Vishal Modi Director - Audit and Assurance 1 Avoiding Fraud This - - PowerPoint PPT Presentation

Vishal Modi

Director - Audit and Assurance

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Avoiding Fraud

This session will cover:

• How you can protect your organisation
• Why effective internal controls are

important

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“At any given moment, there is a certain percentage of the population that’s up to no good”

• J. Edgar Hoover

Director of the Federal Bureau of Investigation (FBI), USA

Fraud

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Misappropriation

• f Assets

Corruption Fraudulent Financial Statements

Fraud Tree

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Fraud Tree Misappropriation

• f Assets

Cash Theft of cash on hand Theft of cash receipts Skimming Sales/Services Receivables Refunds Cash larceny Fraudulent disbursements Billing Payroll Expense reimbursement Cheques/EFT All other assets Misuse Larceny / Theft Fraudulent Financial Statements Net assets/Net Income Understatement Net assets/Net Income Overstatement Corruption Conflict of Interest Bribery Illegal gratuities Economic extortion

Source: Association of Certified Fraud Examiners

Fraud Triangle

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Fraud Triangle Incentives/ Pressures Opportunities Attitudes/ Rationalisation

Lack of segregation of duties Significant cash transactions Lack of controls Informal governance Personal financial problems Desire for status symbol Need to meet with budgets Gambling problems “I am only borrowing the money” “I am entitled to the money” Family pressures High turnover of staff “I am underpaid” Need to meet with fundraising targets “I have to steal to provide for my family”

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

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Internal control weakness that contributed to fraud

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2% 2% 4% 4% 6% 16% 17% 24% 26% Lack of clear lines of authority Lack of independent checks/audits Other Lack of employee fraud education Lack of competent personnel in oversight roles Lack of management review Poor tone at the top Override of existing internal controls Lack of internal controls 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
• f possible issues – e.g. behavioural or lifestyle

symptoms, accounting & analytical anomalies

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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

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Why effective internal controls are important

• Implementing effective internal controls is critical to reducing your
• rganisation’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,

• perating 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
• rganisation’s operations, but should regularly receive and review reports on

internal control from management

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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

• pportunities are maximised and

potential losses associated with unwanted events reduced

• Develop a successful system of internal

control that is responsive to change

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About me – Vishal Modi

• Expertise in providing commercial entities and membership based
• rganisations 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

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Any questions?

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