Books: Fraud Prevention GuideBy
Even ethical organizations with a strong compliance program and robust controls can succumb to fraud.
Victor E. Hartman, an attorney and former Federal Bureau of Investigation (FBI) agent with accounting experience, gives an insightful practitioners’ guide in The Honest Truth about Fraud: A Retired FBI Agent Tells Allon how to combat dishonest acts perpetrated by people who violate their organization’s trust.
Hartman explains the current landscape of threats, including various types of occupational fraud, many related to asset misappropriations, such as embezzlement, accounts receivable fraud, accounts payable fraud, inventory fraud, payroll fraud, corruption/bribery, conflicts of interest, and financial statement fraud.
He also describes securities fraud, financial institutions fraud, scams perpetrated by con artists, insurance fraud, bankruptcy, matrimonial and business divorce fraud, and theft of intellectual property or proprietary information. Hartman also explains various cyber frauds such as distributed denial-of-service attacks. He outlines how defending against the threat of crimes such as money laundering and tax frauds poses a challenge for companies and governments alike.
Donald Cressey’s fraud triangle of opportunity, pressure/incentive, and rationalization is also covered, as well as the five stages of the fraud life cycle: prevention, detection, investigation, mitigation, and remediation.
Based on Hartman’s professional experience while investigating the Enron fraud in 2001, he elaborates on an effective fraud-prevention strategy of both hard and soft controls. He also details the framework for fraud detection, behavioral forensics, and analytical procedures for analyzing unstructured data in simple language.
A chapter is devoted to explaining how to organize an investigative team, eight steps for effective interviewing, tips for obtaining digital evidence, and best practices for documenting evidence and writing a report on your conclusions stemming from the investigation to practice effective crisis management. Organizations need to take mitigation and remediation measures swiftly to minimize the collateral damage of the fraud.
Finally, Hartman concludes by highlighting the role played by forensic experts and gives practical fraud-prevention tips. This can be used as a textbook for students studying forensic accounting or as a primer for finance professionals to understand how to minimize fraud. It’s a useful guide to train personnel in ethics, cybersecurity, and controls.