Online Accounting Program Presents-Fighting Fraud in Your Organization

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JOSEPH MICELE: Okay. We will go ahead and get started. I apologize for the delay and thank you, everyone, who had walked in early. Thank you for joining us this evening. This is the UAB Collat School of Business Online Accounting Program’s webinar featuring a panel discussion entitled Fighting Fraud in Your Organization.

Before I move forward and introduce the panel and get this evening’s events started, I just want to go through a couple of logistics.

You are in a listen-only mode. You should be listening through your computer speakers as we are broadcasting this webinar. You are able to ask questions. You can do so by typing in either the chat box or the Q&A box to the right of the screen.

We will hold all questions until the end of the presentation and discussion. But please go ahead and type in your questions at any point you would like, and I will make sure that we get to it and address it.

You will be able to obtain copies of the slides from tonight. You also will be able to obtain a link to the recording of the webinar as well. Both of those will be emailed out to you tomorrow.

So, first, let me just go through a few quick details regarding ranking and accreditation for UAB and the Collat School of Business. It is accredited by the Southern Association of Colleges and Schools as well as the Association to Advanced Collegiate Schools of Business.

In addition to the School of Business being accredited by the AACSB, the accounting program is what also holds a dual accreditation.

The program has been ranked as one of the best online Bachelor’s programs, according to the U.S. News and World Report’s 2015 Best Online Programs Rankings.

Additionally, the Master of Account Program is a part of the best online graduate business programs ranked by US News and World Reports for 2015.

The program has recently received endorsement by the Institute of Management Accountants, or IMA, for curriculum that meets a quality educational standards required for students to prepare for the certified management accountant designation.

Finally, the Princeton Review was the Collat School of Business’s one of the nation’s best 295 business schools.

Before we jump into our slides, let me go ahead and introduce our panel (inaudible) faculty that have joined us tonight.

We’re joined by Dr. Arlene Savage, Professor and Chair of the accounting and finance department at the School of Business.

ARLINE SAVAGE: Good evening.

JOSEPH MICELE: We’re also joined by Dr. Jamie Worrell, Associate Professor and Director of the Online Bachelor of Science and Accounting Program.

Dr. Jim Byrd, Assistant Professor and Director of the Online Master of Accounting Program.

JIM BYRD: Hello.

JOSEPH MICELE: And Dr. Jennifer Edmonds, Assistant Professor of Accounting at UAB.

I’m going to now go ahead and turn it over to the panel who are going to present a few slides related to the Association of Certified Fraud Examiners 2014 report to the nation on occupational fraud and abuse. And then they will go ahead and discuss some of the aspects of this report as well as how it ties into the curriculum associated with the online accounting programs.

Please go ahead and —

JAMIE WORRELL: Okay. Sure enough. So, again, my name is Jamie Worrell. I’m an Associate Professor of Accounting here, certified public accountant, certified information systems auditor and certified internal auditor. And, you know, I think a lot of time, students are really excited about fraud. I think, you know, there’s a lot of stuff in the new about fraud. It’s excited kind of investigating these types of things.

And so when we were pulling this presentation together, we thought it would be really interesting to talk a little bit about fraud, what fraud is, how prevalent is it, and then kind of tie that back into some of the courses we have here at UAB.

We’re very fortunate. Dr. Edmonds teaches our external audit class. I teach our internal audit class. Dr. Savage teaches our fraud examination class. And it’s something that we’ve got a lot of experience with here at UAB in the accounting program. And it’s something that always generates some interests.

So when we talk about fraud, why should we care? Why should — why do people care? Why is fraud such a big deal?

At the end of the day, fraud’s a big deal because it costs organizations a lot of money. If you look at the APSE’s report to the nations, and they issue this report every couple of years. The most recent one came out in 2014. We’ll have another one in 2016.

We see that organizations lose about five percent of their revenues to fraud. Now, if you apply that to the gross world product, that translates to US $3.7 trillion in losses across the global economy.

So fraud’s a big deal. And one of the things that’s really interesting about fraud is it’s very difficult to detect in a timely fashion. If you look at the medium fraud schemes, and I forget how many fraud schemes were involved in this ACSE survey. I want to say it’s about 1,400, 1,500.

ARLINE SAVAGE: It’s well over a thousand.

JAMIE WORRELL: Yeah. So a large number of frauds. If you look at them, the median, the mid-point was about a year and a half between when the scheme started to when it was detected. And so if you look at that and you think about that for a second, that means, basically, you’ve got a parasite in your organization for a year and a half that’s kind of sucking away at your organizational resources.

And so, you know, these frauds go on for a long time. And as an audit professor, one of the things that’s always struck me, and I’ve been following this ACFE report for a number of years now. One of the things that’s always struck me as interesting about it is how bad we are as auditors at detecting fraud.

And we’ll see it on the next slide. We won’t go to it right now, but if you look at it, the most effective way of detecting fraud in organizations right now is tip. Okay? So somebody gets loose lips. It’s nothing that we do. I mean, it’s somebody in the organization that either knows about the fraud and can’t keep quiet any longer or has an inkling that something’s going on.

JAMES BYRD: The (inaudible) makes mistakes.


JAMIE WORRELL: The (inaudible) makes a mistake, you know. He upsets someone and somebody says, well, I’ll call into the fraud hotline or I’ll make a tip. And so when we look at it, about 43 percent, and this has stayed fairly constant, it’ll bump from 41 to 45 percent, but it’s going to stay around 40, 42 percent. Forty-three percent of all frauds, at least, this last go-round, are detected by tip.

Now, when we start looking at the auditors, and we start thinking about, okay, well, you know, if we’ve got a fraud, we bring the auditors in. When you start thinking about the auditors, we’re horrible at detecting fraud.

Internal auditors who are your auditors that are employed by the organizations that they audit, and so I spent some time as an internal auditor for a financial services company. Fourteen percent of the time of the 1,400 or so frauds that were a part of this ACSE survey, 14 percent of the time, the internal auditors detected it.

So pick on my colleague, Jennifer, here —


JAMIE WORRELL: — who teaches our external audit —

JENNIFER EDMONDS: And 14 percent is a lot better than the external audit. Only three percent of the time do the external auditors pick it out, and that’s really interesting because the public’s perception is that the external auditors will find the fraud. When a lot of students get in the class is one of the things they bring up first, that don’t all external auditors find the fraud. So you see in most cases, we don’t find it.

JAMIE WORRELL: No. So, you know, so your auditors, what we — I think — I guess what the general public would think of as kind of your bread-and-butter of discovering the fraud. We’re not that good.


JAMIE WORRELL: So when you start looking at it, okay, so what’s the median loss? Okay? A hundred and forty-five thousand dollars. And this is up two or three thousand dollars over the 2012 report, more than 20 percent of the frauds, though, that the ACSE looked at had losses in excess of a million dollars.


JAMIE WORRELL: And so this is something that’s always interesting to me as well. When we start talking about fraud perpetrators, less than 13 percent of the people that commit fraud or that are, you know, that are caught committing fraud have a prior conviction. And that’s always an interesting to me. Because if we think about, one of the most common ways that we have again as an employer, when we think about, okay, how can we prevent fraud, is to do a background check.

JENNIFER EDMONDS: Background check. That’s right.

JAMIE WORRELL: Okay. And so when you do a background check, part of that’s going to be to do some type of, you know, criminal, do they have a criminal record.


JAMIE WORRELL: Well, you know, we’re looking at about 87, 90 percent or so of these people don’t have a criminal background. And the reason for that is really pretty simple, at least in my mind. I think what we see oftentimes is that if somebody commits a fraud, organization’s a little hesitant to prosecute. And so they’ll tell the person. The person always says, you know, this is my first time I’ve ever done this, I’ll pay the money back, and they never do. And so the organization fires them. So they terminate them. And then that person goes on to the next employer with no criminal background.

ARLINE SAVAGE: Does the same thing.

JAMIE WORRELL: Does the same thing. And, you know, (inaudible) and repeat, right? So — and then, you know, the last piece of this, a little more than three-quarters of the frauds that were part of this ACSE report fall into a small group of departmental units within the organization. Accounting, operation, sales, senior management. Your top management teams, so what we think of as your C-sweep.


JAMIE WORRELL: Your CFOs, CIOs, CEOs, chief operating officer.

ARLINE SAVAGE: Which is very sad.

JAMIE WORRELL: Which is very sad. But these guys know the way the business runs, right?

ARLINE SAVAGE: They know the way the business runs. They know how to — how to override control.

JAMIE WORRELL: And they know what the controls are.


JAMIE WORRELL: Who’s got the most access.


JAMIE WORRELL: And customer service or purchasing, and so, you know, in my mind, the reason that most of the frauds are perpetrated in these departments pretty straightforward. It’s where the resources are.




JAMIE WORRELL: The cash, the inventory, supplies, those types of things are in these departments.
(Talking over each other)

JAMIE WORRELL: Yeah. That’s why — why are banks robbed, why were trains robbed. What’s where the cash is. Pretty straightforward.

Let’s look at the next slide. So help us out here. Where do I get a change of slides? Go up one. Go up one. Okay. Right there. Try right there. There we go. All right.

So this is one of the ones, and I think, you know, I think, for us, like for us to talk about this. So this may be interesting for you guys, but how are most frauds detected?

Okay. And, again, this is the results of that survey that was done in 2013 for part of this 2014 ACSE report. So, typically, we’ve already covered that.

Forty-three percent of the time, so the old saying, you know, loose lips sink ships. Right? So that one.

Number two, 14 percent of the time, management review. So, Arline, when we’re talking about management review, what’s a management review?

ARLINE SAVAGE: So that would be management reviewing the work of the people who report to them, and maybe management look at the fate of financial statements, and I see that the, you know, the numbers look out of line, and investigate further. So, yes, that’s the (inaudible), management review of documentation of reports of, yeah, any other information that comes their way.

JAMIE WORRELL: So we get down to number 3 on the list, internal audit again. That’s the class I teach.


JAMIE WORRELL: You know, we start talking about internal audit and we’ll talk about internal versus external. Internal audit, these are auditors that work specifically for a single company. So, here at UAB, we have an internal audit department that only audits UAB.

When I was with Raymond James Financials, we had an internal audit shop that only audited Raymond James Financial. And so the internal audit, audit shop that solely housed in that organization, that’s all they do.

So 14 percent of the time, of these 1,400, 1,500 or so frauds, we were able to — internal audit was able to catch that, which is really sad, because from the things that we teach in the class and what an internal auditor should be doing, one of the things every audit starts out with doing a risk assessment for fraud.

So trying to say, okay, in this department that we’re looking at or this business unit or this business process, what are the specific fraud schemes that can occur, what are the indicators of those fraud schemes, and how susceptible is our organization at this.

So 14 percent of the time, you know, I don’t like those odds. But —

ARLINE SAVAGE: No, no, no.

JAMES BYRD: One thing and we’re presenting this picture that we’re missing all these frauds and that’s — the things that we’ve just been talking about, management review, internal audit are part of the internal controls. Some extent, doing that the right way, reduces the amount of fraud.

JAMIE WORRELL: Absolutely.



JAMES BYRD: So that’s part of what we teach here at UAB as well is how do you build a good effective internal control system to reduce the amount of fraud taking place in the first place.

ARLINE SAVAGE: Yeah. If you can prevent the fraud from happening, well, then, you’ll have a lot less to detect.

JAMIE WORRELL: Absolutely. So I always put this one in and this next bullet point here, actually, the ACSE doesn’t classify it as dumb luck, but I think that’s a lot more — it fits my personality better.

ARLINE SAVAGE: They said it’s my charm.

JENNIFER EDMONDS: (Inaudible) by accident.


ARLINE SAVAGE: By accident.

JAMIE WORRELL: I think, yeah. Actually, there’s a change, but I think, you know, I think dumb luck is a lot more descriptive because, you know, at the end of the day, as the saying goes, sometimes, it’s better to be lucky than good.


JAMIE WORRELL: And so, you know, we’ll see things like, you know, maybe somebody forgets and leaves something on the printer and maybe it’s some type of reconciliation schedule between what the book should be and kind of what they really are, right?

Or, you know, somebody — one of the common things, one of the things I’ve actually seen is someone got sick.


JAMIE WORRELL: And so this person who was the primary fraudster that was kind of the brains behind making this fraud scheme work, they had a sickness in the family and they had to attend to that for a number of days. And so when the person that stepped in to take over, you know, wasn’t part of the fraud scheme, they were able to pick up on that.

JENNIFER EDMONDS: Yeah. That’s a good point. So if they rotate the duties, then it might be easier to pick up on it.

JAMIE WORRELL: Which is oddly enough is one of the reasons why we see a lot of times in the financial services sector, your banks, especially, that people have to take a mandatory vacation and you’ve got to take two weeks off.


JAMIE WORRELL: So, you know, a lot of us, you know, I get my vacation time. I like to take a day or so here, a long weekend here and there, but in financial services, used to be the case —

JAMES BYRD: It’s gone away.


JAMIE EDMONDS: You have to be gone a while. And that’s the reason because they figure that if you’re out for a consecutive number of days, that it’s enough time to, you know, for somebody else to detect it.

And so next up, we’ve got external audit, actually, not next up, Number 7.

JENNIFER EDMONDS: And the last place, we have external audit. And so we are actually independent auditors that are hired to come into the company. And we’re going to take a look at the entire financial statements to make sure they’re in line with GAP. So we’re not just looking for fraud. We’re looking for errors or just mis-application of GAP. But there are several things we do to try to find fraud.

In the beginning, one thing is we have a brainstorming session. We try to think of ways that fraud could be committed, accounts where it might be highly susceptible to fraud, how management might do it, how we could assess those risks and the fraud. So that’s one

And then we also try to talk to a lot of people. Like Jamie mentioned, some of this is just luck. So we’re required to ask management about if they know of any instances of fraud, if anything’s been reported, and also talk to the audit committee.

So then, we even talk to lower-level people. We might talk to someone that’s a manager of the inventory warehouse to see if inventory they claim to have has actually come in or to the purchasing agents. So there are a lot of things like that that we can do or different types of analytical procedures where we’re calculating ratios and kind of comparing what we saw last year to this year to just find unusual areas that focus more attention.

JAMIE WORRELL: So these are — and, again, there are, you know, there are a few more items in here, but, you know, these were the ones I think that were really interesting for us in terms of kind of how do we detect fraud, how do we identify fraud, what’s the nature and the scope of it.

To get the next slide here. And then we’ll talk about just really quickly one of the frameworks that we have for kind of understanding the nature of fraud in organizations and then I think we can go from there to kind of talking about what do we cover with respect to fraud in the undergrad and Master’s curriculum here at UAB.
So one of the best frameworks that we have for understanding fraud is this fraud triangle. And the fraud triangle said that these three things have to be present for fraud to exist. There’s got to be — and I’ll take them a little bit out of order. There’s got to be an opportunity.

In other words —


JAMIE WORRELL: — there’s got to be an opportunity for somebody to do something and feel like they can get away with it.

ARLINE SAVAGE: Yes. So these items, if they think they could get away with it, they wouldn’t do it.

JAMIE WORRELL: Absolutely.

ARLINE SAVAGE: So the ceased opportunity. When we pick up a really good system of internal control, we try to minimize the risk of having any opportunity and so the more we can — you’ll never have a 100 percent foolproof system of internal control.

JAMES BYRD: It’s too much.

ARLINE SAVAGE: It’s cost too much. But we want to minimize the opportunity for fraud. They can minimize an opportunity, then the other two sides of that triangle just don’t happen.

JAMIE WORRELL: I talk about it in class. I say, you know, if I lay my wallet out and it’s clear there’s a wad of $100 bills, and if I leave my wallet on the desk and I walk out, there’s a pretty good chance it’s going to grow legs and walk off, right? Somebody’s going to take it. But if I leave my wallet out and there’s a video camera right there on it —


JAMIE WORRELL: — then, you know, there’s a better than good chance it’ll still be there.


JAMIE WORRELL: What’s the difference? Well, the difference is the video camera because people know that if they take it, they’re going to be on camera, it’ll be easier to get caught.


JAMIE WORRELL: And so the perceived opportunity, if we can take the opportunity away, if we can minimize that perception that you can get away with some type of activity, and we do that, like you were saying, through internal controls.


JENNIFER EDMONDS: Right. And also with the (inaudible) management (inaudible).

ARLINE SAVAGE: Yeah (inaudible), yeah.


ARLINE SAVAGE: The culture of the organization, just the ethics that flows down.


ARLINE SAVAGE: The ethical culture or culture of integrity that flows down from the (inaudible).

JAMIE WORRELL: Absolutely. And then the next piece of this is rationalization. So rationalization is basically convincing yourself that it’s okay to do something wrong.



ARLINE SAVAGE: Like everybody else is doing it. These are rationalizations.


ARLINE SAVAGE: Well, I’m not being paid enough so, therefore, I’m just going to take what is due to me. That is rationalization.

JAMIE WORRELL: Absolutely.

ARLINE SAVAGE: So they found any — but every fraudster in every case study we’ve done, fraudsters come up with rationalizations for their actions.

JAMIE WORRELL: Yeah. It’s interesting. We were — something I’ve just been dealing with, actually, in the last 24 hours.


JAMIE WORRELL: You know — yeah. It’s very close up front here. You know, the person had a great — had a great story about, you know, other people were doing it. It was an accepted practice. Oddly enough, I was the only one that got caught, and you know what? That was a good return on investment.

So, you know, everybody —

ARLINE SAVAGE: Rationalization.

JAMIE WORRELL: Yeah. Everybody that commits a fraud, you know, there’s always — very rarely are you going to have somebody come out and say, you know what, it was wrong, I know it was wrong.


JAMIE WORRELL: I did it. There’s always some type of — they’ve got to convince themselves to overcome their consciousness.




ARLINE SAVAGE: And the perceived (inaudible) on our next — you can also say motive. There must be some motive — motivation that drives a person to commit fraud.

JAMIE WORRELL: It varies from person to person.

ARLINE SAVAGE: It could be financial pressure, you know.

JAMIE WORRELL: Healthcare.

ARLINE SAVAGE: Healthcare.



JAMIE WORRELL: Yeah. The reputation of the company is a big one. I think what we — you know, a lot of times when people think about fraud, they think about, you know, the extravagant lifestyle, drug problem, gambling problem, healthcare issues and all.


JAMIE WORRELL: But the reputation of the company is a big deal.


JAMIE WORRELL: Especially if you’re personally identifying with that company —


JAMIE WORRELL: And the company is failing, you’re going to do everything you can to kind of (inaudible).


ARLINE SAVAGE: Make it look better by, you know, by manipulating financial statements. It’s financial statement fraud.


JAMIE WORRELL: Yeah. One of the ones, oddly enough, a friend of mine, she and I were talking about it. She used to be a controller for a beverage bottling company. Had a slightly different slant on it. So publically-traded companies, your bonuses are going to be tied to your earnings per share.


JAMIE WORRELL: And so your earnings per share is going to be — your Wall Street analysts are going to look at that, and then if it meets expectations, then — or received expectations, you’ll typically see a bump, and that bump in stock price is going to translate to dollars for —

JENNIFER EDMONDS: Yeah. Huge dollars.

JAMIE WORRELL: — your employees, right?


JAMIE WORRELL: And so as she was going through and doing the financials, there was always pressure to make sure we were meeting those expectations. And so, you know, there’s often times, we talked about, you know, I think the — we talked about the healthcare side of it or the financial need and all, but there’s a pressure as well, is if you know that bonuses are tied to meeting a certain number —


JAMIE WORRELL: — then that can be kind of that lever that you used —


JAMIE WORRELL: — for tweaking or being aggressive.


JAMES BYRD: Some of the big highly visible frauds, Enron, HealthSouth, WorldCom, that was a big part of it.


JAMES BYRD: Because they had built this culture where they’re making earnings every year, then, all of a sudden, you had to beat earnings every year and so the fraud had to get bigger and bigger.


JAMIE WORRELL: Absolutely.

JENNIFER EDMONDS: And a lot of times, people only think about like a fraud to overstate revenue that’s not really there. But, like, your point with the earnings, sometimes, they’ll overstate it and then if they do have a good year, then, they’ll understate revenue so that they can save that revenue and misreport it in the following year. So it’s not always just fraudulent to overstate their items. You just kind of —

ARLINE SAVAGE: You have to (inaudible) the understatement for tax purposes.




JAMIE WORRELL: True. So, hopefully, this is giving you a little bit of an idea, you know, for those that are interested in fraud, hope, not interested in fraud as committing fraud, but interested in fraud as investigating it.


ARLINE SAVAGE: Investigating and fixing it.

JAMIE WORRELL: So I think it might be useful for us to talk about — a little bit about the curriculum here at UAB and kind of how we address some of these things.


ARLINE SAVAGE: And I’ve spoken to a variety of our courses.



ARLINE SAVAGE: And us talking with your courses is probably the ones I do first.

JAMIE WORRELL: Yeah. So the internal audit —

ARLINE SAVAGE: Internal audit.

JAMIE WORRELL: — depending on where you are when you come in and when it’s offered, the internal audit would be one of the ones that you would certainly get exposure to. And we do some pretty interesting things in the class. Of course, we talked about what the internal audit standards say with respect to what does the internal auditor need to do on detecting fraud and fraud procedures and all.

We actually get a little bit further into it, though, because we use some data analytic software called ACL. It’s kind of the facto standard in terms of data analytics for auditing. And we can go through — we work through some exercises that show our students how to use ACL to do some fraud detection.

So one of the things that we’ll do is something called a Bedford (ph) analysis, and what this does, and I won’t go into it in a great detail, but this uses the mathematical properties of the first digit in a number. So, you know, somebody — so the last four of their Social Security number is 27972 would be the first digit.

And this uses that distribution to identify whether it deviations from it. And, typically, what we’ll see people deviating from is if there’s a control that says, all checks over $10,000 require two signatures. Well, if you’re a fraudster, you want to come in just under 10,000 so that leading digit will be a 9 —


JAMIE WORRELL: — we would see an inflation or a deflection there. So we go through a lot of stuff in my class in our internal audit class. Things like looking for employees with multiple employees with the same street address.

Okay. Well, that may be valid, you know, if you’ve got a husband and wife living together. They’re, hopefully, going to have the same street address.
But that’s also a test that we can use to determine if you’ve got fictitious employees in the organization because if I’m going to set up a fictitious employee, I’ve got to give a street address. What’s the easiest street address to have the check mailed to or have your employment papers mailed to? Well, the one you live at. Right?


JAMIE WORRELL: And so there are a lot of different things that we will work through using ACL to look for potential and fraudulent behavior.


JAMIE WORRELL: And so, you know, internal audit, we do a lot of stuff with that. And I know in Jennifer’s class, she does a lot of stuff with fraud as well.

JENNIFER EDMONDS: In external audit, we look at it in terms of how you can design the audit procedures, to either detect the fraud or how you can get design and audit procedures to see if the internal controls are functioning to prevent the fraud.

So we look at it from that standpoint. And we also do several case studies in the class where we review what frauds have happened and how they happened and how they could have been prevented.

ARLINE SAVAGE: Yeah. I mean, the fraud examination class which I teach and which — and Dr. Byrd teaches fraud examination as well, but we just go through — with our course, has to do with fraud examination, obviously, and so we will deal with the fraud triangle. We’ll start off with that. And then we make extensive use of case studies, real-life case studies, you know, all based on real cases. And so students get a lot of hands-on experience on — well, solving pretty complex cases.

JAMES BYRD: And even some techniques like interview techniques, I mean, how do you interview somebody to detect if they’re lying to you and things like that. So it’s — it has a pretty interesting aspect to it that way.

ARLINE SAVAGE: And then we also have a course, forensic accounting and IT auditing. And so we use ACL and do (inaudible) analytics, using ACL on different cases and the use of — the students get a lot of experience with using software to detect fraud.

JENNIFER EDMONDS: And that’s really good.


JENNIFER EDMONDS: Because a lot of employers, they want you to know the technology just as much as knowing the subject.


JAMIE WORRELL: And the technology, I mean, the ACL is, like I said, it’s a defacto standard. There are a couple of other software packages out there, but the ACL is the best name recognition.


JAMIE WORRELL: And we’ve done really good in positioning our students for employment with them.


JAMIE WORRELL: I mean, we’ve just had one of our students was placed with one of the big four specifically in their data analytics group.

ARLINE SAVAGE: Yeah. And she went through all of our courses and she, you know, she’s —


ARLINE SAVAGE: — she got the job because of the training she got here.

JAMIE WORRELL: Right. Absolutely, so, you know, we bring — you know, bring all that to there — I want to go back to Jim’s comments talking about the fraud examination, the forensic accounting, these types of things.

You know, it’s not just the interview techniques, but there’s a whole legal aspect —


JAMIE WORRELL: — to the fraud examination of forensic accounting that you have to be aware of in terms of evidence, discovery, chain of custody of the evidence that from a normal accountant, a normal CPA, or an auditor, these are things we just don’t even think about.



JAMES BYRD: And with the — in the Master’s program, we have an elective that focuses on that specifically, legal elements of a fraud investigation. So we really take you through all those pieces.

ARLINE SAVAGE: Yeah. We’re actually the only school in Alabama who has now the forensic concentration, you know, in our undergrad degrees.

JAMIE WORRELL: Yeah. So lots of (inaudible) for students that are interested in fraud investigation or have an aptitude for that, and lots of courses that we have again, Jennifer’s class, the external audit, that’s our cast-on class and our undergrad accounting program.

And my class is going to be a required class as well. And then when you get into Master’s of accounting program, the two classes —

ARLINE SAVAGE: Okay. The in general — the fraud examination’s required and also the forensic accounting and IT audit.

JAMIE WORRELL: So, you know, even if this isn’t something you want to specialize in, we feel that — we feel at UAB, that it’s important enough that it’s a big enough problem in corporate America and in the — in governmental not-for-profit agencies, it’s a big enough problem that we need to be focusing on it.

ARLINE SAVAGE: And that happens all the time in every organization. And we all pay for it, I mean, how do we pay for it? The (inaudible) of revenue that are lost, guess who pays for it?

JAMIE WORRELL: Higher insurance premiums.

JAMES BYRD: Insurance money.

ARLINE SAVAGE: High insurance premium and customers. They raise their profits to cover the fraud. Yeah, it’s a cost of doing business.

JAMIE WORRELL: It’s passed along.

ARLINE SAVAGE: It gets passed along and we all pay for it.

JAMIE WORRELL: So I think at this point, I’d be interested in opening things up for questions.

JOSEPH MICELE: Yes. Absolutely. Thank you, everyone. We can definitely open up the floor to questions. As I had mentioned, go ahead and type any questions you may have in the chat box or the Q&A box to the right of the screen and I will go ahead and direct them.
We also have here, Nathanial Gilbert, from our enrollment team who, if you might have a question related more towards enrollment in one of the programs, Nathanial is here to answer those questions for you as well.

So let me just go ahead and take a quick look at a couple of the questions here.
This one’s for the panel. Can you give an example of maybe one of the case studies that you had mentioned that you go through in some of the courses?

ARLINE SAVAGE: Well, we’ve got a large number of cases, and most of the cases that we use have actually been (inaudible) peer reviewed by other academics. They’ve also been used in the classroom because of that review process is that you have to show the (inaudible) of the case.
So they’ve been using throughout (inaudible) so they are very, very high quality. I know that because I’ve written some of them and I’ve gone through the peer review process. And it’s rigorous.

JAMES BYRD: It is. And they’re usually based on a real situation.

ARLINE SAVAGE: They are. They are. And the one case — one case that we used he’s looking at, it’s a family interest issue and something not very many people would think about. But what happened is they changed the accounting rules for pharmaceutical companies, making pediatric vaccines whereas when the government — the government bought the pediatric vaccines. And then they had to be stockpiled by the companies.

And so accounting rules said that when those vaccines went into stockpile in case of an emergency outbreak, those companies could then say that this was revenue that they had earned. Well, then, the rule changed.


ARLINE SAVAGE: And they said they could not treat that as earned revenues so, in other words, they got paid for the vaccines but they could not in their income statements say this is revenue that we earned. It was unearned revenue which doesn’t go into income statements. As you (inaudible) accounting, you will find out all about that. They got the cash.

JAMES BYRD: So what happened?

ARLINE SAVAGE: What happened? The companies refused to stockpile vaccines, and we went through this crisis in the country which there’s a big shortage of vaccines for babies. And there was a huge outcry in Congress. People were saying how can accounting rule cause our babies not to be vaccinated, and then we’re going to have outbreaks and children are going to die.

And so do this case of the consequences of a change in an accounting rule. There was no impact on the cash that went in — that the companies received. It was just the pure accounting rule.


ARLINE SAVAGE: That caused the shortage of vaccine.

JAMES BYRD: And it was corrected by an SEC rule.


JAMES BYRD: That allowed them to recognize the revenue and continue — and to stockpile and having those vaccines available.

ARLINE SAVAGE: And the thing is that this was a — you know, when the companies were recognizing this as revenue, they were saying, well, this is a fraudulent financial reporting and things like that. So many, many types, and, obviously, we look at the obvious ones.

Jim and I are just (inaudible) a case now for that same submission process, and we (inaudible) class. We’re using HealthSouth, another really good type that looks at the control environment.

JAMES BYRD: And it’s actually about three miles —


JAMES BYRD: — about three miles that way.

ARLINE SAVAGE: And, normally, we have a case a week. So you can imagine pretty busy with cases.

JAMIE WORRELL: One of the things I do in my class a lot of times in my internal audit classes, I actually have an audit case that you work through where you get six months’ worth of transactional data from a — it’s a fictitious company based on a real company, and so you’re using that data analytic software and it’s actually auditing a purchasing cycle.

So how this company is a book wholesaler, so they buy the books from the publishers and then sell them to either Barnes and Noble or Books-A-Million or whatever. And one of the things that’s embedded in this case and that the students have to kind of flesh out is there is a fraud scheme going on where your purchasing agent has set up a fictitious vendor and they’ve got inventory that they’ve been able to put in the inventory record that is a legitimate book title but it’s marked up at an inflated rate. And so every time this purchasing agent gets a purchase request for a book title, she looks on — and changes the item number to her company, sends the purchase order out to her company which is actually her house, right? And is billing the company for an inflated price for the product.

And so do the students discover this? Well, they have to use some of these red flags that we’ve talked about in these data analytics and what they find is when they start looking at the data, and they have to get comfortable with the data, they’ll do an analysis of, do we have any vendors that have the same street address as an employee. And, of course, this one turns up.

And then they’ll, you know, think about the way that business operates. And so as a packing slip comes back in from this vendor, when they isolate all the packing slips from that vendor, they’re all sequentially number which suggests that we’re that vendor’s only customer. And, again, knowing the way business works, it’s highly unlikely that a publishing company only has one customer. Right?

And so using a lot of these other techniques, you know, they get to see what that fraud is in the context of an audit.
So what other questions do we have?

JOSEPH MICELE: We have another here. The question is, is there a large demand for auditors as compared to CPAs?

ARLINE SAVAGE: Oh, what kind of —

JAMES BYRD: Auditors versus — for CPAs.

JENNIFER EDMONDS: For like external or internal? I mean —

ARLINE SAVAGE: It depends on what type of auditor you’re talking about.

JENNIFER EDMONDS: Most of the time, an auditor would be a CPA.

ARLINE SAVAGE: Yeah. External auditor would be a CPA. And internal auditor could be a CPA or not.


ARLINE SAVAGE: But you could also be a certified internal auditor which is also a professional designation.

JAMIE WORRELL: And so — and I’ll take that one a little bit because I’m — again, I’ve got a CPA. I’m also a certified information systems auditor. I am a certified internal auditor. And so I think the answer is yes.

If you look at — no, it’s actually — you know, there was an article — I forget where it was. It was a few years back, talking about — it was actually during the recession, the great recession, talking about the top ten recession-proof jobs.

And auditor was one of them because as times get lean, you know, you typically see a spike in fraud and so organizations tend to be hesitant to, you know, they may re-trench (ph) a little bit in terms of operations or middle management or whatever, but they’re not getting rid of the auditors. Right?


JAMIE WORRELL: And so if you look, you know, when we think about auditors, as I think about it, you’ve got IT auditors. These are people that specialize in auditing information systems. So looking at the business information systems that support the organizations in terms of transactions, you know, financial accounting, manufacturing decision-making, those guys are definitely in demand because it’s a very unique skillset.

Because a good IT auditor has to understand technology and they’ve also got to understand the business and they’ve got to understand how it flows through to the financials.


JAMIE WORRELL: You know, that’s a triple threat. It’s just hard to find. And so those are always in demand. Again, I’m the president of our local IT auditor’s chapter. And I can think right now, I’ve got three different chief audit executives for very large companies here in the Birmingham area with presence throughout the southeast that are trying to find IT auditors.

And as I give them a student, they get gobbled up. I’ve had three hired — actually, I’ve had three hired in the last — geez, last two and a half months.

ARLINE SAVAGE: Yeah. The thing is that, you know, if you think of the medical profession, you become a doctor, and then you’re not specialized. I think your CPA is — you become a doctor. Then, you can do the — you can become — you can specialize in IT audit, you can specialize in fraud examination. You can specialize in all sorts of areas.

JAMIE WORRELL: Absolutely.

ARLINE SAVAGE: And so it’s a good — it’s a — CPA is an excellent designation. It gives you more opportunities.

JAMES WORRELL: And there’s a lot of things you can do with a CPA. I mean, you can have — you know, I look at it — so I can’t spell IRS. I’ve been a CPA almost 20 years. I’ve never done my own taxes. I plan on being a CPA for another 20 years and still not doing my own taxes. And that’s cool, right? Because there’s a lot of room under the umbrella if you have a CPA.


JAMIE WORRELL: You’ve got people that are very good at financial accounting.


JAMIE WORRELL: And so they might go into controllership. I used my CPA. I’ve very linear. I’m very logical. And I’m very good at understanding business processes. And I like IT. I was joking with Dr. Byrd, I can spell IT.
So, for me —

JAMES BYRD: I have trouble with —

JAMIE WORRELL: And Dr. Byrd, you know, clearly, as you guys can tell, Dr. Byrd sometimes — we have — we struggle with that. So but there was a place for me to specialize there. If you like, you know, if you’re a CPA and you like the fraud examination piece, then there’s a way that you can with that.
So the CPA is a good entry point.

ARLINE SAVAGE: Yes. You can specialize in not-for-profit and governmental, or you can specialize in tax. So —


ARLINE SAVAGE: I mean, the CPA calls it the degree with 360 — what is — 360 degrees of possibilities. Or you can —

JAMES BYRD: Every business needs an accountant, even Mabel’s Beauty Salon and Chainsaw Repair needs an accountant.



JAMIE WORRELL: I like that.

JAMES BYRD: They’re, you know, everywhere.

ARLINE SAVAGE: And then you can also go into (inaudible) when, you know, you’ve done all your real world stuff and I’ve worked for General Motors. I’ve worked for one of the big four. And only then did I decide to come into academics. And then you can specialize in academics as well. You just have to go and get your CPA. I mean, you’ve got to go get your PhD with your CPA.

JAMES BYRD: I think about accounting — an accounting degree as being one of the most transferrable degrees that you can have. If you have an accounting degree, it gives you a broad understanding of how business works. Then you can apply it to any kind of business. And my experience at BellSouth, we had senior marketing people that had accounting degrees.


JAMES BYRD: That’s where they started their careers. It will take you wherever you want to go really.

ARLINE SAVAGE: Well, I’ve got a story to tell you about UAB. The chair of our marketing department, he’s actually — his first career was a CPA.

JAMIE WORRELL: Absolutely.


JAMIE WORRELL: He doesn’t like that story told, but —

ARLINE SAVAGE: Yeah. He’s a CPA. I mean —

JAMIE WORRELL: He’s a closet CPA.

ARLINE SAVAGE: Yeah. And he worked for the big four and then he went and got a PhD in marketing because he found out that he was really good at marketing accounting services. So he figured out here was a good (inaudible) marketing. So, really, and also there’s a strong link to finance, yes. There’s so many directions you can go in — into.

JAMIE WORRELL: Broad shoulders.


JAMIE WORRELL: Broad shoulders and lots of money to be made.

JAMES BYRD: That’s right.

JOSEPH MICELE: Okay. Thank you. Another question we have here is, do you know what the job market looks like for forensic accounting right now?

ARLINE SAVAGE: (Inaudible) forensic accounting, but my advice is entry level forensic accounting, there are not very many people who will take someone who isn’t a CPA into forensic accounting. You really need to get your CPA first and then specialize in forensic accounting and take the CFE examination.

JAMIE WORRELL: And there’s, you know, just thinking about I guess from my perspective in, you know, kind of the IT bend on it, you know, at the end of the day, you’ve got to be able to — you’ve got to be able to kind of tie everything together. So it’s not just the accounting side of it, but it’s hard to do much of anything in business today without using technology.


JAMIE WORRELL: So you’ve got to be able to leverage the technology, understand how the systems are integrated in the organization, know where the data is, be able to get comfortable with the data, be able to interrogate the data. Right?

ARLINE SAVAGE: Yeah. You need to know the business processes.

JAMIE WORRELL: And the technology side of that.


JAMIE WORRELL: And so for somebody that’s interested in this, I mean, there’s — this one’s a bit of a strange animal because you’ve got to understand the accounting. You’ve got to understand the business processes You’ve got to have a piece of the technology. You’ve got to have a piece — a little bit of a legal vent.


JAMIE WORRELL: Because, you know, you can go in guns-a-blazing and pretty quickly, you can ruin your evidence such that it’s not — or ruin your support such as it’s not admissible in court. And those are things for me when I was in practice and I was with the industry in big four for 12 years before I went back to school, you know, this was just something I didn’t want to get into, because there are a lot of moving parts. I mean, you’ve got to understand the law, the ends and outs of the law.

The technology piece, I was cool with. I mean, hacking into something, finding the data, you know, interrogating the data, I am good with that.

JENNIFER EDMONDS: Right. And (inaudible) you’d be good at, too.

JAMIE WORRELL: Yeah. And, you know, that type of stuff, I’d be fine with. But the, you know, understanding the legal ramifications of it and the chain of evidence, the chain of custody, those types of things, I mean, there are a lot of moving parts to this. So it’s something that an entry level position, I’m with Arline. I think a good foundation would be getting a CPA knocked out. Getting that done and then start working your way in.

And then the other thing on the certifications is don’t — I think I see a lot of people that talk about the certifications, and they say, well, I want my CPA and then I want this certification and that certification. You will purposeful in those things and look for the certification that gives you legitimacy in that profession.
And so if fraud examination, forensic accounting is what you want, you know, I would say get the CPA first. It’s got broad shoulders, 360 degrees of possibility, and then I would look for that certification that gives you legitimacy. And that’s going to be the CFE.

ARLINE SAVAGE: The CFE. The Association of Certified Fraud Examiners, which, I mean, people have found that pretty easy after they become CPAs.


JAMES BYRD: And our Master’s program really aims towards getting you through that CPA program. All our courses are tailored around that and our goal would be to have you complete the exam by the time you graduate.

JAMIE WORRELL: Absolutely. And it’s certainly doable. I know when I was a student, I finished it up — my first — I took the CPA exam my first semester in the Master’s accounting program. And so the second semester of the Master’s accounting program, I’d gotten my results back, found out I’d passed the exam, and so the professors were saying, this will be on the CPA exam. I remember thinking to myself, looking at buddy of mine next to me, and it’s not on the exam, I just took the exam.

But that’s a good place to be in because you come out — you come out of your Master’s program with that CPA in hand, right? And so that takes a lot of the stress off.

JOSEPH MICELE: We have another — we’ll call this our last question here as we’re starting to move towards the end of the hour, but we have a question regarding the CPA and the Master of Accounting.

And the question is, would you say having both the Master of Accounting and CPA makes you more marketable as opposed to just having a CPA?
JAMES BYRD: I’d say yes. Here’s the order I would put them in. Coming out of school, the CPA is probably going to be worth more money to you immediately. You’ll recognize the benefits of the Master’s degree in four or five years down the road.

And I’m strictly talking about how much money you’re going to make and what incremental wage, salaries, that you’ll be able to earn as a result of those. So you definitely want to get the CPA, but, then, it’d behoove you to get the Master’s degree as well.

Once you get a few years down the road, everybody’s going to have a Master’s degree. So you’re going to have a hard time competing without having that.
JENNIFER EDMONDS: Yeah. And a lot of the times, depending on the state you’re in, you need the hours for the CPA exam. So if you’re going to be taking those classes anyway to get your hours for the CPA, then it’s just a nice benefit to go ahead and do it while you’re in the Master’s program because then you come out with another degree, like you said.

ARLINE SAVAGE: We are finding, you know, there are CPAs in my class now (inaudible) their CPA quite a few years ago. They’re coming back now to do their Master’s because they need it for their — to advance in their careers.


JAMIE WORRELL: It’s a useful degree. I think you can save a little bit of money just doing — just taking the additional classes, but you’re penny-wising pounds away because that Master’s degree is going to serve you a lot better long-term in your career.


JAMIE WORRELL: So you can save a little bit of money now and get the CPA but then you’ll find four to five years out, when it comes time for advancement, you’ll get past because you don’t have that Master’s.

JOSEPH MICELE: Excellent. Thank you. We’ll call that the last question as we do have one slide really quick to go through here just to make sure everyone’s aware of some important dates and information.

For both enrollment for the fall term which we are in your recruitment enrollment period for now, for both the Bachelor of Science and Accounting and Master of Accounting Program, just a few things to keep in mind.

The current application deadline is July 20th with a completed file due by August 3rd. By completed file, we mean all the necessary information. So in addition to your completed application, all of your transcripts, anything else being submitted for enrollment.

Classes will begin August 24th. You can always contact one of your enrollment advisors either toll free at 1-877-830-7368, or you can reach them locally at 1-205-909-6300.

Just a quick thank you again to our panel, Dr. Savage, Dr. Worrell, Dr. Byrd and Dr. Edmonds. I think this was a — hopefully, this was very informative for our attendees out there this evening. Thank you for your time and the information. And we look forward to further participation in these more topical webinar-type events.

Thank you again.




JAMES BYRD: Thank you.