You can sometimes compare fraud to a terminal disease. You never really think about it until you either catch it or somebody near to you dies from it. In the same way as a disease, businesses are affected by frauds daily, but most never bother about it affecting their company until it actually happens!
Complacency is the biggest contributor to the problem of fraud risk. Nowadays accounting controls are put in place by most businesses over their finances in an attempt to prevent problems. These will typically be passwords for computers, reconciliations of various numerical processes and supervision of financial and other business activities.
But, fraud prevention will not be achieved just with accountancy controls. They are essential and will reduce the risk of fraud somewhat, but as a sole fraud prevention tool they are inadequate. The cunning criminal can get round any accounting control if not monitored, by searching for its inevitable weaknesses. But consider this - he or she is more likely to look for such a chink if the perception is that nobody cares about the problem of fraud. Should a person prepared to comit fraud believe his only enemy is a feeble line of accountancy controls then he will focus his efforts on finding a way to circumvent them. This happens by producing forged paperwork, knowledge that errors are never checked or colluding with other like minded dishonest staff.
If on the other hand there is someone looking over his shoulder, asking the question "is there any fraud going on?" the fraudster will be less likely to begin to commit fraud. However, as a result your business need not be oppressive, looking over the shoulder of every worker all the time! This means that all the workers must be fully aware of the fraud problem and have it ingrained in their work ethic that fraud seriously threatens their future job security. A fraud review is just about the most effective way of achieving this.
A fraud review is often called an audit, but unlike the statutory compliance visits by the auditors it is a more focused, expert and simplified process that can vastly reduce the risk of fraud. If you have an internal audit function already, this can be employed to carry out fraud reviews. With a little specialised training it is possible to divert part of their resources to better effect thus costing little or nothing to introduce. Therefore, other than initial training of your workers, running an efective fraud awareness program can cost very little but stands to save you potentially massive sums - it may even save you from corporate failure due to major fraud! It may also have the advantage of reducing petty expense claim exaggeration and pilfering.
It is extremely easy to introduce a fraud review process. An anti-fraud professional will take time to understandt the processes taking place in your business. This will take place in the head office of the parent organisation and likely take around one to two days. At the end of this time, depending on whether the fraud review is to be outsourced or in house audit skills are to be employed, the fraud expert will present a fraud awareness training course to staff. The service package puts in place an overall policy for fraud, improving the culture of awareness and building an ever strengthening barrier against fraud that then business must maintain. If an entity's own resources are not utilised, and expert fraud practitioner might want to visit various subsidiaries and divisions of a business, which are often more risky due to their remoteness from the parent.
The health of any business needs a fraud review system in place, but the size of the process need only be matched to the size of the organisation it is trying to protect. However much time and effort put in to the defence of fraud, it is the senior managers' obligation to its stakeholders to achieve suitable protection. The fraud review is a critical element of the internal fraud prevention process and must be incorporated along with the all important "fraud policy" setting out a fraud aware culture within the business.
Mark Jenner specialises in fraud risk. He is a Fellow of the Institute of Chartered Accountants, a Member of the Expert Witness Institute, a Certified Fraud Examiner and has a Masters Degree in Fraud Management. He assist victims of the proceeds of crime act, criminal defence lawyers and fraud regulators.
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