HOW FRAUDSTERS FOOL THE AUDITOR Jenny Reid
Presentation Road Map COMMON DENOMINATOR My area of expertise – People Risk How do we fool an auditor? COMMON DENOMINATOR
The crime victim's prayer “I thank Thee I was never robbed before; They took my purse but they did not take my life; They took my all, it was not much; It was I who was robbed, and not I who robbed.” Matthew Henry, English commentator on the Bible and Presbyterian minister, 1662-1714
What is an audit? The general definition of an audit is an evaluation of a person, organization, system, process, enterprise, project or product. The term most commonly refers to audits in accounting, internal auditing, and government auditing, but similar concepts also exist in project management, quality management, water management, and energy conservation. In any auditing the auditor perceives and recognizes the propositions before him for examination, collects evidence, evaluates the same and on this basis formulates his judgment which is communicated through his audit report. Wikipedia
Who is an auditor? Forensic Quality Cost Performance Internal Statutory
What are the COMMON DENOMINATORS ???
Staff Suppliers Management Clients Authorities Reactive PEOPLE
Can we fool an auditor? “Scamming the auditors is as simple as cut & paste” www.forbes.com
External Case Study iFacts
Hardworking staff Need training Conference with team building activity
Supplier Good service Nice guy Helpful Synergy in service offering
Finances Possible business venture Rented a property from us Used his services again Discussed joint marketing strategy
HELP US ALL TO GROW and $$$ MY AIM HELP US ALL TO GROW and $$$
Finances Introduction to my suppliers Introduction to my clients Access to our marketing contacts and systems PROVIDED INFORMATION FREELY
Colleague Supplier Tenant PEOPLE
Colleague Supplier Tenant THREAT PEOPLE
DID WE HOOK THE WORM? YES
When should we have been aware of the risk? Gave good service Nice guy Paid his rent late Reasons for delay varied from time to time Did business with our clients and did not pay on time His clients always let him down and this caused payment delays Never introduced us to his contacts His suppliers were always unreliable
Did we verify any information?
NO!!
The Result Finances Loss of US$3 000 Loss of reputation Hours of investigation
Finances Investigation Findings 6 fraud charges in New Zealand 6 months imprisonment in New Zealand for fraud 10 cases of fraud related charges in Gauteng 1 assault charge Various civil charges Shocking client references
Where did I go wrong?
IFACTS VENDOR FRAUD SURVEY
Was I going to jump….?
Internal People Management
Factors necessary for a successful whistleblowing programme Reward mechanism Independent platform Ongoing awareness programmes Provide feedback Executive commitment Clear reporting structure for receipt of reports Commitment and buy in from ALL stakeholders
Staff Suppliers Management Clients Authorities Threat PEOPLE
HOW HAPPY ARE YOUR EMPLOYEES?
WHERE DOES INTEGRITY BEGIN & END?
ARE YOUR STAFF MOTIVATED?
Is there hope?
People Risk Management Programme Wellness People Management People Safety & Security Third Party Executive Security / Loss Control People Risk Management Programme HR Procurement
A good employee wellness programme will include advice and recommendations on: o Good Health o Stress management o Motivation o Counselling services o Ethics & Fraud awareness o Personal financial advice o Security awareness
The people risk prevention programme should include the following: · Employee screening · Integrity assessments · Truth verification tests · Hot line · Third party / vendor verification · People Risk Database
Online People Management tools include: · Induction training · HR climate & employee satisfaction surveys · Appraisals and performance assessments · Recruitment strategy · Fraud investigations · Exit interviews · Health and safety assessments & training · Security and risk assessments & training · Risk policies and procedures
How effective is your People Risk Management Programme?