fooling the auditor - understand the people risk
DESCRIPTION
Understand the people risk in your organisatiton and realise how people can fool the auditor. Audits are reactive. Learn to take proactive steps in fraud prevention.TRANSCRIPT
FOOLING THE AUDITOR
Jenny ReidSeptember 2014
What is an audit?The general definition of an audit is an evaluation of a person, system or process.
An auditor exams, collects evidence and evaluates before making a judgement call via an audit report.
Who is an auditor?
Cost
Statutory
Forensic
Performance
Internal
Quality
Who is an auditor?
Cost
StatutoryForensic
PerformanceInternal
Quality
Can we fool an auditor?
“Scamming the auditors is as simple as cut & paste”
www.forbes.com
HUMAN
REACTIVE
HOW DO PEOPLE FOOL THE AUDITOR?
Internal• Financial pressures during
economic crisis have led to an increase of fraud
• Employees pose the greatest fraud threat in the current economy
• Layoffs are affecting organizations' internal control systems
• Fraud levels are expected to continue rising.
HOW DO PEOPLE FOOL THE AUDITOR?
Staff• False representation
• Fails to disclose information
• Corruption
• Abuses a position of trust
HOW DO PEOPLE FOOL THE AUDITOR?
Staff• Compromising customer or
payroll data • Theft • Submission of inflated
expenses• Can also be linked to serious
and organised criminal network or terrorist financing.
FinancesEXTERNAL• Dishonest vendors in
bid-rigging schemes – tender fraud
• Billing the company for goods or services not provided
• Demanding bribes from employees.
HOW DO PEOPLE FOOL THE AUDITOR?
FinancesEXTERNAL• Dishonest customers -
submit bad checks or falsified account information for payment
• Attempt to return stolen or knock-off products for a refund.
• Security breaches and thefts of intellectual property perpetrated by unknown third parties.
HOW DO PEOPLE FOOL THE AUDITOR?
FinancesEXTERNAL• Hacking• Theft of proprietary
information• Tax fraud• Bankruptcy fraud• Insurance fraud
HOW DO PEOPLE FOOL THE AUDITOR?
Where could I go wrong?
People Risk
ManagementProgramme
Anti- FraudBehaviour
Ethics Policies & Training
Internal Controls
ProactiveAssessments
Fraud Prevention Strategies
Executive
Security /
Loss Control
HR Procurement
EmployeesPast
PresentPossible
Contract LabourVendors
People Risk Management Programme
Executive
Security /
Loss Control
HR Procurement
Leaders commit to
doing it right
Integrity Assessments
Communicate company
policy
Understand staff risk & assist with
training
Anti-Fraud
Behaviour
Executive
Security /
Loss Control
HR Procurement
Annual review of
Ethics Policy
Internal Communication
Strategy
External Communication
Strategy
Ethics Policies & Training
Executive
Security /
Loss Control
HR Procurement
Manage finance
documents & reconcilations
Insist leave is taken & staff
back each other up
Unannounched spot checks
Review policies & procedures
annually
Regular inventory checks on
finance / bank documents Internal
Controls
Executive
Security /
Loss Control
HR Procurement
Whistleblower Programme
Employee Assistance
Programme
Awareness Programmes
Employee Satisfaction
Surveys
Proactive Actions
Executive
Security /
Loss Control
HR Procurement
Do you want to jump????
