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Today’s Topics

This comprehensive guide discusses various strategies for preventing and addressing fraud within organizations. Key methods include installing strong internal controls, discouraging collusion among employees, alerting vendors and contractors, closely monitoring employee activities, providing tip hotlines, and creating an expectation of punishment for dishonest actions. Furthermore, it contrasts the traditional default model of handling fraud with a proactive fraud-savvy model, emphasizing the importance of training, risk assessment, and audits in preventing fraudulent activities.

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Today’s Topics

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Presentation Transcript

  1. Today’s Topics • Preventing Fraud-Part II • Eliminating opportunities for fraud • Dealing with Fraud FORENSIC ACCOUNTING - BA124 - Fall 2005 Slide 4-1

  2. 7 Methods of Risk Reduction • Install good internal controls • Discourage collusion • Alert vendors and contractors • Monitor employees • Provide tip hotlines • Create expectation of punishment • Audit proactively FORENSIC ACCOUNTING - BA124 - Fall 2005 Slide 4-2

  3. Install Good Internal Controls • Systems • Segregation of duties • Policies and procedures • Minimize undermining events FORENSIC ACCOUNTING - BA124 - Fall 2005 Slide 4-3

  4. Discourage Collusion • 29% of all fraud is due to collusion • More than one person involvement • Trend is increasing • Complex nature of businesses • Rising supplier alliances • Unmerited or complacent trust factors FORENSIC ACCOUNTING - BA124 - Fall 2005 Slide 4-4

  5. Alert Vendors and Contractors • Communications that set policy • Right to audit clauses FORENSIC ACCOUNTING - BA124 - Fall 2005 Slide 4-5

  6. Monitor Employees • Lifestyle awareness • Detection and deterrent FORENSIC ACCOUNTING - BA124 - Fall 2005 Slide 4-6

  7. Provide Tip Hotlines • 33% of frauds detected through tips • Only 52% of Fortune 500 companies have whistle-blowing programs • Concern for mixed employee messages • i.e. “Do we have a fraud right now?” • Whistle-blower protection policies FORENSIC ACCOUNTING - BA124 - Fall 2005 Slide 4-7

  8. Create Expectation of Punishment • Causes employees to stop and think • Don’t fall victim to fear of time or bureaucracy associated with prosecution FORENSIC ACCOUNTING - BA124 - Fall 2005 Slide 4-8

  9. Audit Proactivity • Identify risk exposure • Identify symptoms • Implementing proactive audit initiatives • Investigate symptoms FORENSIC ACCOUNTING - BA124 - Fall 2005 Slide 4-9

  10. Dealing with Fraud • Traditional or Default Model • Fraud-Savvy Model FORENSIC ACCOUNTING - BA124 - Fall 2005 Slide 4-10

  11. Default Model • Fraud takes place • Investigation of the event • Decision regarding action • The file is closed and no further action takes….. • This approach guarantees that fraud will not go away!!! FORENSIC ACCOUNTING - BA124 - Fall 2005 Slide 4-11

  12. Fraud-Savvy Model • Tone is set at the top • Training takes place • Risk assessment and internal controls are set • Reporting and monitoring systems installed • Proactive auditing initiated • Commitment to action & follow-up FORENSIC ACCOUNTING - BA124 - Fall 2005 Slide 4-12

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