Fraud Alert Summaries:

FEB/MAR 2008 issue of fraud Alert

Backdating stock options

Reward executives the right way

Although there are legal ways to grant options below their fair market value, the Securities and Exchange Commission and, more recently, at least one jury have decided that it’s fraud when options are backdated without telling shareholders. And it’s fraud when companies change documents such as board meeting minutes or board approvals to support the backdating. What’s more, companies must record the appropriate compensation expense in its financial statements, and report the transaction properly for tax purposes. As this article makes clear, the consequences of illegal stock backdating are severe.

Software can stop fraud before it starts

In recent years software companies have launched dozens of fraud detection programs to take the guesswork out of monitoring financial controls — and to close gaps when they’re detected. Today, even private companies consider such programs essential. Fraud detection software may cost money, but it can also prevent businesses from losing even more to theft. This article discusses what the software can do and how to choose a program.

Everybody does it …

Expense padding is an easy — and popular — form of fraud

One of the easiest ways to defraud a company is by padding expense reimbursement reports — which is why it has always been a popular scheme. This article talks about ways businesses can prevent such fraud by implementing strict controls and punishing perpetrators. Stopping expense reimbursement fraud before it starts isn’t complicated. But it does require management to lead by example and be vigilant in investigating and acting on suspicions.

Your attorney’s role in a fraud investigation

Embezzlement and other forms of fraud aren’t only financial problems — they’re legal problems as well. This article provides tips on working with an attorney during a fraud investigation. It advises companies to consider calling their lawyer at the first sign of fraud, and then letting the attorney hire a forensic accountant to better protect the fraud expert’s work product.

Fraud to watch for

Sophisticated spyware

This short article explains how today’s spyware can sabotage businesses. A keylogger program loaded onto an accounts payable computer, for example, could open a company’s vaults to criminals.

For more information or to subscribe to Fraud Alert, please contact Craig Greene.