The Institute of Internal Auditors February 2014 LONG ISLAND CHAPTER Volume 14 NEWSLETTER Issue 3
Up Coming Events- In This Issue
Annual Fraud Conference 1. FRAUD SEMINAR THIS MONTH Friday, February 28, 2014 2. DISTRICT REP CORNER Melville Marriott 3. JOB CORNER- News & info-article Annual IT Conference 4. Year End Dinner ‘Save the Date’ ( including COBIT) Friday, March 21, 2014 5. Candidate Seminar Topics List Melville Marriott 6. CIA Certification Recipients Annual Long Island 7. CIA-Related Certification News Chapter Conference 8. Long Island Chapter Website Friday, April 11, 2014 9. Meetings & Coming Events Melville Marriott 10. Risk Concerns for Companies IIA International Conference London ~ July 6 – 9, 2014 Across Multiple Industries Article ______For more information go to: 11. Fraud Seminar Registration http://www.theiia.org/chapters/index.cfm?cid=241 12. Chapter Officers & Board 13. FRAUD STUFF Article - - - Local Career Opportunities ‘Genuine Fraud’ Saga Continues
Visit the website above and click on News and Jobs
1. Fraud Conference Features Insight Into Fraudster Thinking
The Long Island Chapter of the IIA will present its annual special meeting on Fraud, Friday February 28th at the Melville Marriott. Our moderator is Long Island board member Ernie Smith, of Narwocki Smith, LLP Certified Public Accounting and Business Consultants. This daylong event includes breakfast and lunch, 8-CPE credits and a robust program. Kathleen Rice, Nassau County’s District Attorney, will be our keynote speaker. A rare opportunity to gain insight into a fraudulent situation in the corporate world is afforded by one of our speakers who became entangled in one of the largest accounting frauds on Long Island involving one of the most well known public companies. Current
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developments in fraud detection and developments in audit practices will also be presented. A complete outline of the day’s program/schedule, speaker’s bios and instructions for registration are presented in section ‘12’ of this newsletter. Chapter members and their associates are welcome.
2. District Representative Corner
Gary Jendras, our District representative, presents the following District news update:
Going into 2014, the IIA continues to provide valuable support for all of its members across the globe. Currently there are 187,000 members worldwide in 190 countries with the majority coming from North America – 37%; Europe – 28%; and, Asia Pacific 19%. The IIA has 603 full and part time staff around the world to support its members including 180 that work in Altamonte Springs, Florida.
The IIA magazine, published six times yearly, won the magazine of the year award in Florida for 2013. The International IIA Conference will be held in London this year during the month of July. Speaking of conferences, the IIA Florida will host the annual Leadership Conference from April 27th thru April 29th this year at the Disney World Yacht and Beach Club resort. This conference will focus on presentation skills, personality style workshops, communication techniques, and roundtables on specific chapter related topics. Two members from each IIA chapter that are either Officers or Board members are invited to attend, learn and network with other IIA chapter member leaders.
Also, if you are a member of the Long Island Chapter and are interested in learning more about IIA Chapter operations and are considering volunteering for one of the many Chapter Committees that we have, plan to attend the Northeast District workshop. The District workshop will be held at the Hotel Pennsylvania in NYC on June 27th this year with representatives expected from IIA Chapters including: Albany, New Jersey, Central Pennsylvania, Leigh Valley, New York City, Northeast Pennsylvania, Philadelphia, Westchester(NY)/Fairfield(CT), and of course, Long Island. If interested in attending, please note the date and contact/email Gary Jendras.
3. IIA Long Island Chapter - Job Corner
CHAPTER EMPLOYMENT HELP The Long Island Chapter offers employment help to members – matching those searching for work to those companies hiring. For more information contact, Russ Safirstein, IIA Board Governor and Employment Committee chair, at - [email protected] - Good luck in your job search.
Using LinkedIn To The Fullest Extent I talk to recruiters regularly in my role for the IIA employment committee. They all speak very highly of LinkedIn. They find good candidates, get to know them and approach them with job opportunities that are geared towards the right candidates. To a recruiter this is extremely helpful in mining the right Page | 2 The Institute of Internal Auditors February 2014 LONG ISLAND CHAPTER Volume 14 NEWSLETTER Issue 3
candidates for a job rather than just blindly posting a job and being pounded with hundreds of unqualified applicants. How can you use this information to help your job search? Note the information on the next page to address this question.
3. IIA Long Island Chapter - Job Corner Continued
A LinkedIn Profile is NOT your resume
What used to work doesn't anymore. A resume was your sales brochure summarizing your "features and benefits", listing out your skills, experience and education. Not only is that out-of-date, it doesn't work for LinkedIn. What should you have?
A nice professional photo with a simple background. No other people, kids, significant others or anything else that doesn't present you in the best professional light.
A professional heading that should describe who you are. Be descriptive and not just the title from your last job or the fact that you're unemployed. Use professional keywords.
A Summary which describes the professional "you". Use keywords here again in conversational paragraphs and not a bulleted list of responsibilities.
A Skills section filled with keywords. You can choose 50. Anything less your shorting yourself.
Anything else that may be of interest. A professional blog or public presentations via SlideShare.
Be Active Once you've set up your profile, don't forget about it. Actively engage in updating it, adding new insights and sharing, professionally, any insights and updates that your connections and others who view your profile might be interested in. Remember this is a social professional network. Just by posting a minimal profile is not going to have the offers rolling in. LinkedIn doesn't work that way. What should you do?
Get connected!! The more connections you have the greater your visibility. Try to add 20 connections a month, at least.
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Groups can be very important to helping others know who you are and what you think. They're online meet and greets. Treat them as such. Be active and insightful. Join those groups that have meaning to your current and future profession. You're allowed 50 Groups - go find 20 that are valuable to you.
Keep those updates coming. Post something intelligent at least once a week. Get your connections interested in you and what you have to say.
4. Save-The-Date ~ Long Island Chapter Year End Dinner Save the Date IIA Long Island Chapter Annual Year-End Dinner
Friday May 16, 2014 7 pm
TASTE 99 Restaurant At Carlyle On The Green Bethpage Page | 4 The Institute of Internal Auditors February 2014 LONG ISLAND CHAPTER Volume 14 NEWSLETTER Issue 3
There will be a 99 percent guarantee there will be no snow on the 16 th of May to mar the Long Island Chapter’s gala. Hopefully the scenic hills of the PGA ‘Black’ course will also be visible in their verdant glory without a covering of that ‘white-stuff’ – though this guarantee is only 75 percent this snowy year! All Chapter IIA members, and their guests, are invited to this entertaining, interesting and elegant evening. Watch your email for the very affordable prices and registration details.
5. Candidate Seminar Topics for 2014 - 2015
SEMINAR TOPIC IDEAS SUBMITTED by PARTICIPANTS of CHAPTER SEMINARS
Following is a list of ‘candidate’ topics for possible use in future seminars. Please note that this is a ‘list in progress’ and is not complete. Additionally, there is no assurance that topics can be appropriately staffed with speakers, or scheduled in a time of preference (month). Suggested candidate speakers are not listed as it would be inappropriate prior to contacting them for an engagement – but please send in speakers of your preference so they can be added to the list of ‘possible’ speakers.
Topics are listed, in no particular order, by suggested month of preference for the seminar to be held.
SEMINAR TOPIC IDEAS for SEPTEMBER: Fraud; GRC / Sarbanes Compliance Management Software Products; Ethics; Governance; Enterprise Risk Management (ERM); Cybersecurity; Portfolio Stress Testing; Dealing with the Regulators; Audit of 340 Drug Program; Audit of Institutional Cost Report; Updates to Disproportionate Share (DSH); Risk Assessment and Connecting to IS; Corporate Risk and the Business Leaders; and, Minimizing Internal Staff Turnover. . . .
SEMINAR TOPIC IDEAS for OCTOBER: Topics Related to Public Schools; Banking Regulations; Bring in a Convicted Felon to Hear Their Perspective on Crime. . .
SEMINAR TOPIC IDEAS for NOVEMBER: Technology Currently Utilized by Different Branches of Internal Audit; Synergies Between Compliance and Audit; Cross Functional Relationship Building. . . .
SEMINAR TOPIC IDEAS for DECEMBER: Writing an Audit Report; AUDITING ERM, auditing Board of Directors, auditing Data Mining; Any topic pertaining to Risk to suffice my CRMA and any Data Analytic Tools such as ACL to learn on it; IT AUDIT, PCI, DSS, PII / Privacy, SOX, COSO 2013, SEC, PCAOB, SAP; DATA PRIVACY, Integration of Acquired Companies; Audit of Corporate Capital Actions (purchase of treasury stock, issuance of debt, issuance of common shares, etc.) . . . . Page | 5 The Institute of Internal Auditors February 2014 LONG ISLAND CHAPTER Volume 14 NEWSLETTER Issue 3
SEMINAR TOPIC IDEAS for JANUARY: Technical approach to auditing in the 21st century. What can we begin to eliminate as we take on so many new tasks.
As the above is a “ . . . list in progress . . . “ please continue to pass on any of your ideas on future seminar topics, schedule-month preference and/or speaker suggestions. Contact / email any board member, or note ideas on Seminar Evaluation you receive via Email after attending any LI Chapter Seminar.
6. Long Island Chapter Members Receiving CIA Certifications The officers, board and membership congratulate chapter members who were certification recipients in January 2014. Biju Beegum, our CIA Chairperson, also sends personal letters of congratulations to recipients. Presented below are Long Island Chapter CIA certification recipients CERTIFIED INTERNAL AUDITOR ( CIA ) - - - Anthony Cervoni and Arthur Ekahn
- - - Again – congratulations and best wishes for a successful career.
7. CIA Exam and Related Certification News
Biju Beegum, our CIA Chairperson, presents the following information on: TIPS TO PASS THE CIA EXAM; CHANGES IN CIA EXAM and REQUIREMENTS TO SIT FOR EXAM; and , CIA and CRMA AVAILABLE STUDY AIDS
Tips on Passing the CIA Exam Passing the CIA Exam requires a commitment of time and energy. This commitment is often complicated because most aspiring ‘CIA Candidates’ have other demands on their time - a job, a family, daily routines, commuting, etc. Thus a ‘plan’ is required to identify study resources and organize time for studying and adapt a strategy for test-taking that fits your needs. A Long Island Chapter member who sat for the CIA, and passed the exam, has relayed Biju the following tips on passing the CIA exam outlined below:
. . . . Since I work full time and have a family, I studied mostly at night. This was my schedule: I sat for the first 3 parts. I studied on average approximately 3 hours/day. For the first two parts, I:
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Studied for about three weeks;
Used the CIA learning system initially;
Used an outdated Gleim book for additional test questions during the final weekend cram session.
7. CIA Exam and Related Certification News Continued - For the third part, I :
Studied for about six weeks;
Used the CIA learning system at the same time as an outdated Gleim book. found it difficult to rely solely on the CIA Learning system for the first two sections, so, first I read the Gleim chapters related to those sections, took the Gleim practice quizzes in the book, then I read the CIA learning system units. For the remaining units, I followed the same system as the first two parts.
For a few topics, I did use my old Becker book as a refresher, off the top of my head, they were (Section B) accounting for bonds, warrants, capital stock and leases. I scheduled my exams on Tuesday or Wednesday so I could cram the whole weekend before the exam and depending on how prepared I felt, I could request that Monday and/or Tuesday off from work to continue cramming. . . . my supervisor was very considerate. I hope this helps. Let me know if you need some additional info...... Above ‘ Tips on Passing the CIA Exam ’ outline, though brief, appear very useful to aspiring CIA Candidates. If you take the CIA exam, please consider sharing your experiences with the study and test- taking ‘ordeal’ with other Chapter members by contacting / Email Biju with your experiences and views on the effort. ( Biju’s Email: Biju.Beegum@cardworks,com). New Education & Certification Requirements for the CIA
The following are changes to the certification and education requirement for the Certified Internal Auditor Educational Requirements: With approval from the Global Board, the CIA educational requirements now have a provision that allows experienced internal audit practitioners around the globe not possessing a bachelor’s degree or its
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equivalent to pursue CIA certification. Candidates may now become eligible for the CIA, subject to approval, who possess: 1. Two years’ post-secondary education and five years’ verified experience in internal audit or its equivalent, - OR - 2. Seven years’ verified experience in internal audit or its equivalent. Individuals who meet the above prescribed criteria may now qualify to pursue CIA certification. This alternative provision opens the door to certification to those accomplished practitioners from around the globe who have had varied educational experiences, but possess the technical knowledge and expertise to obtain the designation. For more information on new CIA eligibility requirements, visit >http://bit.ly/1krYldu<.
7. CIA Exam and Related Certification News Continued - Eligibility Requirements for All Certification Programs have also changed recently. The Board also updated the documentation requirements for candidates to move from an “Applied” to an “Approved” status in all certification programs. Effective 1 January 2014, The IIA must receive and approve the following described candidate documents before a candidate may register for any certification exams:
Proof of Identification in the form of a copy of the candidate’s official passport or national identity card. These must indicate current status; expired documents will not be accepted. All documents must be scanned and uploaded through the ‘Document Upload Portal’ in a manner that ensures the photo is clearly legible. Applicants must indicate their highest level of education on the exam application. Proof of education in the form of a copy of the degree(s) or transcripts is required. These documents should be transmitted to The IIA via the ‘Document Upload Portal’. NOTE: Full-time university students who are in their senior (final) year may enter the certification program and sit for exams before completing their education requirement upon approval. To be accepted into the certification program and ultimately achieve certification, they must: Complete the Special Student/Professor application in CCMS. Submit a University Student/Professor Registration form. and Complete the education requirement. A ‘Character Reference Form’ must be completed and signed by an active IIA-certified individual, a current or prior supervisor, or the candidate’s current professor and transmitted to The IIA via the ‘Document Upload Portal’ . Effective 1 January 2014, a candidate must provide all three documents indicated above and receive acceptance to the certification program before they can register and sit for any exams.
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Above outlined significant changes and enhancements to the IIA’s certification process and a discussion of the implementation of the 3-part CIA exam structure, updated forms and new eligibility requirements can be obtained in the: UPDATED CERTIFICATION CANDIDATE HANDBOOK. If you are pursuing certification, or plan to, downloading this December 2013 Handbook will prove very useful - - - A copy of this handbook is obtainable at: >http://bit.ly/1j8RolK<.
The IIA’s CIA Learning System Slogan for the IIA’s CIA Learning System is “Prepare To Pass”. With an array of personalized training options this IIA System is the solution to those seeking the best way to prepare for the Certified Internal Auditor exam. Combining printed books and interactive online study tools with optional live and online courses to ensure you are prepared to pass the CIA exam. Your choice determines the training option, study time and place.
7. CIA Exam and Related Certification News Continued -
For additional information, recommendations of those who have used the system or to order your own CIA LEARNING SYSTEM visit: ww.LearnCIA.com – or – call: 877.442.2425. You can try a demo of the CIA LEARNING SYSTEM online by accessing the above website. Should you wish to purchase the system for self-study, contact the Long Island Chapter to arrange a member discount.
The IIA’s CRMA Test The CRMA ( Certification in Risk Management Assurance) testing has begun and materials for study for those preparing to take the test are becoming available. The IIA bookstore is reported to have a book of test preparation materials – with other test preparation materials in development as this is a new credential. Visit the IIA website for more information on the CRMA test and study materials.
8. Chapter Website – A Member Resource
Thanks to our new members and those returning members we have had outstanding attendance at our monthly seminars. We hope you continue to enjoy the benefits of being a member of the institute of internal Auditors Long Island Chapter. Our seminars continue to bring you the latest on hot topics impacting our profession.
Our membership continues to exceed 400 members and is growing. Stay connected with the Chapter through our website http://chapters .theiia.org/long-island/, where you can find complete information on our upcoming seminars and activities. Of course, access IIA National, >theiia.org<, for info also. Our Chapter webmaster, Mindy Kaplan, is always available if you have comments/questions/contributions to our website.
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9. IIA Long Island Chapter Meetings and Coming Events
On July 6 thru 9, 2014 join more than 2,000 of your peers in LONDON, England for the IIA INTERNATIONAL CONFERENCE (International Conference details visit www.ic.globaliia.org }
The Long Island Chapter has a full program of scheduled seminars offering CPE’s throughout the year. Listed bel ow are the seminars, associated CPE’s, presentation dates and registration information thru the end of the chapter year. A full description of each seminar will be Emailed prior to each seminar to Chapter members. For informati on // questions on Seminars please contact: Chapter President Ron Goldman at
9. IIA Long Island Chapter and Coming Events Continued Format/ Date/Location CPE/CPDs Topic Prices
February 28, 2014 Full Day Member - $170 Friday (Breakfast and - Annual Fraud Conference - Non-member - Melville Marriott Lunch) $220 8 CPE/CPDs Student - $30
March 21, 2014 Full Day - Annual IT Conference – Member - $170 Friday (Breakfast and Non-member - Melville Marriott Lunch) ( including COBIT ) $220 8 CPE/CPDs Student - $30
April 11, 2014 Full Day Annual Long Island Chapter Member - $170 Friday (Breakfast and Non-member - Melville Marriott Lunch) Conference $220 8 CPE/CPDs Student - $30 May 16, 2014 Friday – 7pm Cocktails, Dinner, IIA Long Island Chapter Annual Watch your TASTE 99 – at - Music, Networking, Email for Caryle On The Green Prizes Year-End Dinner details on this Bethpage, event
OTHER ON & OVER THE HORIZON IIA CONFERENCE & EVENT SCHEDULES Following are schedules for typical IIA professional conferences / events, some in exotic places! . LI Chapter Annual Fraud Conference, February 28, Melville, NY . Lean Six Sigma Tools for IA Fieldwork, March 6-7, Atlanta, Georgia . LI Chapter Annual IT Conference, March 21, Melville, NY Page | 10 The Institute of Internal Auditors February 2014 LONG ISLAND CHAPTER Volume 14 NEWSLETTER Issue 3
. 2014 General Audit Management Conference (GAM), March 24-26, Orlando, Florida . Construction Activity: Audit Strategies, April 8-9, Phoenix, Arizona . Annual LI Chapter Conference, April 11, Melville, NY . Analyzing & Improving Business Processes, April 22-23, New York, NY . IIA Long Island Chapter Annual Year-End Dinner, May 16, Bethpage, NY . Auditing Derivative Strategies, June 10-11, Chicago, IL . IIA Northeast District Workshop, June 27, New York, NY . IIIA International Conference, July 6 – 9, London, England
Anyone attending the above – or in fact any – IIA conferences/events are asked to submit comments on their experience to our Chapter’s newsletter – please note items from conference/event that may be of interest to chapter membership. Email: CHAPTER NEWSLETTER - to [email protected] . 10 Risk Concerns for Companies Across Multiple Industries
This topical article was contributed by one of our IIA LI Chapter Governors, Chris Wright of Protivity * * *
A New Risk Survey from North Carolina State University ERM Initiative and Protiviti Finds Regulatory Change Tops List of Risk Concerns for Companies Across Multiple Industries. Board members and senior executives’ concerns about strategic risks show largest year-over-year increase, according to study. Survey information was released in MENLO PARK, Calif. – February 5, 2014 – Changes in the regulatory environment and heightened scrutiny by regulators ranked at or near the top of risk concerns among corporate leaders regardless of industry. This is according to Executive Perspectives on Top Risks for 2014 www.protiviti.com/TopRisks, a just-released survey report by global consulting firm Protiviti (www.protiviti.com) and the Enterprise Risk Management (ERM) Initiative at North Carolina State University’s Poole College of Management www.erm.ncsu.edu. A summary of findings of this recent Risk Survey follows:
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx “ The pressures created by regulators, plus the potential for major adjustments in light of regulatory change, are understandably tremendous concerns and present substantial risk. Having to comply with new regulatory requirements can dramatically affect the profitability and growth of an organization,” said Dr. Mark Beasley, Deloitte Professor of ERM and director of the ERM Initiative at NC State University. “Even organizations in industries that are less heavily regulated can feel the indirect effects of new and changing regulations, especially those affecting all types of organizations, on profitability and growth.”
This marks the second year in which Protiviti and the NC State ERM Initiative conducted their study to identify the top risks on the horizon that are driving risk conversations in boardrooms and C-suites. Respondents rated the potential impact of each of 22 risks considered in the survey on a scale of one to 10, with 10 being the highest impact. Despite a slight decrease in its rating year-over-year, regulatory change and heightened scrutiny again ranked as the top risk with a rating of 6.4 on the 10-point scale in the current survey. Notably, financial services organizations and those in the healthcare and life sciences industry group rated this risk Page | 11 The Institute of Internal Auditors February 2014 LONG ISLAND CHAPTER Volume 14 NEWSLETTER Issue 3
substantially higher than the average from other industries, with scores of 7.3 and 8.2 respectively. Most executives rated the business environment as risky, although improving relative to 2013. The 2014 scores for a majority of risks assessed in the study are lower than their respective scores in the prior year, suggesting a slight improvement in the risk environment. Interestingly, board members appear to view the business environment as more risky than does management. By contrast, CEOs seem to have the most optimistic views about the risk environment.
10 Risk Concerns for Companies Across Multiple Industries Continued
“ One possible reason for directors perceiving the business environment as riskier than management does is that the risks with the highest ratings were primarily strategic in nature and many directors tend to focus more on strategic rather than operational issues,” said Jim DeLoach, a managing director with Protiviti. “With respect to CEOs, they tend to focus heavily on the strength of markets. The global economy was showing signs of improvement during the survey period, which could have had a positive influence on the participating CEOs, resulting in a lower assessment of macroeconomic and strategic risks.”
The Top Ten Risks According to the 374 survey respondents, who included board directors, C-suite executives and other top management from companies across a range of industries, the top 10 risks that present the greatest concerns this year are:
1) Regulatory changes and heightened regulatory scrutiny
2) Economic conditions restricting growth
3) Uncertainty surrounding political leadership affecting U.S. and international markets
4) Challenges related to succession-planning and talent acquisition/retention
5) The ability to grow organically through customer acquisition
6) Cyber threats that have the potential to disrupt core operations significantly
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7) Resistance to change restricting necessary adjustments to the business model and core operations
8) Privacy/identity management and information security/system protection
9) Anticipated volatility in global financial markets and currencies
10) Uncertainty surrounding costs of complying with healthcare reform legislation
10 Risk Concerns for Companies Across Multiple Industries Continued
The survey was conducted in the fourth quarter of 2013. Respondents represent both U.S.- based and non-U.S. organizations and public and private companies. The report also breaks out survey results by size of company, position and industry, and offers implications of the survey results for organizations and suggestions of how to respond to these top risks.
“Managing uncertainty across a multitude of business issues continues to be a challenge that companies struggle with,” said Patrick Scott, Protiviti executive vice president, global industry programs. “It’s critical that organizations continue to prioritize risk management strategies to ensure that they are prepared to address emerging issues. These survey results should serve as a catalyst for an updated assessment of risks within organizations.”
Resources Available: Video, Infographic, Podcast & Benchmarking Tool - Following are resources & tools for further study of this Risk Survey:
The report from Protiviti and NC State Poole College’s ERM Initiative, Executive Perspectives on Top Risks for 2014, along with an infographic and a video of key survey results, is available for complimentary download at www.protiviti.com/TopRisks and www.erm.ncsu.edu. A podcast featuring DeLoach and Beasley discussing the major findings from the study is available at: www.protiviti.com/podcasts. Executives can also compare their views about risks that are Page | 13 The Institute of Internal Auditors February 2014 LONG ISLAND CHAPTER Volume 14 NEWSLETTER Issue 3
likely to affect their organizations in 2014 to the survey findings online using Protiviti’s Benchmarking Tool, available at www.protiviti.com/TopRisks.
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10 Risk Concerns for Companies Across Multiple Industries Continued
Above article was contributed by one of our IIA LI Chapter Governors, Chris Wright of Protivity. An abbreviated background of the generators of this study follows:
About Protiviti - - - Protiviti (www.protiviti.com) is a global consulting firm that helps companies solve problems in finance, technology, operations, governance, risk and internal audit. Through its network of more than 70 offices in over 20 countries, Protiviti has served more than 35 percent of FORTUNE 1000® and FORTUNE Global 500® companies. The firm also works with smaller, growing companies, including those looking to go public, as well as with government agencies. Protiviti is a wholly owned subsidiary of Robert Half (NYSE: RHI). Founded in 1948, Robert Half is a member of the S&P 500 index.
About the North Carolina State University ERM Initiative - - - The Enterprise Risk Management (ERM) Initiative in the NC State University Poole College of Management provides thought leadership about ERM practices and their integration with strategy and Page | 14 The Institute of Internal Auditors February 2014 LONG ISLAND CHAPTER Volume 14 NEWSLETTER Issue 3
corporate governance. Faculty in the ERM Initiative frequently work with boards of directors and senior management teams, helping them to link ERM to strategy and governance, host executive workshops and educational training sessions, and to issue research and thought papers on practical approaches to implementing more effective risk oversight techniques (www.erm.ncsu.edu).
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11 Fraud Conference Information and Registration
The 2014 All Day Fraud Conference will be held Friday, February 28th, 2014 at the Melville Marriott. In addition to a robust program, the day’s event includes breakfast, lunch, networking and 8 CPE/CPD credits. Program description, the day’s agenda and registration details follow.
This year’s Annual Fraud Conference promises to deliver in many ways what you all have been waiting for from us in state of the art Fraud education:
Our keynote speaker is the Nassau County District Attorney-Kathleen Rice, the trailblazer Prosecutor who has brought about successful reforms in prosecuting criminal activity and innovative programmatic changes that have meaningfully changed the face, both locally and nationally, of Nassau County, today.
After many years of searching for just the right presenter/presentation we bring to you a professional who became entangled in one of the largest accounting frauds on Long Island involving one of the most well- known, local, public companies
General Session: Emerging Trends in Social Network Investigations
Live demonstration designed to update investigators using the Internet and Social Media in their investigations. This is an overview showing the popular search engines and overlooked by most users. A foray into Web 2.0 social networks and open sources will open up the class understanding to the volume of information people share about themselves.
Highlights:
• Learn how monitoring social media can be the best intelligence tool for security. • Expose fraudulent business enterprises, locate assets, and find undercover intelligence. • Attendees will leave with actual Web sites to utilize in their own investigations.
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Breakout: Investigating with Social Networks
Using social networks allows you to vet hires, conduct due diligence pre-acquisition, prevent competitive intelligence, and identify problem employees before workplace violence or intellectual property theft occurs. This session reviews social- and photo-network Web sites, mapping tools and other Internet features that can be used for intelligence-gathering and security assessments.
Highlights:
• Understand the difference between Web 2.0 and traditional Web sites • Expose social networks and personal vulnerabilities. • Hunt down online social network profiles.
Come join us for what will be a full-day of something for everyone in the ever changing world of Fraud as we enter into calendar year 2014.
About Our Speakers -
Kathleen Rice, Nassau County District Attorney, brings passion, innovation, and creativity to the office of the Nassau County District Attorney. Elected in 2005, re-elected in 2009 and 2013, Kathleen is the first woman to serve as Nassau’s chief law enforcement officer.
As District Attorney, Kathleen has been a champion for progressive criminal justice policies which have achieved impressive results and commanded national attention. She took on the epidemic of drunk driving on Long Island, championed passage of “Leandra’s Law” to enact tougher penalties, and her work has been lauded by advocates like Mothers Against Drunk Driving and featured on “60 Minutes.” She confronted Hempstead’s notorious open-air drug market with the Terrace-Bedell Initiative, a progressive offender-rehabilitation and prevention program that engaged the community, helped offenders get back on track with drug treatment and job training programs, and transformed the neighborhood with an 82% reduction in drug-related crime since the program’s inception.
Rice has revamped bureaus focused on the prosecution of domestic violence, and established new resources to protect of children and the elderly. She has also dedicated specialized resources to the investigation and prosecution of public corruption, identity theft rings, consumer frauds, and Medicaid fraud.
In her second term, Kathleen is fighting the epidemic of prescription drug abuse with the creation of a Pharmaceutical Crimes Unit to identify and prosecute dirty doctors and pharmacists, while getting addicts the treatment they need to reclaim their lives.
In 2010, Kathleen formed Long Island’s first animal cruelty prosecution unit. As a result of Kathleen’s deployment of specially-trained prosecutors and a 24-hour complaint hotline, the office has received and investigated more than 1,000 tips and the number of Nassau’s animal abuse prosecutions has quadrupled. Page | 16 The Institute of Internal Auditors February 2014 LONG ISLAND CHAPTER Volume 14 NEWSLETTER Issue 3
She is the lead author of several pieces of state legislation designed to strengthen animal cruelty laws and prosecutions across New York. Kathleen’s efforts have led the Animal Legal Defense Fund to name her one of the nation’s “Top Ten Animal Defenders.”
Kathleen believes that a District Attorney should not just enforce the law but work to make it better. Since her election, Kathleen has proposed and advocated for legislation to strengthen drunk and drugged driving laws, to give prosecutors better tools to investigate and prosecute child sex abuse, to tackle prescription drug abuse and illegal guns, and to reform antiquated animal crimes laws with stronger protections for animals and tougher penalties for those who abuse them.
Rice has dedicated her entire career to public service prosecuting crime at the local and federal levels. She served as an Assistant District Attorney in Brooklyn prosecuting murders and rapes, and took on white collar criminals as an Assistant US Attorney under Attorney General Janet Reno.
A resident of Garden City, District Attorney Rice is a graduate of Garden City High School, The Catholic University of America, and Touro Law School.
Cynthia Hetherington, CFE has more than 18 years of experience in research, investigations, and corporate intelligence. She is the founder of Hetherington Group, a consulting, publishing, and training firm focusing on intelligence, security, and investigations. Cynthia was named the 2012 James Baker Speaker of the Year for the Association of Certified Fraud Examiners.
A widely-published author, Cynthia authored Business Background Investigations (2007) and the Manual to Online Public Records (2008), published by Facts on Demand Press. She is the publisher of Data2know.com: Internet & Online Intelligence Newsletter and has co-authored articles on steganography, computer forensics, Internet investigations, and other security-focused monographs. She is also recognized for providing corporate security officials, military intelligence units, and federal, state, and local agencies with training on online intelligence practices.
Ernest Patrick Smith, CPA/ABV/CFF, CVA, CFE, Moderator is a Senior Partner with Nawrocki Smith LLP and leads the Special Services Practice which includes providing Internal Audit, Internal Control Review and Evaluation, Forensic Accounting/Business Valuation and Risk Management Services to for- profit, not-for-profit, governmental, banks/credit unions, insurance companies and other related entities. He has extensive experience as a Financial Investigator regarding integrity, internal control and evaluation, business valuation challenges, fraud and other related situations. He has led numerous training services for his clients and professional staff on various topics relating to internal audit, internal control review and evaluation, business valuation, fraud and forensic investigations and practice standards. He is a member of several committees within the New York State Society of CPA’s including the Business Valuation Committee, Public Schools Committee and the Professional Ethics Committee. He has provided assistance to counsel, deposition testimony and trial testimony in all aspects of litigation-related matters including mediation, arbitration and litigation. He has been recognized as an expert witness in accounting, business valuation and fraud related matters in both federal and state courts.
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Page | 17 The Institute of Internal Auditors February 2014 LONG ISLAND CHAPTER Volume 14 NEWSLETTER Issue 3
Registration: Instructions and Day’s Agenda – F riday, February 28, 2014 - starting at 8:30 am - Check-in and breakfast begin at 8:30 a.m. Program begins at 9:00 a.m. Lunch will be served at approximately 12:30 p.m. Dress is business casual. How to Register: Please use the following on-line registration link: http://www.cvent.com/d/d4q1tk/4W
If you are having trouble with the link, notify Ron Goldman at [email protected] or call Ron at 516- 918-7166 For making payments offline, You should register on-line (above) and in the payment section, select “check” or "other." If not registering online, contact us at [email protected] or call Bob McNair at (631) 344-5921 at least 24 hours before to reserve your seat. Then complete and enclose this registration form along with your check made payable to the IIA Long Island Chapter and mail to: Institute of Internal Auditors LI P.O. Box 442, Smithtown, New York 11787 or bring it the day of the seminar.
No. of Prepaid IIA Member Non Member CPE CPD First Name(s) Last Name(s) Subscriptions $170 Each $220 Each Y/N Y/N Applied
Total $ $ #
Company Name: ______Address: ______Phone #: ______E-Mail Address: ______
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Page | 18 The Institute of Internal Auditors February 2014 LONG ISLAND CHAPTER Volume 14 NEWSLETTER Issue 3
Directions to the Melville Marriott: From New York City: Take the Long Island Expressway (Rte. 495) to Exit 49 South. Take the Ramp (right) onto the South Service Road. Turn left (North) onto Old Walt Whitman Road (Walt Whitman Road) From Eastern L.I.: Take the Long Island Expressway (Rte. 495) to Exit 49 North. Take the Ramp (right) onto the North Service Road. Turn right (North) onto Old Walt Whitman Road (Walt Whitman Road). The Melville Marriott phone number in case of weather emergency: (631) 423-1600
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12 Chapter Officers and Board Members ~ 2013-2014 CHAPTER OFFICERS President RON GOLDMAN, MBA, Deloitte & Touche Executive Vice President and Treasurer - ROBERT C. MCNAIR CIA, MBA, MS, CRMA, Brookhaven National Laboratory Vice President & Operations Officer - DEEPALI ADHIKARI CPA, CA, Deloitte & Touche Vice President & Professional Services - KAREN AMATO, CPA, Karen Amato CPA, P.C. Asst. Treasurer - ELLEN CARAVELLA, CPA, CIA, Diocese of Rockville Center Vice President and Secretary - BRIAN BLISARD, CPA, KPMG, LLP BOARD OF GOVENORS Lucille Brower, CPA, CIA, CFSA, CISA, CardWorks Servicing Geraldine Brennan, CIA, CFSA, CRMA, Ridgewood Savings Bank Vincent Colletti, CIA, CFSA, CRMA, Medical Action Industries, Inc. Larry Karp, MBA, CPA, CA Technologies Prabhat Kumar, CPA, Canon U.S.A., Inc. Michael Lanning CIA, CFSA, CRMA, Astoria Federal Savings Joel Lanz, CPA, CISA, CISSP, CFE, CITP, MBA, Joel Lanz, CPA P.C. Joyce Larson, New York Community Bank Maria Michaelson, CPA, CRMA New York Community Bank Lauren A. Nichols, CPA, MBA, Hofstra University Caroline Pavlik, MBA, CIA, CRMA, Consultant Frederick Piulson, CPA John Rostern, CRISC, QSA, Coalfire Inc. Russell Safirstein, CPA, Paracon Group Inc. Robert M. Skirkanich, MBA, CIA, CRMA, Consultant Ernest Patrick Smith, CPA/ABV/CFF, CVA, CFE, Senior Partner - Nawrocki Smith LLP Christopher Wright, CPA, CGMA, Protiviti, Inc. Carolyn J. Leahy, CIA, National Grid Page | 19 The Institute of Internal Auditors February 2014 LONG ISLAND CHAPTER Volume 14 NEWSLETTER Issue 3
Past Presidents: 2011-2012: Alice Seoylemezian, CIA, CCSA, CRMA, Morgan Stanley 2012-2013: Roy Garbarino, CPA, CIA, CRMA, Teachers Federal Credit Union District Representative: ~ Gary Jendras: CIA, CBA, CFSA, CRMA, Bethpage FCU District Advisor: ~ Linda Grotton, MaineHousing Committee Members: ~ Website Administration - Mindy Kaplan ~ CIA Committee Biju Beegum ~ History - Dawn Scala * * * Contact any of above via IIA Chapter Email
FRAUD STUFF … from the LONG ISLAND CHAPTER of the IIA
By: Ernest Patrick Smith, CPA/ABV/CFF, CFE, CVA Senior Partner-Nawrocki Smith, LLP-Certified Public Accountants and Business Consultants (P) (631)-756-9500 ext. 223/(C) 516-659-5151 - - - (E-mail) [email protected] In the last two issues, we have discussed the first two legs of our equilateral triangle as outlined by Donald L. Cressey-opportunity and motivation.
We know are ready to discuss the final leg of our triangle; rationalization. Rationalization begins like this; it acts to reduce the inhibitions of the fraudster. So let’s define rationalization, but before we do let’s recognize that there are many definitions of this term and to keep it in the context of the fraud triangle we define as follows:
Rationalization-is the ability to persuade yourself that something you otherwise know is wrong is not. Another words, what was wrong before is now acceptable.
This definition now deserves some context which is best served with the presentation of some common rationalizations utilized by fraud perpetrators:
The organization owes it to me
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I am only borrowing the money and will pay it back “Nobody will get hurt” “I deserve more” “It’s for a good purpose” “We’ll fix the books as soon as we over this financial difficulty” “Something has to be sacrificed” “I wasn’t stealing from my boss; I was stealing from my company”
These are but to name a few as there are many and much more to come. Behavioral Psychologists call this rationalization “reframing” where someone who is about to cheat will adjust the definition of cheating to exclude his or her actions.
Cressey in his groundbreaking study indicates that rationalization is a necessary component of the crime before it takes place; in fact, it is part of the motivation for the crime. Given that the embezzler does not view himself as a criminal, he must justify the misdeeds before he commits them. Cressey further states that rationalization is necessary so that the perpetrator can make his illegal behavior intelligible to himself and maintain his concept of himself as a trusted person. Cressey found that the embezzlers he studied generally rationalized their crimes by viewing them
1. as essentially noncriminal 2. as justified, or 3. as part of a general irresponsibility by for which they were not completely accountable
He also found that the rationalizations used by his trust violators tended to be linked to their positions, and to the manner in which they committed their violations. He examined this by dividing the subjects of his study into three
Page | 21 The Institute of Internal Auditors February 2014 LONG ISLAND CHAPTER Volume 14 NEWSLETTER Issue 3 categories: independent businessmen, long term violators and absconders. He discovered that each group had its own types of rationalizations.
It is very important to recognize that there are very few, if any, people who do not rationalize. We rationalize being overweight, not exercising enough and spending more than we should. Ultimately when it comes to fraud a person must essentially “lie to themselves” to justify their dishonest behavior. An excellent example is the issue of tax evasion; folks rationalize underpaying taxes as follows:
“I pay more than my share of taxes” ‘The rich don’t pay enough taxes” ‘The government wastes money” And many more…
To understand the extent of income tax fraud, consider that, in 1988, for the first time, the IRS required taxpayers who claimed dependents to list the Social Security numbers for their dependents. In 1987, 77 million dependents were claimed on federal tax returns. In 1988, the number of dependents claimed dropped to 70 million. Fully one tenth of the dependents claimed, or 7 million dependents disappeared. Where did they go? Had they ever existed? The IRS determined that in 1987 and probably in previous years over 60,000 households had claimed four or more dependents who did not exist. Claiming dependents how do not exist is one of the most blatant and easiest to catch income tax frauds. Yet millions of US citizens rationalized and blatantly cheated on their tax returns.
We have now completed our discussion about how folks commit fraud and the contributing factors of opportunity, motivation and rationalization. Most companies work to eliminate the opportunity to commit fraud and pay much less attention to the factors of motivation and rationalization. Identifying the Page | 22 The Institute of Internal Auditors February 2014 LONG ISLAND CHAPTER Volume 14 NEWSLETTER Issue 3 contributing factors of motivation and rationalization and how to minimize them will assist greatly in lessening the incidence of fraud in organizations. In the next issue of Fraud Stuff we will examine how specific acts of fraud are perpetrated on victim organizations by identifying specific types of fraud activities and the case studies that demonstrates such efforts, thereof.
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