2-2: Fraud Risk Assessment
2-2 Short Paper: Fraud Risk Assessment
Ashley Nelson
Southern New Hampshire University
Auditing and Forensic Accounting
Richard Barrett
September 11, 2022
2-2: Fraud Risk Assessment
Summary
Justice, 2022) reports a case of healthcare fraud. A Florida woman and 15 co-conspirators are
charged with laundering over $700K from Medicare, Medicaid, and other private insurance
companies over a two-year period. The defendants utilized five fake medical supply companies
and billed over $48 million in medical equipment to insurers.
Fraud Risk Assessment
Fraud Risk Assessment is a tool utilized by management to identify and understand
business risks and weaknesses in controls to the organization (Mayeresky, 2017). The first
component to risk assessment is the description of fraud risk. This is the process of defining the
types of fraud the business could experience. This can be anything from fraudulent
disbursements to falsified certifications. The second is to identify the internal controls both
preventative and detective. The next component is likelihood of occurrence, this should be based
on frequency, rare to frequent. Then they must determine the significance to the organization. If
this fraud occurs will it be catastrophic or incidental. The fifth component is to assess the
effectiveness of the internal controls in place. Next is fraud risk response, what additional
controls/procedures does the company have in place to mitigate fraud. The company should
appoint a responsible part to implement controls and mitigation efforts. Finally, fraud risk
assessment should be monitored periodically (Mayeresky, 2017).
Elements for this Case
The elements that could have been utilized in this case, is the description of fraud risk.
and the monitoring of activities. The medical insurance companies that were defrauded should
2-2: Fraud Risk Assessment
have had an assessment somewhere laying out the types of fraud that are likely to occur. If the
risk assessment was full and complete, this type of fraud would have been included. In addition,
the banks that were cashing the checks for the defendant should have suspected fraud based on
the use of cashier's checks. Repeated transactions of less than $10K, multiple transactions from
different people on the same account, internal transfers between accounts, and cashing checks to
immediately withdrawing funds are all red flags for money laundering (Doppelt, A. B., 1990)
These transactions should have been on the radar as possible risk.
The medical insurance companies and banks involved with this scam should have been
monitoring for fraud periodically. The fraudulent companies activities were suspicious from the
start. These should have been spotted and from there the companies activities should have been
closely monitored. The article does not do a great job at explaining how the fraud was detected.
but having these risk assessment elements would have been beneficial in preventing and
mitigating the fraud before it got over $700K.