Konsep Kecurangan (Fraud) : Fraudsters?

Konsep
kecurangan (fraud)
Definisi dan jenis kecurangan
Kompleksitas dan prinsip kecurangan
Profil para pelaku kecurangan
Memahami internal dan ekternal kecurangan
Psikologi para pelaku kecurangan
Siapa yang paling sering menjadi korban dari
fraudsters?
Persepsi publik terhadap kecurangan
Reaksi peraturan terhadap kasus kecurangan
Fraud models: e.g. fraud triangle, fraud
diamond, GONE
Memahami konsep blue - dan white-collar
crimes
Memahami red flags dan fraud symptoms
Studi kasus fraud schemes
Audit
Kecurangan/
Forensik
Teodora Winda Mulia

What is Fraud?
Fraud means any act, expression, omission,
or concealment calculated to deceive another
to his or her disadvantage specifically a
misrepresentation or concealment with
reference to some fact material to a
transaction that is made with knowledge of its
falsity or in reckless disregard of its truth or
falsity and with the intent to deceive another
and that is reasonably relied on by the other
who is injured thereby.
(Merriam-Webster Dictionary of Law)
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FRAUD INVESTIGATIONS
• Fraud can be defined as any
intentional act or omission designed to
deceive others, resulting in
the victim suffering a loss and/or the
perpetrator achieving a gain.
• Three factors are generally accepted
as being necessary for a fraud
to occur pressure, opportunity, and the
ability to rationalize illegal behavior.

What Is Forensic Accounting?
• Integration of Accounting, Auditing and
Investigative Skills
• An Analysis That Forms the Basis for Discussion,
Debate and Ultimately Dispute Resolution in the Court
Of Law
• Encompasses Both the Investigative Accounting and
Litigation Support
• Forensic Accounting is a specialty area of
accountancy that provides investigative
accounting services to gather, analyse and report
financial information.
• Although Forensic Accounting, Fraud Examination, and
traditional Auditing are interrelated they have
characteristics that are separate and distinct.
What is Forensic Accounting?
• The essential components of forensic
accounting include an attempt to piece
together or reconstruct a past event or events
using financial information where that
reconstruction is likely to be used in some
judicial proceeding
(e.g., criminal court, civil court, deposition,
mediation, arbitration, settlement negotiation,
plea bargaining).

WHAT IS CORRUPTION?
• In broad terms, corruption is the misuse by
government officials of their governmental powers
for illegitimate, usually secret, private gain.
• Forms of corruption vary, but include bribery,
extortion, cronyism, nepotism, patronage, graft,
and embezzlement. While corruption may facilitate
criminal enterprise such as drug trafficking,
money laundering, and trafficking, it is not
restricted to these organized crime activities.
• The end-point of political corruption is a
kleptocracy, literally "rule by thieves".

What is Fraud Examination?
• Examination means the act or art of
examining
i.e., to observe carefully or critically
inspect or to study or analyze an issue
(American Heritage Dictionary, 4th ed.)
• Fraud examination is the thorough study,
inspection or analysis of an issue relating to
fraud

Fraud Examination
Fraud Prevention
Fraud Deterrence
Fraud Detection
Fraud Investigation
Fraud Loss Costs Recovery
Anti-fraud Controls Remediation
Anti-fraud Education Training

Fraud Examination
• Fraud Prevention
Fraud Deterrence
Forensic Accounting
Fraud Detection
Intellectual Property Infringement Damages
Estate/Family Valuation
Financial Contract Disputes
Government Contract Claims
Fraud Investigation
Construction Claims
Environmental Claims
Fraud Loss Costs Recovery
Anti-fraud Controls Remediation
Anti-fraud Education Training

Forensic Accounting Fraud
Examination
• A broad discipline applying accounting skills
to
legal matters in a wide range of issues
• Addresses a past event
• Uses financial information
• A focused discipline relating entirely to the
issue of fraud
• Addresses past, present and future events
• Uses financial and nonfinancial information

Forensic Accounting Fraud
Examination
• Produces information about finances, people
and
their actions
• For use in business governments internal
proceedings and private and judicial
proceedings
• A large force fighting fraud in business and
government
• Produces information about finances
• For use in judicial proceedings
• A relatively small group of practitioners

Konsep
kecurangan (fraud)
Why People Commit
Fraud?
myth that fraud is a big scheme
that should have been
uncovered sooner and easy to
detect
Fraud starts small and just
gets bigger and bigger, until
something becomes
noticeably different or unusual.

What is Fraud?
• Occupational Fraud is defined by
the ACFE as:
“The use of one’s occupation for
personal enrichment through the
deliberate misuse or misapplication
of the employing organization’s
resources or assets.”

Facts about Fraud
According to the ACFE Report to the Nation
on Occupational Fraud and Abuse, U.S.
businesses will lose an estimated $652 billion
in 2006 due to fraud.
The average organization loses 5 percent of
revenue to fraud and abuse. In addition,
based on the ACFE’s survey of more than
1,100 occupational fraud cases,
approximately 24 percent of these cases
resulted in losses of $1 million or more.

Type of People That
Commit Fraud
• What type of people commit fraud?
– Anyone!
– Not demographically or psychologically

differentiated
– Have the profile of other honest people
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or
Reasons to Commit Fraud
• A combination of the following
( ex: Fraud Triangle):
– Pressure
– Opportunity
– Rationalization
• Immediate financial need

• The fraud gets larger and larger
as confidence in the fraud gets
higher and higher
The Fraud Triangle
The Fire Triangle
The Fraud Scale
The Fraud Diamond
The Fraud Pentagon
GONE

Pressure
• Divided into four main groups:
– Financial pressures
– Vices
– Work-related pressures
– Other pressures
• Approximately 95 percent of all

frauds involve either financial or
vice-related pressures
Pressure
• Common Financial Pressures:
1. Greed
2. Living beyond one’s means
3. High bills or personal debt
4. Poor credit
5. Personal financial losses
6. Unexpected financial needs
Pressure
• Vice Pressures
• Worse kind of pressures to
commit fraud
• Examples include:
– Gambling
– Drugs
– Alcohol
– Expensive extramarital relationships
Pressure
• Vice Pressures
• Real-life examples:
– Dad that embezzled his six-year-old son’s
allowance
– Women who stole money to fund her
children's drug addiction
– Man that used company money to fund his
drug addiction
– The parents who took their newborn baby
from the hospital with heroin under its
tongue
Pressure
• Work-Related Pressures
• “Get even with the employer”
• Motivated by these factors:
– Getting little recognition
– Feeling job dissatisfaction
– Fear of losing one’s job
– Being overlooked for a promotion
– Feeling underpaid
Pressure
• Work-Related Pressures
• Real-life example:
– The worker that worked 12-
14 hour days, received a
promotion, and accepted
kickbacks to compensate for
her “overworking.”
Pressure
• Other Pressures
• Spouse Pressures
– Spouse’s lifestyle demands
• Life Pressures
– Family crisis
• Social Pressures
– “Being successful”
Opportunity
Six major factors that increase opportunity:
1. Lack of controls
2. Inability to judge performance quality
3. Failure to discipline fraudsters
4. Lack of access to information
5. Ignorance, apathy and incapacity
6. Lack of audit trail
Controls to Prevent/
Detect Fraud
• Internal Control Framework
– From Committee of Sponsoring
Organizations (COSO)
– Control Environment
– The Accounting System
– Control Activities
Detect Fraud
• Control Environment
– Management’s Role and Example
– Management Communication
– Appropriate Hiring
– Clear Organizational Structure
– Effective Internal Audit Department
Detect Fraud
• Accounting System
– Transactions are…
1. Valid
2. Properly authorized
3. Complete
4. Properly classified
5. Reported in the proper period
6. Properly valued
7. Summarized correctly
Detect Fraud
• Control Activities or
Procedures:
1. Segregation of duties, or dual
custody
2. System of authorizations
3. Independent checks
4. Physical safeguards
5. Documents and records
Rationalization
• Third element of Fraud triangle.
• Common rationalizations by perpetrators
– I deserve more
– I am only borrowing the money and will
pay it back
– Nobody will get hurt
– It’s for a good purpose
– I pay more than my fair share of taxes
– The government wastes money
Recruitment of Fraudsters
• Many frauds are committed by
more than one person
• The majority of frauds—especially
financial statement frauds—are
collusive
• CFO survey results:
– 67 percent received requests to
misrepresent corporate results
– 55 percent fought off the requests
– 12 percent yielded
• Types of Power
– Reward Power
A’s ability to provide benefits to B
– Coercive Power
A’s ability to punish B if B does not comply with A
– Expert Power
A’s possession of special knowledge or expertise
– Legitimate Power
A’s legitimate right to prescribe behavior for B
– Referent Power
The extent to which B identifies with A
Konsep
kecurangan (fraud)
White Collar and Blue

Collar Crime
Types of workers
• Black Collar Worker is used to refer to workers in the mining or the
oil industry. Sometimes, it is also used to refer to people who are
employed in black marketing activities.
• Blue Collar Worker is a member of the working class, who
performs manual labor and earns an hourly wage. It originates
from the popularity that blue color enjoys among manual laborers.
• Gold Collar Worker is a newly formed phrase which has been
used to describe either young, low-wage workers who invest in
conspicuous luxury (often with parental support). It is also used to
refer to highly-skilled knowledge people who are highly valuable to
the company. Example: Lawyers, doctors, research scientists, etc.
• Gray Collar Worker refers to the balance of employed people not
classified as white or blue collar. Although grey-collar is something
used to describe those who work beyond the age of retirement.

Types of workers
• Green Collar Worker is a worker who is employed in the
environmental sectors of the economy. Example: People
working in alternate energy sources like solar panels,
Greenpeace, World Wide Fund for nature etc.
• Pink Collar Worker is employed in a job that is traditionally
considered to be women’s work and is often low-paid.
Example: Librarian, maid, flight attendant, receptionist,
secretary, etc.
• Scarlet Collar Worker is a term often used to refer to
people who work in the pornography industry, especially
women entrepreneurs in the field of internet pornography.
The color scarlet has traditionally been associated with
adultery.
• White Collar Worker is a salaried professional, typically
referring to general office workers and management. It
originates from color of dress shirts worn by professional
and clerical workers.
What Is It??
• A white-collar crime is defined as
"a crime committed by a person of
respectable and high social status
in the course of his occupation“.
• Fraud, bribery, inside trading,
embezzlement, computer crimes,
and forgery are all accessible to
white-collar employees

A Brief History
• The term was coined by Edward Sutherland
in 1939.
• He used it to set a line between white-collar
crimes and regular street crimes
• White-collar crime is generally new and it
came about around the time following the
Great Depression.
• People wanted to gain their money and social
status back. Also many people were angry at
the economy status and felt they were
underpaid. This led to the development of
white-collar crime

A Brief History
• The term was coined by Edward Sutherland
in 1939.
• He used it to set a line between white-collar
crimes and regular street crimes
• White-collar crime is generally new and it
came about around the time following the
Great Depression.
• People wanted to gain their money and
social status back. Also many people were
angry at the economy status and felt they
were underpaid. This led to the development
of white-collar crime

A Brief History
• It is typically dealt with in terms of civil law
instead of criminal law.
• Civil law refers to general regulations
involving economic losses between private
parties and criminal law deals with specific
laws that define every individual's moral
responsibility to society.
• It is estimated that the harm done to society
by white-collar crime is greater than street
crime, yet most people are not concerned
about this form of deviance.

Why Is It Committed?
• Most people do not start out as criminals. Most
white-collar crimes involve normal people who
are struggling financially. It is just as common in
bigger corporations as stealing is in a poor
community.
• Greed is another influence on this crime. Many
people with high ranking jobs tend to desire
wealth and will do anything to obtain it.
• Also, more people are beginning to think that
committing these crimes is acceptable because
they have been around the corruption for long
periods of time.

Why Is It Committed?
• Many people get away with white-collar
crime more than regular street crimes. It is
a fact that almost no police effort goes into
stopping it and people are rarely convicted.
• People may have power because they have
friends in politics, they have money to get
the best lawyer, or they usually have friends
in the law-enforcement agencies.
• When a crime is discovered, suspects
usually get a light punishment because
violence wasn’t used.

Types of white collar crime
• Bank Fraud: Health Care Fraud:
• Blackmail: Insurance Fraud:
• Investment Schemes:
• Bribery:
• Kickback:
• Cellular Phone Fraud: • Larceny/Theft:
• Computer fraud: • Money Laundering:
• Counterfeiting: • Racketeering:
• Credit Card Fraud: • Securities Fraud:
• Currency Schemes: • Welfare Fraud:
• Tax Evasion:
• Embezzement:
• Unfair trade practices:
• Environmental • Weights and Measures:
Schemes: • Insider Trading:
• Extortion: • Telemarketing Fraud:
• Forgery:

2 types
1. Occupational crime which occurs when
crimes are committed to promote personal
interests. An example would be. altering
records. (Ex. Tax evasion)
2. Organizational or corporate crime which
occurs when corporate executives commit
criminal acts to benefit their company by
overcharging or price fixing, false
advertising, etc. (Ex. Unfair trade practice)

DIFFERENCE BETWEEN BLUE COLLAR AND
WHITE COLLAR CRIMES
The difference between blue

and white collar crimes is
typically divided by social class.
White collar crimes are usually
committed by those in a higher
social class, whereas blue
collar crimes are usually
committed by those in a lower
social class.

What is a Blue Collar Crime?
• The term blue collar crime was originally
coined to mean those crimes committed by
someone from the working or lower class
of society.
• Today, blue collar crimes are typically those
crimes that are considered to be fueled on
by passion, rage or other emotions, as
compared to those that are carefully
calculated and executed. The following,
which are crimes that cause injury to
people or property, are considered blue
collar crimes.

What is a Blue Collar Crime?
• The term blue collar crime was originally
coined to mean those crimes committed by
someone from the working or lower class of
society.
• Today, blue collar crimes are typically those
crimes that are considered to be fueled on
by passion, rage or other emotions, as
compared to those that are carefully
calculated and executed. The following,
which are crimes that cause injury to people
or property, are considered blue collar
crimes.

BLUE COLLAR CRIME EXAMPLES:
• Burglary
• Property Crimes
• Theft Crimes
• Sex Crimes
• Assault
• Drug Crimes

Konsep
kecurangan (fraud)
Red Flag and Fraud?
Factors Contributing to Fraud
• Poor internal controls

• Management override of internal
controls
• Collusion between employees
• Collusion between employees
and third parties

How is Fraud Discovered?
Occupational fraud can be
detected through a number of
different methods.
The ACFE’s 2006 Survey
disclosed that 34.2 percent of
frauds were detected through
tips, 25.4 percent by accident,
and 20.2 percent through
internal audits.
What is a Red Flag?
A red flag is a set of circumstances
that are unusual in nature or vary
from the normal activity.
It is a signal that something is out of
the ordinary and may need to be
investigated further.
Remember that red flags do not
indicate guilt or innocence but merely
provide possible warning signs of
fraud.
Why are Red Flags important?
The American Institute of Certified Public
Accountants has issued a Statement on
Auditing Standards (SAS) No. 99 –
Consideration of Fraud in a Financial
Statement Audit - that highlights the importance
of fraud detection. This statement requires the
auditor to specifically assess the risk of material
misstatement due to fraud and it provides
auditors with operational guidance on
considering fraud when conducting a financial
statement audit. SAS 99’s approach is also
valuable for other types of audits.

• Being able to recognize red flags
is necessary not only for public
accountants but also for any
auditor working in the public
sector where the potential for
fraud to occur exists.

Just keep in mind:
Do not ignore a red flag
Studies of fraud cases consistently show that red flags
were present, but were either not recognized or were
recognized but not acted upon by anyone.
Once a red flag has been noted, someone should take
action to investigate the situation and determine if a fraud
as been committed.
Sometimes an error is just an error
Red flags should lead to some kind of appropriate action,
however, sometimes an error is just an error and no fraud
has occurred.
You need to be able to recognize the difference and
remember that responsibility for follow-up investigation of a
red flag should be placed in the hands of a measured and
responsible person.

Types of Red Flags and Fraud
• What are the red flags that are common to
most types of fraudulent activity?

Fraud Perpetrator Profile
• The majority of occupational fraud cases
(41.2 percent) are committed by employees.
However, the median loss for fraud
committed by managers was $218,000,
which is almost three times greater than the
loss resulting from an employee scheme.
• Approximately 61 percent of the fraud cases
were committed by men. The median loss
resulting from fraud by males was $250,000,
which is more than twice the median loss
attributable to women.

Fraud Perpetrator Profile
• Most fraud perpetrators (87.9 percent) have never been
charged or convicted of a crime. This supports previous
research which has found that those who commit
occupational fraud are not career criminals.
• Nearly 40percent of all fraud cases are committed by
two or more individuals. The median loss in these cases
is $485,000, which is almost five times greater than the
median loss in fraud cases involving one person.
• The median loss attributable to fraud by older
employees is greater than that of their younger
counterparts. The median loss by employees over the
age of 60 was $713,000. However, for employees 25 or
younger, the median loss was $25,000.

Organizational Profile:
• Most costly abuses occur within
organizations with less than 100
employees.
• Government and Not-for-Profit
organizations have experienced the
lowest median losses.
• Management ignores irregularities.
• High turnover with low morale.
• Staff lacks training.

Organizational Profile:
• Most costly abuses occur within
organizations with less than 100
employees.
• Government and Not-for-Profit
organizations have experienced the
lowest median losses.
• Management ignores irregularities.
• High turnover with low morale.
• Staff lacks training.

Employee Red Flags
• Employee lifestyle changes: expensive cars,
jewelry, homes, clothes
• Significant personal debt and credit problems
• Behavioral changes: these may be an
indication of drugs, alcohol, gambling, or just
fear of losing the job
• High employee turnover, especially in those
areas which are more vulnerable to fraud
• Refusal to take vacation or sick leave
• Lack of segregation of duties in the
vulnerable area

Management Red Flags
• Reluctance to provide information to auditors
• Managers engage in frequent disputes with auditors
• Management decisions are dominated by an individual
or small group
• Managers display significant disrespect for regulatory
bodies
• There is a weak internal control environment
• Accounting personnel are lax or inexperienced in their
duties D Decentralization without adequate monitoring
• Excessive number of checking accounts
• Frequent changes in banking accounts

Management Red Flags
• Frequent changes in external auditors
• Company assets sold under market value
• Significant downsizing in a healthy market
• Continuous rollover of loans Excessive number of
year end transactions
• High employee turnover rate
• Unexpected overdrafts or declines in cash balances
• Refusal by company or division to use serial
numbered documents (receipts)
• Compensation program that is out of proportion
• Any financial transaction that doesn’t make sense -
either common or business
• Service Contracts result in no product
• Photocopied or missing documents

Changes in Behavior “Red Flags”
The following behavior changes can be “Red Flags” for

Embezzlement:
• Borrowing money from co-workers
• Creditors or collectors appearing at the workplace
• Gambling beyond the ability to stand the loss
• Excessive drinking or other personal habits
• Easily annoyed at reasonable questioning
• Providing unreasonable responses to questions
• Refusing vacations or promotions for fear of detection
• Bragging about significant new purchases
• Carrying unusually large sums of money
• Rewriting records under the guise of neatness in
presentation

Konsep Kecurangan (Fraud) : Fraudsters?

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Teodora Winda Mulia

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– Not demographically or psychologically

– Have the profile of other honest people

• Immediate financial need

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• Approximately 95 percent of all

– The Accounting System

– Clear Organizational Structure

– Effective Internal Audit Department

• Common rationalizations by perpetrators

White Collar and Blue

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The difference between blue

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• Poor internal controls

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The following behavior changes can be “Red Flags” for

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