As a historic storm and government red tape knocked out several key speakers at the ACFE Canadian Fraud Conference last week, the association showed its resourcefulness by delivering a top-notch event without skipping a beat. It was perfect example of how to handle the unexpected.

Of course these conferences aren’t new to the ACFE, and experience paid off when President and CEO James Ratley was able to step in for Tuesday’s keynote speaker and pull off a perfect presentation that had the audience laughing as much as learning. As disappointing as it was to not have Pamela Meyer to speak on liespotting, Ratley delivered a flawless talk on detecting deception, a subject with which he is obviously very familiar.

The Mind of a Fraudster

A couple of other presenters were also absent, including former fraudster, Justin Paperny, who was unable to get permission to enter Canada due to his criminal record. The ACFE staff dealt with these unexpected hiccups without much fanfare and Wednesday’s presentation, Inside the Mind of a Fraudster, went ahead with videos of Paperny’s earlier talk and of another fraudster, Dianne Cattani.

Both fraudsters talked about what they did, what they felt caused them to take the unethical path, and what they learned. The ensuing panel discussion was informative and thought-provoking, as ethics topics often are.

Fraud is a Human Problem

In his introductory talk on the fraud indicators, Ratley said:

The truth is that fraud occurs in all organizations, of every size, in every industry, and in every region. No entity is immune to this risk. The fundamental reason for this is that fraud is a human problem, not an accounting problem. Consequently, as long as organizations employ individuals to perform the business functions, the risk for fraud exists.

Ratley also outlined what he called the pillars of managing fraud risk:

• Fraud risk assessment
• Fraud prevention
• Fraud detection
• Responding to fraud incidents

He discussed the importance of recognizing fraud indicators, watching for the red flags of potential fraud, including internal control weaknesses and anomalies in accounting, operations and behavior.

Accounting Fraud

In a session on how accounting records are used to conceal fraud, Rosanne Terhart of BDO Canada outlined some of the evidence that can be gleaned from accounting records. This includes the “who, why and when” associated with a fraud, found through log-in and log-out records, concealment as evidence of intention, timing of entries that can indicate the extent of the fraud, and other fraud schemes that may be going on at the same time, using the same accounts.

With concrete examples of what to look for in accounting records and financial statements, Terhart provided a road map for a fraud examiner with some great case examples to illustrate the schemes.

Effective Documentation

The best investigation is useless without proper documentation, and Derek Knights, Senior Manager of Strategic Initiatives at TD Bank, gave attendees some great direction on how to write investigation reports in plain language. Clearly written investigation reports are consistent, easy to understand, and useful to the reader. They are free of jargon, undefined acronyms, convoluted sentences and passive language.

The report writer should:

• Use short sentences and words
• Write in the active voice
• Use common words and phrases
• Define all acronyms
• Use correct grammar, spelling and punctuation
• Proofread

Have a Plan

Andrew Kautz, in his session on internal investigations, outlined some of the things that can derail an investigation. Some of the issues he covered were denial, both that a fraud could occur and that a fraud has occurred, assumptions of facts, turf wars and power struggles. He discussed the advantages and pitfalls of using an external investigator and the danger of incomplete investigations.

“There is no one answer or solution to the issues that arise in an internal investigation, but having an action plan is an important first step,” said Kautz. “Allegations of employee fraud can be as harmful to an organization’s wellbeing and future survival as any natural disaster, and a proper, well-planned response is essential.”

The ACFE obviously took this advice, delivering a top-notch conference despite the setbacks.