
DetectingFinancialStatementFraud 5
1-2 HowtoPerformaHorizontal,Vertical,andRatioAnalysis 13
1-3 Exercises—FraudulentFinancialStatements(Larsen
ConvenienceStore) 19
1-4 ExerciseTemplates 22
1-5 ReviewQuestions—FraudulentFinancialStatements
(LarsenConvenienceStore) 26
Chapter2:Case2:CheckFraud,DebitCardFraud,
CashLarceny 29
2-1 AndersonInternalMedicine:PreparingaBank
ReconciliationandSpreading/AnalyzingTransactionson
MonthlyStatementsfromFinancialInstitutions 29
2-2 HowtoPerformaBankReconciliation 35
v
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vi Contents
2-3 HowtoReadChecksandDecodeDebitCardTransactions 38
2-4 HowtoSpreadandAnalyzeCheckandDebitCard
Transactions 41
2-5 Exercises—CheckFraud,DebitCardFraud,andCash
Larceny(AndersonInternalMedicine) 45
2-6 ExerciseTemplates 48
2-7 ReviewQuestions—CheckFraud,DebitCardFraud,
andCashLarceny(AndersonInternalMedicine) 50
Chapter3:Case3:FraudulentEdits/Adjusting
JournalEntries 53
3-1 AndersonInternalMedicine(Edits/AJEs):Vouchingfroma
ScheduletoSourceDocuments 53
3-2 HowtoVouch/TracebetweenaSourceDocumentandan
AccountingLedger,Journal,orActivityLog 56
3-3 Exercise—FraudulentEdits(orAJEs)(AndersonInternal
Medicine) 57
3-4 ExerciseTemplate 58
Chapter4:Case4:UsingDataAnalytics:Analyzing
(cid:2) andSummarizingDatawithExcelPivot 61 (cid:2)
4-1 AndersonInternalMedicine(DataAnalytics):UsingData
Analytics—AnalyzingandSummarizingDatawithExcel
Pivot 61
4-2 HowtoUseExcelPivottoAnalyzeandSummarizeData 65
4-3 Exercises—UsingDataAnalytics(AndersonInternal
Medicine) 77
4-4 ReviewQuestions—UsingDataAnalytics(Anderson
InternalMedicine) 81
Chapter5:Case5:TracingDataAnalyticsRedFlagsBack
toSourceDocumentsUsingSubpoenas 85
5-1 AndersonInternalMedicineandLarsenConvenienceStore
(ConspiracyandLoanFraud):TraceTransactions
DiscoveredduringDataAnalyticsBacktoSource
DocumentsUsingSubpoenas 85
5-2 HowtoWriteWordingtoSubpoenaDocuments,
Information,and/orObjects 89
5-3 Exercise—AndersonInternalMedicineandLarsen
ConvenienceStore(ConspiracyandLoanFraud) 91
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Contents vii
Chapter6:Reports,Schedules,andAudiovisuals 93
6-1 WritingaFraudExaminationReport 93
6-2 FormattingSchedulesforInclusionwithReports 100
6-3 HowtoSimplifytheComplexwithAudiovisuals 104
Chapter7:Documents 115
7-1 Case1:FraudulentFinancialStatements(Larsen
ConvenienceStore) 115
RecordedInterviewonJanuary2,2016—GregoryLarsen 115
AuthorizationforReleaseofFinancialRecords 117
SwornStatementinProofofLoss 118
2013IRSIndividualTaxReturns(SchedulesC) 121
2014IRSIndividualTaxReturns(SchedulesC) 127
2015IRSIndividualTaxReturns(SchedulesC) 133
2014SBAPersonalFinancialStatements 138
2015SBAPersonalFinancialStatements 141
2016SBAPersonalFinancialStatements 144
Transcripts—2015SalesandUseTaxesper
FormST-3 147
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ShamrockGroceries2015PurchasesbyMonth 148
Georgia-TennesseeFuelPartners2015Purchases
byMonth 149
MariettaBeverageCompany2015Purchases
byMonth 150
DiscountTobaccoSupply2015PurchasesbyMonth 151
JenkinsMediaServices2015PurchasesbyMonth 152
10-30-15PhysicalInventory 153
7-2 Case2:CheckFraud,DebitCardFraud,CashLarceny
(AndersonInternalMedicine) 155
BankReconciliation—April1,2016—TonyaLarsen 155
BankStatement—March2016 156
CanceledChecks(Front&Back) 158
DepositTickets—March2016 168
CashReceiptsJournal—March2016 173
CashDisbursementsJournal—March2016 176
7-3 Case3:FraudulentEdits/AdjustingJournalEntries
[AndersonInternalMedicine(Edits/AJEs)] 179
ReportofInterview—JenniferAnderson,MD 179
DataExtraction203—TonyaEdits 181
Deposittickets—JanuarythroughMarch2016 184
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viii Contents
7-4 Case4:UsingDataAnalytics:AnalyzingandSummarizing
DatawithExcelPivot[AndersonInternalMedicine
(ExcelPivot)] 194
ExcelSpreadsheet—AndersonBankTransactions
(SepOctNovDecJanFeb) 194
7-5 Case5:TracingDataAnalyticsRedFlagsBacktoSource
DocumentsUsingSubpoenas[AndersonInternalMedicine
andLarsenConvenience(Husband/WifeLoanFraudand
Conspiracy)] 210
ReportofInterview—JohnGrayson 210
CreditApplication—WaleskaBank 211
WaleskaBankStatementforGregLarsen—December
2015 213
FrontofOfficialChecks—LoanNo.15-3989 215
BackofOfficialChecks—LoanNo.16-3989 216
FrontofChecksforAccount7011176(GregLarsen) 217
BackofChecksforAccount7011176(GregLarsen) 218
SampleU.S.CourtSubpoenatoProduceDocuments,
Information,orObjectsortoPermitInspectionof
PremisesinaCivilAction 221
(cid:2) SampleU.S.CourtSubpoenatoProduceDocuments, (cid:2)
Information,orObjectsinaCriminalCase 223
SampleU.S.CourtSubpoenatoTestifyBeforea
GrandJury 225
SampleU.S.CourtSubpoenatoTestifyataDeposition
inaCriminalCase 227
SampleU.S.CourtSubpoenatoTestifyataHearingor
TrialinaCriminalCase 229
AbouttheAuthors 231
AbouttheWebsite 233
Index 235
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Foreword
I
am pleased to write this foreword to the Fraud Examination Casebook with
Documents: A Hands-on Approach by William H. Beecken and Clark A.
Beecken, a redoubtable father-son team of forensic accountants. Bill has
beenaseasonedforensicprofessionalemployedmanyyearswiththeFederal
DepositInsuranceCorporation(FDIC)OfficeofInspectorGeneral,aswellasthe
BureauofAlcohol,Tobacco,FirearmsandExplosives(ATF).Clarkiscurrently
workingasaforensicauditorforthefederalgovernment.
Severalyearsago,asa facultymemberinthe SchoolofAccountancyat
Kennesaw State University (KSU), I came to know Bill as a popular faculty
(cid:2) member at Southern Polytechnic State University—now the KSU Marietta (cid:2)
campus—whotaughtforensicaccountinginaninnovativeway.Attheendof
hiscourse,itwaspartofthestudents’end-of-termassignmenttogothrough
thereal-worldexperienceofbeingdeposedasan“expertwitness”bythelocal
districtattorneyandoverseenbyajudgeintheactualenvironsoftheMarietta,
Georgia, courthouse. A couple of times, I was a member of the audience in
thecourthouse,ratherenviousofBill’sstudentswhowerebeingexposedtoa
mock-trialscenario.Hence,IenthusiasticallycommendandrecommendBill’s
idiosyncraticinterpretationofahands-onapproach!
Frommyveryfirstmeeting,Clarkappearedtobeachipofftheoldblock,cut
ofthesamecloth,theapplethatdoesn’tfallfarfromthetree,etc.—sharp,inci-
sive,andblessedwiththetechnologicaladeptnessandadroitnessthatcomes
withhavinggrownupdigital.So,Iamnotsurprisedthathehaslefthisindeli-
blemarkonthebookbyfocusingonMicrosoftExcel,theindustrystandardfor
spreadsheets,featuringcalculation,graphingtools,pivottables,andsuch.
Among other things, this practical fraud casebook does a wonderful job
of showing how Excel PivotTables may be profitably deployed—not only to
summarizeahugeamountofdatabutalsotohelptraceExcelPivotredflags
back to source documents to understand the flow of money. After all, much
offorensicaccountingcanbeusefullydescribedastheworkofunderstanding
ix
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x Foreword
and investigating people, money, and associated patterns of behavior with
great tenacity—colloquially described as the “follow the money” approach.
Suchworkcannotbecarriedoutwithoutsophisticateddataanalysisintoday’s
datarich,informationpoor(DRIP)world.
Itisonethingtoappreciatethescopeandreachofforensicaccountingat
aconceptuallevel;quiteanothertogetyourhandsdirtywithdata,andrec-
ognize the power of data-driven insights and solutions. This book admirably
makesthatbridgefromtheorytopracticehappen.Ratherthan“handwaving,”
youbecomehands-on—youdon’tjusttalk,fortalkischeap,butyouactually
perform analyses and learn to manipulate data statistically to yield relevant
andmeaningfulinformation.Thisinformationhelpsyougatherevidenceand
arriveatinferencesthatsupportorchallengeyourhypotheses—amostexcit-
ingendeavor.Afterall,itissuchinformationthatcangreatlyhelpbuttressone’s
arguments,defendone’sposition,persuadeothersincourtroomcontexts,and
thus,helpwincases.
Dr.SridharRamamoorti,ACA,CPA/CITP/CFF/CGMA,CIA,CFSA,
CGAP,CRMA,CFE,CGFM,CRP,MAFF
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AssociateProfessorofAccounting,SchoolofBusinessAdministration,
UniversityofDayton,Ohio
ManagingPrincipal,TheBehavioralForensicsGroup,LLC
(www.bringingfreudtofraud.com)
MEMBERSHIPS
Standing Advisory Group, Public Company Accounting Oversight Board,
2014–2016
ForensicAccountingAdvisoryBoard,GeorgiaSouthernUniversity,2015–
BoardofTrustees,FinancialExecutivesResearchFoundation,2016–
Litigation Forensics Board, National Association of Certified Valuators &
Analysts,2016–
Leadauthor,A.B.C.’sofBehavioralForensics(Hoboken,NJ:JohnWiley&Sons,
2013)
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