2013 Professional Ethics and Conduct TWO HOURS CPE.

2013 Professional Ethics and Conduct

TWO HOURS CPE

Who Said This?

If the confidence of the public in the integrity of the accountants’ report is shaken, their value is gone.

To preserve the integrity of his reports, the accountant must insist upon absolute independence of judgment and action

-Arthur Andersen in 1932 lecture on business ethics

A great Model: Rotary International Four Way Ethics Test

Of the things we think, say or do• “Is it the TRUTH?”• “Is it FAIR to all concerned?”• “Will it build GOODWILL and BETTER

FRIENDSHIPS?”• “Will it be BENEFICIAL to all concerned?”

Health care fraud costs the country an estimated $80

billion a year

FBI - 2013

2013 North Carolina Cases

• August 8, 2013 Linda Smoot Radeker, 72, of Shelby, North Carolina, A mental health counselor who admitted overseeing a health care scheme that defrauded Medicaid of at least $6.1 million for sham mental and behavioral health services was sentenced to 72 months in prison,, was also sentenced to serve two years under court supervision and to pay $6,156,674.68 as restitution to Medicaid

• Radeker, falsely claimed in billings submitted to Medicaid that she was the attending clinician for services provided to Medicaid recipients, when no such services were provided.

• Radeker “rented out” her Medicaid provider number to a network of co-conspirators operating in Gaston and Cleveland Counties and elsewhere and, in return, kept a percentage of the fraudulent Medicaid reimbursements, sometimes as much as 50 percent

• Purchased $500,000 of jewelry…a tip off

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2013 North Carolina Cases

• On May 6, 2013, Betty Ann Cook, of Sparta, N.C., was sentenced to 40 months in prison, two years of supervised release and ordered to pay $325,820 in restitution. On April 25, 2012, Cook pleaded guilty to one count of health care fraud conspiracy and one count of money laundering conspiracy.

• Cook was the owner of Families First Home Health Care, a home health care company.

• From December 2006 to about October 2010, submitted false and fraudulent claims to Medicaid seeking reimbursement for patient care services that were either not provided, not authorized by a physician, or were not based upon a valid in-home eligibility assessment performed by a qualified registered nurse, as required by Medicaid policy.

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2013 Michigan Case

• a popular doctor in Michigan with more than thousand patients was telling people they had cancer even when they didn't, then treating them, all for the money. Prosecutors say he was giving chemotherapy to people who didn't need it, some of whom didn't have cancer at all, as part of an alleged $35 million fraud

• now in jail on $9 million bond, the judge calling him a flight risk

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Drug Manufacturer Plan

• The manufacturer of a prostate-cancer drug, for example, encouraged urologists to bill Medicare for the free samples they provided to patients and offered the urologists extra free samples in exchange for purchasing more of the drug — though federal law prohibits physicians both from billing for free samples and from accepting remuneration in exchange for prescribing a company's product. Several urologists ended up paying tens of thousands of dollars in penalties for participating in the manufacturer's plan.

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Ethical Behavior and Culture

• Top two sources of pressure for unethical behavior– Keeping their job– Paying their bills

• 23% of employees said they would look the other way if someone committed misconduct in order to save their job or avoid cuts in pay and benefits…compared to 13% in 2009

• Wishful Blindness often takes over

Ethics Resource Center 2011

Ethics Culture Has Weakened


Signs of a Declining Culture Increased turnover Out of touch with employees Employee conflict and complaining More office cliques Difficulty recruiting Zombie employees Customer complaints Employees feel more entitled Reduced access to management

Weak Cultures = More Misconduct

Strong Culture Strong Leaning Weak Leaning Weak Culture0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

29%

46%

67%

90%

Employees Observed Misconduct


% of employees feeling pressure to compromise standards


Ernst & Young 12th Global Fraud Survey

• 15% of executives said they were prepared to make cash payments to win business, up from 9% in the previous survey

• 47% of the 400 chief financial officers surveyed felt they could justify potentially unethical practices to help business survive during an economic downturn

• 81% of the respondents said their companies had anti-corruption policies in place, but 42% said they had not received training on those policies. Meanwhile, 44% of respondents said that background checks were not being performed on third party-agents.

Critical Aspects of Ethics Culture• Managements’ trustworthiness

• Managers at all levels talk about ethics

• Managers model appropriate ethical behavior

• Extent to which employees value and support ethical conduct

• Accountability

• TransparencyEthics Resource Center 2011

10 Things you can do to build a strong culture

1. Examine ethical climate and put safeguards in place

2. Don’t just print, post and pray3. Build ethics infrastructure

that is self-sustaining4. Publicly commit to being an

ethical organization5. Separate auditing from

consulting functions6. Talk with employees at all

levels often (goals, roles, expectations, priorities)

7. Build ethical conduct into corporate systems

8. Establish an Ethics Committee to constantly keep the organization focused on the seven main provisions of the Federal Sentencing Guidelines of 1991 in mind.

9. Choose to live your corporate values

10. Keep the lines of communication open

Talk to your employees – it helps


How can boards help the focus on chosen values?

• Talk to people or ask for a staff survey to see if the values expressed in corporate communications are really experienced and shared.

• Make sure that failure to comply with these values elicits appropriate and widely published sanctions.

• Question whether decisions submitted for board approval are at one with the company’s values.

• Make sure that key performance indicators and managers’ performance targets identify adherence to key values.

• Analyze business practices and benchmark performance against your peers.

ETHICS STARTS WITH PEOPLE

There’s one way to find out if a man is honest.

Ask him. If he says ‘yes’, he is a crook.

-Groucho Marx

Honest Truth About Dishonesty

• Is Dishonesty Restricted to a Few Bad Apples? or

• Is Dishonesty a Widespread Problem?

Dan Ariely 2012, "The Honest Truth About Dishonesty"21

Simple Model of Rational Crime Theory

• The benefit that one stands to gain from the crime.

• The probability of getting caught.

• The expected punishment if one is caught.


Simple Model of Rational Crime – Answer

• Increase Probability of Getting Caught

• Increase Magnitude of Punishment


Insider Trading

– Recent defendants sent to prison on insider-trading charges in New York received median sentence of 21/2 years

– May, 2013 48 year old hedge fund manager sentenced to 4 1/2 years for improper trades about Dell• “This was all about money and getting more”

US District Judge Richard Sullivan “It’s hard to explain how someone would do that where they had so much in their life”

What about you

Ethical Gaps – Don’t we all cheat a little?

• Timed Experiment – You are given 20 sheets of 10 matrices and being paid for the number you successfully complete. At the end of the time you are given the answers to self-check and then instructed to shred your sheets and report the number you had correct to the experimenter who will pay you and will never see your sheets.

• The pay is $.50 per sheet. Will you exaggerate the number you had correct?

•

The pay is $1, $2, $5, $10 per puzzle. Will you exaggerate the number you had correct?

• How will you rationalize your answer?

The Matrix Test


0.47 4.58 2.57

3.15 3.82 4.38

4.94 5.42 5.98

2.85 4.80 7.54

0.63 0.85 1.02

2.84 2.34 2.12

2.89 5.98 8.89

9.40 9.37 9.33

0.48 0.74 1.17

3.72 2.00 1.22

3.75 5.22 5.87

8.83 8.23 7.70

1.69 1.82 2.91

4.67 4.81 3.05

5.82 5.08 4.28

6.36 5.19 4.57

0.08 5.07 5.30

1.71 0.03 8.98

2.10 4.98 9.92

4.53 4.85 9.42

0.14 0.67 2.22

5.98 5.58 5.22

7.04 7.59 9.33

9.77 9.50 8.52

A Few Matrix Test Findings

• Cheating is not directly correlated with the amount of financial gain.

• Getting caught does not have as great an influence on whether one cheats.

• More likely to steal things that are not directly related to money.


The Fudge Factor

• We want to be able to look at ourselves in the mirror and feel good, however

• We want to benefit from cheating and get as much money as possible.


Thus, a Conflict, So

We cheat up to the level that allows us to retain our self image as reasonable honest individuals.

The Stroop Effect

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The Stroop Effect

31

Results of experiment

• Subjects were more prone to cheat on a separate quiz after taking the second Stroop Test than subjects that took the first Stroop Test

• Conclusion - When people are tired they are more prone to cheat

The Tainted Self-Concept Experiment

• Gave female MBA students sunglasses and divided them into one of 3 conditions:

1. Authentic2. Fake3. No information

• Had the women perform the math matrix test.

• Does a negative or positive self-concept affect cheating? If so, which is more powerful?

Result - 74% in fake group cheated, 30% in authentic group and 42% in no information


Written Reminders Help Keep People Honest

• Matrix test experiment – Two groups, before taking the test – Group A asked to list the 10 commandments– Group B asked to list 10 books they read over the summer

• Results:– Group A – No cheating on Matrix Test– Group B – Normal cheating

• Same results for comparing students who signed honor code on exam versus those who did not have to sign a code

Cheating is Infectious

In further experiments, if subjects were shown no consequence to cheating before the experiment, cheating increased dramatically

If subjects were led to believe everyone was cheating, they cheated too

What does this say about your work environment?

Essence of Accounting in EthicsGuidelines consisting of judgments and moral values that a professional needs to follow while practicing accounting

1. Clients rely on CPA’s skill, ability, professional competency and integrity

2. Maintenance of professional objectivity and integrity

3. Codes of conduct and ethics must be taught at some point because no-one is born with an inbuilt ethical mind and soul

4. Family, society, schools, universities, and professional organizations must carry on the continuous process of embedding ethics in a person

Essence of Accounting in Ethics

"Accountants and the accountancy profession exist as a means of public service; the distinction which separates a profession from a mere means of livelihood is that the profession is accountable to standards of the public interest, and beyond the compensation paid by clients."

—Robert H. Montgomery, describing ethics in accounting

Golf and Taxes

The income tax code has created more cheaters than golf has.

-Will Rogers

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To contact:N.C. State Board of Certified Public

Accountant Examinerswww.nccpaboard.gov

North Carolina CPA Code of ConductNorth Carolina State Law

http://www.nccpaboard.gov/

http://www.cpaboard.state.nc.us/front.html

One we’ve all seen…affirmation which states that the licensee has read the North Carolina Accountancy Statutes and Rules. The most current copy may be accessed on the Board’s web site, www.nccpaboard.gov, or by clicking the links embedded in the renewal.

READ THE RULES

The Oath of a CPA

• I Will Support the Laws And Regulations of the State of North Carolina and the United States.

• I Will Perform my Professional Duties to the Best of my Ability and Abide by The Rules Of Professional Conduct; and

• I Will Uphold the Honor And Dignity of the Accounting Profession by Serving with Integrity, Objectivity, and Competence.

2012 North Carolina Violations

Recent Board Activity

• Church accountant allegedly embezzles more than $100,000.

• Controller for NFP stole $10,000. NFP did not file claim or press charges. Later stole another $25,000.

• State employee allegedly backdated employment date to August 1, 1989 so retirement would not be subject to state taxes.

• Auditor never asked any questions about having 40-50 AJE’s in NFP audit. NFP nearly went bankrupt.

• Auditor giving audit opinion over the phone with no working papers.

Typical Responses to a Complaint

• Call the client

• Respond to the complaint as requested

• Hire an attorney

• Return their CPA certificate

• Fail to respond to the first letter

• File for inactive status

• File for retired status

Sources of Complaints

• 3rd Party Complaints

• CPE Audit

• Newspaper Articles

• Self-Reporting

• Other Agencies

• Websites/Yellow Pages

• Other CPAs

Rules CPA’s live by….• Integrity

• Conflict of interest

• Confidentiality

• Due care and competence

• Continuing professional education

North Carolina Code - IntegrityThe reliance of the public and the business community on sound financial reporting and advice on business affairs imposes on the accounting profession an obligation to maintain high standards of technical competence, morality, and integrity.

To this end, a CPA shall at all times maintain independence of thought and action, hold the affairs of clients in strict confidence, strive continuously to improve professional skills, observe generally accepted accounting principles and standards, promote sound and informative financial reporting, uphold the dignity and honor of the accounting profession, and maintain high standards of personal conduct.

ConfidentialityA CPA shall not disclose any confidential information obtained in the course of employment or a professional engagement except with the consent of the employer or client.

Exceptions. This Rule shall not be construed: 1) to relieve a CPA of any report obligations pertaining to

Section .0400 of this Subchapter; or 2) to affect in any way the CPA's compliance with a validly

issued subpoena or summons enforceable by this Board or by order of a court; or

3) to preclude the CPA from responding to any inquiry made by the AICPA Ethics Division or Trial Board, by a duly constituted investigative or disciplinary body of a state CPA society, or under state statutes; or

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Confidentiality (continued)

4) to preclude the disclosure of confidential client information necessary for the peer review process or for any quality review program; or

5) to preclude the CPA from assisting the Board in enforcing the accountancy statutes and rules; or

6) to affect a CPA’s disclosure of confidential information to state or federal authorities when the CPA concludes in good faith based upon professional judgment that a crime is being or is likely to be committed; or

7) to affect a CPA’s disclosure on confidential information when such disclosure is required by state or federal laws or regulations

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Whistle Blowing

When is it permissible?When is it ethical?

51

Inside the Mind of a Whistleblower

2011 ERC NBES 52

Inside the Mind of a Whistleblower

Four Steps:

1. Awareness;

2. Agency;

3. Security and Investment; and

4. Support and Connectedness

2011 ERC NBES 53

Increase Awareness By…

• Making more resources available to help employees who have questions or want to report.

• Defining behaviors that your company considers to be wrongdoing.

• Educating managers of the situations that require the reporting misconduct.

2011 ERC NBES 54

Agency

• Can I make a difference?

2011 ERC NBES 55

Promote a Sense of Agency By

• Showing employees that they make a difference when they report.

• Developing a communications campaign.

• Acknowledging and rewarding those that show the courage to report misconduct.

2011 ERC NBES 56

Chinese Proverb

• Tell me and I’ll forget

• Show me and I may remember

• Involve me and I’ll understand

Security & Investment

• Should I be the one to do something?

2011 ERC NBES 58

Employees who feel more financially secure are more likely to report

Help employees Feel Secure By…

• Communicate the well-being of the company financially, strategically and in the commitment to integrity.

• Provide resources for employees to seek advice.

• In high-risk situations provide increased support.

• Provide examples of those that reported misconduct and were supported.

2011 ERC NBES 59

Develop Connectedness and Provide Support By

• Providing opportunities for employees to connect

• Support employees involvement in their

communities.

• Train managers to respond to reports.• Develop support programs to help employees

through the process.

• Provide rewards to those that report.• Offer support to the families of employees who

report misconduct.2011 ERC NBES 60

Who Should I Tell?

2011 ERC NBES 61

What’s on the Computer?

• You work directly for John a senior manager in your organization. One day while working late you noticed John’s computer was still on so you decided to turn it off for him since company policy states computers should be shut down when not in use. As you were hitting the start button to shut down you noticed he was still connected to a graphic child porn website. Being curious, you clicked on his favorites and found a long list of child porn websites frequently accessed. You have only been with the company for two years and John is a long term employee and has an excellent reputation in the company and he does your reviews. What will you do?

Part B

• Assume you reported John to HR and he resigned with the understanding that the reason for his departure would be kept confidential.

• You are reading the local paper and see that John has been appointed as a financial manager for the local private elementary school.

• Do you have a dilemma?• What if the local school called and asked you for

a reference for John? What would you do?

Ethical Issues Today

Amanda Berry, Gina DeJesus, and Michelle Knight

Sandy Hook Shooting

Motivations to Report Outside Company –Ethics Resource Center 2012


Retaliation Against Whistleblowers

2011 ERC NBES 66

Retaliation Against Whistleblowers

2011 ERC NBES 67

The End Result…If only she’d walked by a few minutes earlier, or a few minutes later, she wouldn’t be in this mess. But she did walk by – right then – at that unfortunate moment. She heard what she heard, and now she is stuck dealing with it. She knows that someone has to do something about the situation and, it seems, she’s going to have to be that someone. A few days later, she reports what she overheard to her supervisor. He acknowledges the seriousness of the allegation, promises to protect her anonymity, and vows to keep her as informed about the investigation as he is allowed to by policy. A few weeks pass and she hears nothing. Finally, her supervisor notifies her that management determined there’s not enough evidence to go forward. The next month, she learns she is being transferred to an office with lots of problems and a terrible reputation. Within a year, she decides to return to a previous employer with whom she’d maintained a good relationship.

2011 ERC NBES 68

The End Result…

When her friends at work inquire about why she is leaving, she reveals the shocking things she heard, the way her supervisor promised to look out for her and didn’t, and how the sudden transfer was the last straw. After hearing her story, her colleagues look at their managers – their whole workplace – in a new way. Not that it was perfect before, but now people are getting away with things that are clearly wrong; management stands up for the people with power, but no integrity, and pushes out people who try to speak up. Her two closest coworkers, both trusted and respected employees, stop speaking their mind at meetings and become less and less invested in their company and their work. Within a year, they too, choose to leave.

2011 ERC NBES 69

Willingness to Report Misconduct Is Key In Building an Ethical Workplace

Two of the hallmarks of an ethical company culture:

1. Feeling that it is safe to report misconduct without fear of retaliation

2. Believing that an employer will take the report seriously and do something about it


What About You

• Have you witnessed unethical or even illegal behavior at work?

• Did you report it? • If so, what was the result?• If not, why not?

• If you see it say it

Case Study – Fuel StopJack is the Controller at a manufacturing company and a colleague tells you that the sales director has been inflating the biodiesel fuel purchases for several years to increase the tax benefit. The company has been operating on thin cash flows for the past few years and, if declared, there is a possibility that this could push the company into bankruptcy which could result in job losses for the 150 employees at the company. You have made the other directors aware of the situation, but they have expressed a wish to not disclose the misleading purchases and fix them in future years once the company gets back on its feet.

What would you do?

a. Perception, Prevention and Protection

b. Opportunity, Incentive and Rationalization

c. Intention, Significance and Materiality

d. Raleigh, Durham and Chapel Hill

Question 1 Which of the following represent the elements of the

Fraud Triangle:

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Perceived Need

Opportunity Rationalization

FRAUD

Gambling or other

expensive habits

Unusual work

schedules

Financial difficulty Hesitant to

delegate tasks

Some Warning Signs of Fraud

Uncooperative during audits

Resist taking

vacation time

Living beyond

their means

More authority

than necessary

Turning down promotions or transfers

a. 1%

b. 3%

c. 5%

d. 7%

Question 2

When fraud occurs, the typical organization loses what percentage of its annual revenue due to fraud?

©2012 Association of Certified Fraud Examiners, Inc.

Measuring the Cost of Occupational Fraud


Measuring the Frequency of Fraud

a. Government

b. Retail

c. Banking/Financial Services

d. Real Estate

Question 3

What industry has the highest frequency for fraud?

10 popular health care provider fraud schemes

• Billing for services not rendered.• Billing for a non-covered service as a covered service.• Misrepresenting dates of service.• Misrepresenting locations of service.• Misrepresenting provider of service.• Waiving of deductibles and/or co-payments.• Incorrect reporting of diagnoses or procedures (includes

unbundling).• Overutilization of services.• Corruption (kickbacks and bribery).• False or unnecessary issuance of prescription drugs.

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Who is Watching?

• U.S. Attorney General• FBI• DEA• Medicaid Fraud Control Units• U.S. FDA -Criminal Investigations

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©2012 by the Association of Certified Fraud Examiners, Inc.

Previous ACFE research has identified three primary categories of occupational fraud:

1. Asset misappropriation2. Corruption schemes3. Financial statement fraud

How Occupational Fraud is Committed

Question 4

In the United States, what is the most common fraud scheme?

a. Check Tampering

b. Skimming

c. Payroll

d. Billing


How Occupational Fraud is Committed


How Corrupt is the US?

a. Bribes and kickbacks

b. Economic extortion

c. Undisclosed conflicts of interest

d. Accepting illegal gratuities

Question 5 On average, the most expensive corruption scheme

committed by employees of an organization is:

Bribery & Kickback Red Flags1. Rising expenses for goods and services.

2. Slow deliveries from or substandard performance by a vendor.

3. Rapidly increasing purchases from one vendor.

4. Excessive purchases of goods or services.

5. No divisions of duties between new vendor approval and authorization for purchasing.

6. Contracts written to limit competition (for example, sole-source contracts).

7. The same vendor always wins contracts by small margins. The contract always goes to the bid received last.

8. Splitting one purchase into multiples to avoid the approval process.

9. Paying above-market prices for goods or services.


Types of Asset Misappropriation

How Occupational Fraud is Committed:Asset Misappropriation

Sally’s Skimming Story

See Sally Steal

• Sally was the court administrator for the municipal court of a small city – responsible for collecting fines imposed by the court.

• She maintained the court’s accounts receivable records from customers and collection agencies.

• 6 ½ year scheme (she started on her 25th day of employment).

• Recorded non-cash JE’s to A/R to reduce fines and account for stolen checks (community service, court actions, etc).

• Amount stolen = $290,227 (10% of the courts revenue).

BUT WAIT, THERE’S MORE…

See Sally Go To Jail• She began a second scheme – cash payment from night court

fines ($5,100 from 49 fines).

• Didn’t enter the fine or the collection of the payment

• This is how she was caught:– Temporary employee noticed several missing $100 bills in the deposit

the next day.

– Initially she admitted only this fraud, but after further questioning the bigger fraud was discovered.

• What went wrong…– No segregation of duties.

– No independent monitoring of the “non-cash credit” reports (which would have been very inconsistent with levels of revenue earned).

a. 6 months

b. 12 months

c. 18 months

d. 24 months

Question 6

How long does the average fraud go on until it is caught by the victim organization?


Median DurationBy Scheme

a. Tips and complaints

b. Accidental discoveries

c. Analytical techniques

d. Confessions

Question 7

The #1 method by which fraud is discovered in an organization is:


Detection of Fraud Schemes

Tips have been far and away the most common means of detection in every study since 2002, when we began tracking the data.


Initial Detection Methods


Median Loss by Detection Method


% of Tips by Source

a. Implement harsh penalties for perpetrators

b. Outsource all possible functions

c. Conduct covert audits

d. Increase the perception of detection

Question 8

In general, the best way to prevent fraud is to:


Control Impact on Median Loss


Control Impact on Duration

The Perpetrators


The Impact of Position

a. Executive/Upper Management

b. Sales

c. Operations

d. Accounting

Question 9

Which department commits the most fraud?


Frequency by Department


What’s Happening in Accounting?


What are the Executives Up To?


Perpetrators by Gender


Perpetrators by Gender by Level


Perpetrators by Age

a. Personal financial problems

b. Greed

c. Dissatisfaction with employer

d. Poor internal controls

Question 10

The main reason employees commit occupational fraud is:

Perpetrator Red Flags The most common red flags displayed by

perpetrators were living beyond financial means (36% of cases) and experiencing financial difficulties (27%).

Given that financial difficulties are often associated with fraudulent behavior, it would seem advisable for organizations to devote more efforts to conducting credit background checks on new applicants.


Perpetrator Red Flags

Ethics or Fraud?Mary is a cpa who spent 8 successful years with a large firm in the tax department. When twins arrived she quit her job but after a year her husband was laid off from his management position and found a low-paying, long hours job in retail. She missed working and they needed her paycheck. A regional firm hired Mary with a work at home agreement that she would work at least 40 hours per week and be available for calls. The plan was great…she hired a nanny to help with the twins and was able to get her hours in with excellent reviews about her work from her manager. Financial pressures got worse and she had to cut the nanny’s hours to 20 per week. She felt she could manage work and taking care of the family. ..after all she could do taxes while they napped and at night. She tried to meet the work hours expectation but the children got sick, and routine parenting pressures made it impossible. She felt that she was still getting more work done than her office colleagues, just in less time so it should be ok

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Money became more of an issue with the children’s doctor bills. She had a friend from her previous firm that was now in sole practice and had asked her if she had time to work part-time during tax season. She was already under time pressure from her current employer, but the money was very attractive so she agreed to work at home for him too. Is there a problem? • What should Mary do?

The Future Ethical/Fraud Issues: What’s Coming

• IT Security

• Cybercrime

Corporate Identity Theft

• According to the latest statistics corporate identity theft amounts to $48 billion/year in the US alone

• The dollar amount has been steadily increasing each year

• Creating fictitious documents:– Counterfeit checks– False purchase orders– Fictitious bank forms and correspondence– Corporate identity theft scam involving credit checks

How do I protect myself and my company from Identity Theft?

• Use difficult to replicate logos or other devices such as a watermark on company documents.

• Use color on important documents.

• Order nonstandard paper for corporate printing needs. Anti-counterfeiting aids include specially treated paper that displays the word "Void" when the paper is copied or tampered with.

• Consider using protective devices on any corporate computer, such as software that uses passwords to control access to information in a hard drive.

• Consider a positive pay system with your bank to mitigate the risk of forged checks clearing from your corporate account.

• Verify that a vendor is legitimate before providing any completed credit application or other corporate information.

Cybercrime:• Criminal activity done using

computers and the Internet.

• Downloading illegal music

• Stealing millions of dollars from online bank accounts

• Non-monetary offenses, such as creating and distributing viruses on other computers or posting confidential business information on the Internet.

http://www.techterms.com/definition/virus

Cybercrime: the next wavePWC Global Economic Crime Survey

• 23% of those who reported economic crime in the last twelve months experienced cybercrime

pwc 2011

Methods of Attack – Verizon 2012 Study of Data Thefts

Hacking 52%

Malware 40%

Physical 35%

Social 29%

Misuse 13%

Error 2%

0% 10% 20% 30% 40% 50% 60%

Data Theft

Data Theft

Time from initial compromising to discovery – Verizon 2012

Time

MonthsYearsWeeksDaysHoursMinutes

MonthsWeeks

Days

Hours

Years

Minutes

Think You’re Not at Risk?

Cost of Cybercrime

• $97M• Fake Antivirus• Users get a message warning them that their

computer has been infected with malware. When they click on a link to download antivirus software, their machine is infected. An analysis of financial records from three criminal gangs found that from 2008 to 2010 they collectively earned $97 million annually.

• $1,000M↑• Advanced Fee• Advanced Fee Fraud, sometimes called 419 fraud

after the relevant article of the Nigerian criminal code, is legendary for its variations on the same theme: The request is for a small amount (an advance fee) to pay the costs so that a larger fortune can be release

Business Week, 2012

• $320M≈• Online Banking Fraud: Phishing• Online banking fraud is sometimes carried out in a

phishing attack, in which criminals impersonate websites to get unsuspecting users to provide their login credentials. University of Cambridge researchers estimated that in 2007, between 280,000 and 560,000 people were taken in by fake websites.

Business Week, 2012

What are organizations worried about?

pwc 2011

What are organizations doing to deal with cybercrime?

• 61% said they don’t have or are not aware of having access to forensic technology investigators

• 60% said they don’t have or are not aware of having the in-house capability to investigate cybercrime

• 56% said they don’t have or are not aware of having a media and public relations plan in place

• 46% said they don’t have or are not aware of having controlled emergency network shutdown procedures in place

• 40% said they don’t have or are not aware of having the in-house capability to prevent and detect cybercrime

pwc 2011

Effective Cybercrime Training

pwc 2011

Create an Ethical Culture in your Organization

“Tone at the Top”

137137

Communicate expectations

Lead by example

Model the behavior you expect from the organization

Provide safe mechanism for reporting violations

Reward integrity

Reward employees not only for meeting financial goals, but also for ethical behavior

Continuously communicate the message

Provide Ethics Training

• May need to be different for management versus non-management employees.

• Ethics training is useful in helping employees feel prepared to handle situations that invite misconduct

• Most effective if driven by the CEO or Managing Partner

Does Your Ethics Training Work

• High-profile misconduct cases often involve companies which have an ethics policy or code in place.

• Recent research also suggests that many staff are unaware of these policies.

• bridge the gap between ethics programs and daily worklife – and stories can help us do that.

• Using scenarios in a learning situation supports these three elements – experience, practicality and application – and also adds a fourth dimension of participation.

http://www.guardian.co.uk/sustainable-business/ethics

Generational Integrity• Integrity begins to show itself at a very young age

and continues to mature throughout their lives.

• 2/3 middle schoolers admit to cheating

• >80% of high schoolers admit to cheating (has been growing every generation)

• 56% of MBA students admit to cheating

• The time is always right to do what is right.— Martin Luther King, Jr., civil-rights leader, minister (1929-1968)

• Of all the properties which belong to honorable men, not one is so highly prized as that of character.— Henry Clay, statesman, orator, politician (1777-1852)

“Our task here is not to know what goodness is, but to become good.” Aristotle

“When you come close to selling out, reconsider”

From I Hope you Dance, Lee Ann Womack

How Did I Live Today? Questions to ask yourself at the end of every day

• Did I practice any virtues (e.g., honesty, integrity, compassion)?

• Did I do more good than harm? • Did I treat others with dignity and respect? • Was I fair and just? • Was my firm or organization and my community

better because I was in it? – Adapted from Thomas Shanks, S.J., Ph.D., Executive

Director of the Markkula Center for Applied Ethics

“To see what is right and not to do it is want of courage.” (Confucius)

Thank you!!!!!!!!!!!!!!!!!

Joanne Rockness

[email protected]

mailto:[email protected]

2013 Professional Ethics and Conduct TWO HOURS CPE.

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