Vishal Modi Director - Audit and Assurance 1
Avoiding Fraud This session will cover: How you can protect your organisation • “At any given moment, there is a certain percentage of the population that’s up to no good” • Why effective internal controls are important J. Edgar Hoover Director of the Federal Bureau of Investigation (FBI), USA 2
Fraud Misappropriation of Assets Fraudulent Financial Corruption Statements 3
Fraud Tree Fraud Tree Fraudulent Misappropriation Financial Corruption of Assets Statements Net assets/Net Income Cash All other assets Conflict of Interest Understatement Net assets/Net Theft of cash on Theft of cash Fraudulent Income Misuse Bribery hand receipts disbursements Overstatement Skimming Cash larceny Billing Larceny / Theft Illegal gratuities Sales/Services Payroll Economic extortion Expense Receivables reimbursement Refunds Cheques/EFT 4 Source: Association of Certified Fraud Examiners
Fraud Triangle Gambling problems Personal financial problems Family pressures Desire for status symbol Need to meet with Incentives/ Need to meet with budgets fundraising targets Pressures High turnover of staff “I am only borrowing the money” Lack of segregation of duties Fraud “I am entitled to the money” Triangle Significant cash transactions “I am underpaid” Lack of controls Attitudes/ “I have to steal to provide for Opportunities my family” Rationalisation Informal governance 5
How you can protect your organisation It is important that you consider these aspects of your organisation: • Ethical culture Communication flow • Formal policies and procedures • 6
Internal control weakness that contributed to fraud 26% Lack of internal controls 24% Override of existing internal controls 17% Poor tone at the top 16% Lack of management review 6% Lack of competent personnel in oversight roles 4% Lack of employee fraud education 4% Other 2% Lack of independent checks/audits 2% Lack of clear lines of authority 7 Source: Report to the Nations: Asia-Pacific Edition, Association of Certified Fraud Examiners
Steps for fraud prevention • Be clear about the ethical values, e.g. honesty and accountability – set the “ tone at the top ” on fraudulent behaviour Be open about the possibility (risk) of fraud, • even if it is only a small risk – if you don’t acknowledge that fraud happens, you are not going to find it • Identify the types of fraud you may be at risk from – conduct a risk assessment Understand the red flags that act as a warning • of possible issues – e.g. behavioural or lifestyle symptoms, accounting & analytical anomalies 8
Prevent fraud with proper internal controls • Develop sound written policies and procedures – important they are clear about roles and responsibilities, and what steps must be taken, including: ü detailed and robust financial procedures, information technology & security ü fraud prevention policy ü human resources procedures Promptly report any suspected fraud or other criminal activity that takes place, and • take steps to minimise any loss and prevent it from reoccurring 9
Why effective internal controls are important Implementing effective internal controls is critical to reducing your • organisation’s exposure to fraud risk Reviewing the effectiveness of internal control is an essential part of the Board’s • responsibilities; whilst management is accountable to the Board for developing, operating and monitoring the system of internal control and for providing assurance to the Board that it has done so The Board cannot rely solely on a process of internal control embedded within the • organisation’s operations, but should regularly receive and review reports on internal control from management 10
Why effective internal controls are important As well as a regular review, do undertake • an annual assessment Risk management and controls are not to • be seen as a burden on business, rather the means by which business opportunities are maximised and potential losses associated with unwanted events reduced • Develop a successful system of internal control that is responsive to change 11
About me – Vishal Modi Expertise in providing commercial entities and membership based • organisations with expert advice and guidance with their assurance requirements • Focused on building strong partnerships with clients Passionate about advising and implementing efficient risk management controls and • affecting long term sustainable improvements in business outcomes Joined Hill Rogers in 2005 and appointed Director in 2012 • Bachelor of Commerce • Member of Chartered Accountants Australia and New Zealand • Registered Company Auditor • • Vishal.Modi@hillrogers.com.au │m: 0434 129 005 12
Any questions? 13
Recommend
More recommend
