6 large billion over 9 years billion year 1 year 3

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Unformatted text preview: ample of a Fraud Where I Testified Example Large Fraud of $2.6 Large Billion over 9 years Billion – – – – – Year 1 Year 3 Year 5 Year 7 Year 9 $600K $4 million $80 million $600 million $2.6 billion In years 8 and 9, four of In the world’s largest banks were involved and lost over $500 million over © 2003, 2005 by the AICPA 3,000,000,000 2,500,000,000 2,000,000,000 1,500,000,000 1,000,000,000 500,000,000 0 Year 1 Year 3 Year 5 Year 7 Year 9 Why Fraud is a Costly Business Problem Problem Fraud Losses Reduce Fraud Net Income $ for $ Net If Profit Margin is 10%, If Revenues Must Increase by 10 times Losses to Recover Affect on Net Income Income – Losses……. $1 Million – Revenue….$1 Billion Revenue….$1 © 2003, 2005 by the AICPA Fraud Robs Income Fraud Revenues $100 100% Expenses 90 90% Net Income $ 10 10% Fraud 1 Remaining $ 9 To restore income to $10, need $10 more dollars of revenue to generate $1 more dollar of income. Fraud Cost….Two Examples General Motors General – $436 Million Fraud – Profit Margin = 10% – $4.36 Billion in $4.36 Revenues Needed Revenues – At $20,000 per Car, At 218,000 Cars 218,000 © 2003, 2005 by the AICPA Bank – $100 Million Fraud – Profit Margin = 10 % – $1 Billion in Revenues $1 Needed Needed – At $100 per year per At Checking Account, 10 Million New Accounts Financial Statement Fraud Financial...
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