Thursday, May 13, 2010

A Multi-Disciplinary Approach to Fraud Prevention

A multidisciplinary approach to fraud prevention consists of management, staff members, oversight bodies, computer experts, internal and external fraud experts, and legal advisors. As previously stated, management is responsible for adhering to company policies and making sure that all employees do the same. All of the bodies in the organization are responsible for the prevention and detection of fraud.

Staff members have to be trained to identify fraud and misconduct in the work place, and there has to be a reporting line available to all employees, which assures anonymity, and the ignorance or failure to report fraud or other offences should also result in a disciplinary hearing. Employees should be aware of the organization’s ethics policy, and be obligated by their contracts to adhere to the rules and procedures as set by management. Responsibilities in the work place should be given so that all employees are responsible for their own mistakes and misconduct, and disciplinary actions should be taken against employees who violate the code of conduct or ethics code.

The Audit Committee or Board of Directors’ members are mostly from outside the organization and they help the Main Board with operations, because of time restraints, and should have a written charter of responsibilities approved by the Main Board. They are financially literate, and help the Main Board with financial reporting and internal control responsibilities. The Audit Committee has to encourage management to create functional reporting systems, and receive feedback from all fraud cases, and they also have the right to investigate senior managers with the help of internal and external fraud auditors.

Internal fraud auditors are needed within and organization to detect fraud. Responsibilities also include adding value to the organizations operations, and evaluate and improve the effectiveness of risk management, internal controls, and the governess process. By evaluating and improving the governess process, internal auditors contribute to the prevention of fraud, and they communicate and establish values and goals, monitor the accomplishments of goals, ensure accountability, and preserve values.

External auditors’ primary responsibility is to audit financial statements and other information, and give comments on it, making sure that the financial statements of an organization is valid, and that it corresponds with the organization’s affairs. In effect, irregularities have to be reported. External auditors are needed to detect and prevent fraud and errors within the organization, but they can not be held responsible for the prevention of fraud, as that responsibility lies with management. They do however work with managers and the Board of Directors or the Audit Committee to help prevent fraud, by reporting on irregularities and suspected fraud, and providing assessments on the organization’s process for identifying, assessing, and responding the risks of fraud.

Computer experts are needed for implementing effective controls to protect organizations against computer crimes, such as hacking, and stealing information.

Certified fraud examiners have the same duties as the internal and external auditors, but their knowledge is extensive. They can also assist the Board of Directors directly when it comes to investigating senior personnel. They provide better evaluations of fraud risks, gained by experience. They also create operations and tests to resolve allegations or suspicions of fraud, and they report to either management or the Board of Directors.

Forensic auditors investigate fraud within the organization, with the goal to obtain legal confessions and prove the elements of fraud. Their responsibilities include investigation of evidence, analysis and presentation of evidence, supplying information and findings in the form of reports and supporting documents, and assisting in legal proceedings, such as testifying in court as an expert witness.

Forensic accountants are needed in an organization to analyse, interpret, summarise, and present complex financial statements, needed to investigate fraud, as the forensic accountants are experts in accounting and auditing. They investigate and analyse, and create computer systems to assist in investigating and analysing financial evidence, and they document reports on findings, and lastly they also assist in legal proceedings, such as testifying in court as an expert witness.

Legal advisors can be internal or external to the organisation, and they’re duty is to advise and assist the organization in any legal proceedings, for example, taking action against people who have committed fraud.

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