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Dealing with Fraud.

Accountants generally aren't forgiving of ethical lapses. As professionals--and certainly as IMA[R] members--we adhere to a clear code of ethical professional practice and take those guidelines very seriously. But not everyone is bound by the ethical moorings of our profession, and fraud, in its many guises, occurs every day. Accountants would do well to be aware of this and know what to do if a fraud is suspected or perpetrated.

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This is one of the key points of Stephen Pedneault's book, Anatomy of a Fraud Investigation. One part true-story crime drama and one part fraud reference book, Pedneault's book takes the reader through an entire fraud investigation, following the same principles as the old television show Dragnet: just the facts, ma'am, with names changed to protect the innocent and the guilty.

Anatomy of a Fraud Investigation reads like a novel, but it's also interspersed with learning points and fraud facts that are boxed-off for easy recognition and to separate them from the story. The story is approximately 75% of the book, with the learning points and fraud facts comprising the remaining 25%.

Any reader looking for a crash course in fraud and fraud prevention could read through the learning points and fraud facts in a couple of hours and walk away understanding a great deal more about fraud and investigating fraud. Some of the facts that stood out to me were how fraud is generally detected: 46% by an anonymous tip and 20% by accident. Both numbers emphasize how important it is to educate employees regarding their fiduciary duty to provide information as well as the organization's obligation to provide a means to do so. Another eye opener was the list of top 10 passwords used and where you might find them. Key learning points included the importance of the chain of custody in protecting evidence, the best way to handle the ensuing police investigation, and the importance of the smallest details in convicting the criminal.

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I learned a lot from the technical parts of the book, but the underlying story was riveting as well. It involves a nonprofit organization where a large fraud has been perpetrated. One individual is suspected initially, but the ensuing drama reveals the involvement of others. Pedneault takes the reader on a journey of discovery from the first hint of fraud, what to do next, meeting the players (and personalities) involved, how the evidence was gathered, and the difficulty in obtaining a conviction. The story provides excellent lessons for the reader: While the organization made many of the right moves in handling the situation, it also made some glaring mistakes that made it much more difficult to prove the case. Anatomy of a Fraud Investigation is a great place to begin studying fraud, and it will surely whet your appetite to learn more.

--John M. Brausch, president of J Brausch and Co. and former IMA Chair, jbrausch@imanet.org
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Author:Brausch, John M.
Publication:Strategic Finance
Geographic Code:1USA
Date:Oct 1, 2012
Words:489
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