Understanding and Fighting Fraud
BY JACK LITTLE, CPA, CFE, Professor of Practice
Fraud costs organizations around the world an estimated 5 percent of their annual revenues – a total of $3.7 trillion dollars – according to a 2016 study conducted by the Association of Certified Fraud Examiners (ACFE). Fraud – “a knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment” – can take many forms: corporate fraud, consumer fraud, tax fraud, identity theft and many others.
That’s why it’s important for students in the Charles H. Dyson School of Applied Economics and Management to learn how to detect, address, and prevent fraud, says Jack Little, CPA, CFE, professor of practice at Dyson and director of the new MPS-Accounting Program, offered in collaboration with the Johnson Graduate School of Management.
“Our current business students are our future business leaders,” Little says. “It is essential that they – all of them, not just the accounting majors – learn about what fraud is, its magnitude, how and why it happens, how we attempt to deter it, and how to deal with it when it is found.”
Dyson students have many opportunities to learn about combating fraud in classes such as AEM 2210/2225 Financial Accounting and AEM 4530 Auditing and Assurance. And in AEM 4532 Fraud Examination, which Little has taught since spring 2014, students investigate specific cases of fraud around the country.
“They write articles and create podcasts highlighting the fraud and illustrating what they have learned in class,” Little says. The podcasts address cases such as mortgage fraud in Michigan, a hearing-aid scam in Syracuse, and an MCAT-related scheme in Atlanta.
Megan Sutton ’17, an applied economics and management major, took AEM 4532 in the spring of 2016.
“The most important thing I learned was that separation of duties and internal controls are key in helping prevent fraud from occurring,” Sutton says. “The most surprising thing I learned was that auditors only caught about 3 percent of the frauds discovered. I always assumed that audits were the main way frauds were discovered.”
For more than 10 years, the AFCE has sponsored International Fraud Awareness Week – “a global effort to minimize the impact of fraud promoting anti-fraud awareness and education,” with this year’s event taking place Nov. 13-19. Dyson students had several opportunities to participate in Fraud Week, which Little described as “fun and informative.”
“I was not surprised at the level of student interest, but I was surprised by the interaction with other universities and from the folks around the world.”
Fraud Week also included two on-campus events held Nov. 14: the workshop “So, You Want to Become a CPA or CFE?” explored career options, and IRS Special Agent Tim Shannahan discussed his work in fraud investigations at the agency.
“We about 20 people in the CPA/CFE workshop,” Little says. “What was best was that they were from around campus – Dyson, SHA, Arts and Sciences – and there were sophomores, juniors and seniors. There were quite a few questions about our new Johnson MPS-Accounting in the College of Business, as well.”