|As we know, fraud can come in a variety of different forms and can happen at all levels in an organization.
In a survey undertaken by Ernst and Young they found that 75% of the sample of 1,200 companies world-wide were victims of fraud during the last 5 years. Of the worst fraud over 80% was committed by staff over 75% of whom had been with the company for more than 5 years.
The study also discovered that 25% of businesses lost over $1m through fraud in the last 5 years and that more than half of the frauds discovered were discovered by chance.
Understanding circumstances where Risk of fraud is higher than usual:
Management must have an understanding of how and why fraud occurs in order that internal controls can be properly designed and operated.
The risk of fraud can arise in certain circumstances or due to certain factors, some of which are as follows:
like Cash sales which are tempting particular where internal controls are underemphasized.
increases the risk for fraud, for example changes in the management information system, in particular increased computerisation. Computer fraud is rapidly increasing in frequency and sophistication and presents a real danger for many organisations;
can also present very welcome opportunities for fraudsters, particularly during transition phases or following downsizing when key controls such as segregation of duties may be compromised;
Fraud can also occur during periods of rapid growth in the volume of activity when there may be inadequate time for proper verification of all transactions. Most organisations expand first and try to put the controls in place later;
The risk of fraud may also be increased by factors which are specific to the industry, for example extensive travel and related expenses or very high levels of corporate entertainment;
may also have a significant influence where a dominant manager is either given or exercises extensive authority;
· Lack of emphasis on compliance with internal controls will eventually invite fraud;
Includes no proper follow up on interviewing re: gaps in curriculum vitas
This include unexplained changes in living standards (driving very expensive cars, ornaments, etc), staff not taking holidays, working unsociable hours, turning down promotions, resigning unexpectedly ,etc)
this can also create an environment where fraud may be perpetrated.
November 17th, 2009 Comments off
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