Fraud: challenge for businesses

SHARED FROM:

     HOW TO PREVENT FRAUD

     BY PATRICIA FRANCIS

     ACCOUNTANTS TODAY, JULY/AUGUST 2013

 

Fraud is an ubiquitous challenge for businesses.  Fraud is usually defined as “…including a course of action by deceit or other dishonest conduct, involving acts or omissions or the making of false statements, orally or in writing, with the objective of obtaining money or other benefit from, or of evading a liability to the organization.”

Fraudsters are also becoming more diverse and ingenious.  Thus controlling fraud is key to curbing risk and losses.  Effective fraud and corruption prevention programmes are key elements of an effective internal control structure.  There are several reasons why fraud is difficult to detect or prevent:

1.  Limited time

2.  History

3.  Lack of fraud system expertise

4.  Lack of fraud specific tools

5.  Lack of analysis skills (analytical and skepticism)

6.  Lack of expertise in technology and analysis

10 Key Factors To Be Considered In Relation To Fraud Management
1	Trust alone is no longer enough; Robust control measures are needed
2	Imperative to produce training and create awareness of fraud
3	Imperative to communicate the consequences and penalties
4	Establish and clearly communicate code of ethics and conduct
5	Set clear standards for behavior
6	Enforce and measure compliance and non-compliance
7	Put in whistle-blowing policies and channels
8	Instituting formal protection for whistle blowers
9	Respond quickly to allegations of fraud
10	Tailor policies and processes to fit organization to environment

It is important to engage all employees in a holistic culture of ethical behavior, but still, fraud prevention is the responsibility of management.  External auditors are not responsible for detecting fraud.

Best practices encourage management to establish prevention and detection control techniques to avoid potential key fraud risk events.  Preventive measures are the first line of defense in minimizing fraud risk.  The key to prevention is making the personnel throughout the organization aware of the fraud risk management programme and the consequences of committing fraud.

Fear of getting caught is always a strong deterrent.  Therefore, an ongoing communication effort to create awareness of the potential disciplinary, criminal and civil actions should be in place.

Adequate risk assessment and systems of internal control should be put in place to prevent fraud and monitor its effectiveness.  Embedding and anti-fraud culture is critical.  A robust forensic investigation process must be in place which includes:

·         Basic steps of witnessing

·         Forensic interview

·         Taking statements

·         Interrogation

·         Preparing a case

·         Collecting and safeguarding evidence