Marquette students learn to detect fraud by thinking like crooks
The Business Journal of Milwaukee
By Jennifer Batog
In a nondescript room on the third floor of Marquette University’s Straz Hall, a dozen students are learning how to steal.
They’re learning how embezzlers skim money from cash registers, how corporate thieves use fake purchase orders or inventory sheets to pocket money and how such criminals are caught.
They’re students in Maureen Mascha’s “Fraud Examination” class in Marquette’s College of Business Administration, which offers a different spin on the typical accounting class. Rather than relying on textbooks, the class focuses on real-life examples of how people managed to steal from their employers and how they eventually slipped up and were caught. The class hears from guest speakers with practical experience, such as a former FBI agent who now works as an investigator for a large accounting firm.
“I’ve never had an FBI speaker in an accounting class before,” said student Noel Stuiber. “It’s fun. It’s not just fun learning how to steal, it’s learning how you can prevent people from stealing that makes it interesting.”
Fraud classes are growing around the country in the wake of corporate scandals such as Enron. At least 300 schools around the world offer such classes, according to the Association of Certified Fraud Examiners, Austin, Texas.
Marquette’s accounting department offered the class for the first time in the spring 2006 semester. The first class attracted about 12 students. Because some of the work is done on computer, class size is limited to 20 to 25 students. It is open to graduate students and seniors who are pursuing graduate studies. It is an elective for people in the accounting masters and the MBA program.
Fraud classes are new to the accounting curriculum, rising in the wake of the corporate scandals of the early 2000s. Before, such classes were taught in the criminology department, said Tracy Coenen, owner of Sequence Inc., a Milwaukee firm which offers fraud-fighting and forensic accounting services.
“Fraud is such a reality for companies,” Coenen said. “Even if you’re a general accountant, it is important to have the knowledge. Maybe you’ll be able to spot a problem.”
Teaching future financial industry employees how to find and fight fraud is a sea change in accounting preparation. Most auditing classes teach students how to examine and verify financial statements, but little or no emphasis was placed on detecting fraud, said Marquette accounting department chair Mike Akers. Auditors simply weren’t trained to look for theft, he said.
“All of our classes teach our students the right way to do it,” he said. “They also need to understand the wrong way. So we wanted that additional exposure for them.”
Although some might cringe at the idea of teaching theft, the knowledge can be helpful to future accountants, whether they become general accountants or enter the emerging field of forensic accounting.
“You teach people how to steal to teach them what to look for,” Mascha said. “Most people don’t think, ‘how would somebody rip me off.’ Most people don’t understand all the different ways there are of ripping off an employer.”
And there are many. Through case studies, computer programs, stories from Mascha and examples from guest speakers, students think through schemes such as forged check writing, financial statement fraud similar to the Enron case, payroll fraud, expense padding, setting up phony customers and taking the merchandise instead or how someone might use a computer to steal from the company and make things look legitimate. The students also work with and build auditing programs that use data mining to catch fraud. For example, most people who steal tend to steal in even amounts, taking $10,000, rather than $1,261.21. The computer programs will search for oddities in the numeric patterns, which can serve as red flags.
“It’s much more situational than academic,” said Marge Vanderbok, one of Mascha’s students. “We’re not just studying cases. We’re talking about real people and the elements that got them caught.”
Skimming over time
One assignment was to figure out ways to find cash theft using a computer program. For example, one way people steal cash is to skim over time, a sale that doesn’t get rung up, voiding out sales or fake refunds where the thief takes the money instead.
“We really had to get in the mind of, ‘what are the ways they could do it and how could you catch them,’” Vanderbok said.
The class also looks at motivations behind corporate theft. That was part of the discussion at a recent class that featured former FBI agent Michael Dyer, who now works for PricewaterhouseCoopers in Chicago. Dyer gave students insight into a fraudulent mind. Fifty-five percent of such thieves are men; a third are 41 to 50 years old; they have a stable family life and an above-average education. They also likely had prior accounting experience or at least some knowledge of accounting systems. They often steal because they feel their employer owes them something — they didn’t get a promotion they thought they deserved or a plum assignment.
“You have to think like a thief,” he told the students. “You have to think, ‘what could they do.’ “