How To Prevent A Fortune In Losses From Your Business
Can you protect a business from fraud? Your auditors will review your systems and advise you on areas of accounting controls that are weak. These will be obvious areas such as supervisory controls, password protection and reconciliations. However, it is the very fixed nature of the accounting control system that allows the fraudster to find the chink in the armour and to exploit it. What is needed is a number of practical steps aimed specifically at preventing the attack of the fraudster.
Once you have shed the biggest cause of fraud within your business, complacency, you will want to make sure that this new culture is communicated throughout your management and workforce. You have obtained a few examples of fraud policy documents written by a range of other organisations and have drafted your own suitable for the size and nature of your business. Now that you have your biggest anti-fraud control in place there are a number of important and constructive steps that need to be followed to strengthen your security and provide some peace of mind that the fraudster will find your business a difficult proposition.
1. You will have circulated your new fraud policy throughout your business in order to improve the overall culture within the business. A request for comments should be made - this should include comments on areas of fraud risk within the business and a request for volunteers to sit on a small anti-fraud steering committee that will meet once every couple of months at the most to review the anti-fraud control framework generally. Attendees from management and finance functions should be joined by representatives from sales, purchasing, manufacturing and other departments. Computer systems and technology staff should certainly be included. The fraud group would probably be steered by a senior member of the finance department or board of directors.
2. Assign responsibilities to persons outside a particular department to review fraud risk within that department. As an example a member of the board plus a manufacturing line manager as part of the group could monitor the finance function for a spell, or a purchase ledger clerk could look at asset security. Responsibilities would be changed regularly and membership of the committee rotated on an annual basis. In this way, all areas of the business are being reviewed by all managers and responsible personnel in the business on a regular basis. Within different sized businesses this can be adjusted to suit, but works well in the largest organisations most in need of fraud prevention and having a big pool of supervisors and managers. However, do not forget the junior staff who can sometimes usefully challenge management and provide a valuable contribution to the fraud prevention process.
3. You have now set up what is effectively a specialized "audit committee" that is part of your company's system of governance. It can strongly support any large organisation, public authority, bank, insurance company or listed company if properly promoted. However, it is most effective when incorporating a high level of fraud expertise. The fraud prevention matrix needs specialist fraud skills and experience in the same way as general corporate governance requires solid business and financial acumen to succeed. Audit committees invite participants from outside the business, such as a member from the statutory auditing firm used for the company's annual audit and the management board will include non executive directors. Similarly, benefit would be gained if the newly formed fraud group asks somebody with formal fraud expertise to join to advise on matters being discussed.
Fraud is often ignored by even the largest of organisations until it happens. Even so, fraud is often covered up to prevent a public relations problem. As a result, fraud flourishes today and is unlikely to be dealt with by the efforts of the fraud regulators and national fraud umbrella organisations set up to supposedly monitor the problem. It is essential that you contiually make sure that your company is a hard target for fraud, to lessen the chance that serious losses occur or even that your business is destroyed.
Once you have shed the biggest cause of fraud within your business, complacency, you will want to make sure that this new culture is communicated throughout your management and workforce. You have obtained a few examples of fraud policy documents written by a range of other organisations and have drafted your own suitable for the size and nature of your business. Now that you have your biggest anti-fraud control in place there are a number of important and constructive steps that need to be followed to strengthen your security and provide some peace of mind that the fraudster will find your business a difficult proposition.
1. You will have circulated your new fraud policy throughout your business in order to improve the overall culture within the business. A request for comments should be made - this should include comments on areas of fraud risk within the business and a request for volunteers to sit on a small anti-fraud steering committee that will meet once every couple of months at the most to review the anti-fraud control framework generally. Attendees from management and finance functions should be joined by representatives from sales, purchasing, manufacturing and other departments. Computer systems and technology staff should certainly be included. The fraud group would probably be steered by a senior member of the finance department or board of directors.
2. Assign responsibilities to persons outside a particular department to review fraud risk within that department. As an example a member of the board plus a manufacturing line manager as part of the group could monitor the finance function for a spell, or a purchase ledger clerk could look at asset security. Responsibilities would be changed regularly and membership of the committee rotated on an annual basis. In this way, all areas of the business are being reviewed by all managers and responsible personnel in the business on a regular basis. Within different sized businesses this can be adjusted to suit, but works well in the largest organisations most in need of fraud prevention and having a big pool of supervisors and managers. However, do not forget the junior staff who can sometimes usefully challenge management and provide a valuable contribution to the fraud prevention process.
3. You have now set up what is effectively a specialized "audit committee" that is part of your company's system of governance. It can strongly support any large organisation, public authority, bank, insurance company or listed company if properly promoted. However, it is most effective when incorporating a high level of fraud expertise. The fraud prevention matrix needs specialist fraud skills and experience in the same way as general corporate governance requires solid business and financial acumen to succeed. Audit committees invite participants from outside the business, such as a member from the statutory auditing firm used for the company's annual audit and the management board will include non executive directors. Similarly, benefit would be gained if the newly formed fraud group asks somebody with formal fraud expertise to join to advise on matters being discussed.
Fraud is often ignored by even the largest of organisations until it happens. Even so, fraud is often covered up to prevent a public relations problem. As a result, fraud flourishes today and is unlikely to be dealt with by the efforts of the fraud regulators and national fraud umbrella organisations set up to supposedly monitor the problem. It is essential that you contiually make sure that your company is a hard target for fraud, to lessen the chance that serious losses occur or even that your business is destroyed.
