Thursday, 21 January 2016
How to prevent fraud in business: An Auditor's perspective
Hello readers, so today I decided to write the 3rd part of this article. I will advise you to read part 1 and part 2 before reading this one and yes there is still going to be another part, the last part. There are 3 main qualities associated with fraud which include
1. The reason why the individual/group wants to commit the fraud.
2. The loop-holes in the system of the business that could make the individual/group to justify their fraudulent act.
3. The ability of the individual/group to justify their fraudulent act.
When internal auditors do a good job it can be very useful at preventing, detecting and mitigating fraud. Prevention and detection are two different actions that can be used to deal with fraud. In order to prevent fraud, thus limit the exposure of the company to fraud, the owner/owners must set the right tone, thus they must deal with fraudulent activites in a strict manner
An effective and efficient internal control will prevent potential fraudsters from getting tempted, controls can range from screening customers to suppliers and other entities they have business with. Employees must also be trained on how to identify fraudulent activities and an anonymous way of passing the information to the owner/owners of the company must be made known. Employee must also be enlightened about the strict consequences of any fraudulent activity in order to discourage potential fraudsters.
The method through which fraud can be detected must be flexible and reviewed regularly. Fraud can be detected via whistleblowing, thus employees should be encouraged to do so. Employees that have resigned should be interviewed so it can enhance the way fraud can be detected, some auditors will say fraudsters that have been caught and sacked should be interviewed so they can help identify other loopholes so that other possible fraud can be detected. Well, that sounds unrealistic because I do not believe a person that has been sacked will be willing to honour any interview except there is a catch or the person has repented.
The last part will be out soon. Keep checking my blog regularly. Cheers!