Fraud Prevention

Internal controls are the single most effective measure to assist in deterring fraud. A hotline is the most effective method to detect fraud. The presence of strong internal controls is associated with significantly reduced fraud losses, shorter duration of fraudulent activity, and more reliable and rapid detection of fraud activity. Another critical anti-fraud tool for business is the operation of a hotline for anonymous reporting of suspected fraud activity. In fact, most fraud is exposed as a result of tips and complaints by other employees. Fraud was more likely to be detected by a tip than any other mechanism used to detect fraud.

Fraud prevention, in practice, falls into three broad areas:

Monitoring – Organizations can develop and utilize tools, policies and procedures for the monitoring, identification and reporting of suspected fraudulent activity. 

Investigation – Once potential fraud has been identified, a thorough investigation should be performed by qualified fraud investigators to identify the perpetrator(s) of a fraud, ascertain the losses, and assess the root cause, which is critical in preventing future fraud at the organization.

Program Improvement –  Training of all personnel on fraud identification and reporting can greatly increase organizational awareness and reduce overall fraud risk. Review of policies and procedures on a consistent periodic basis can help an organization ensure it is adequately prepared to combat fraud.

Internal controls, if proactively applied by an organization, can significantly assist an organization in fraud  prevention.

Management  and  the  Board  of  Directors  must  have  a thorough understanding of internal controls and how they create value. regardless of size. An effective system of internal controls forms one of the foundations necessary to help control  fraud  risks. 

The  controls of current and potential vendors are a key component of many organization’s vendor management program.

Leading practice internal controls change as the processes and technology that support an organization change.  Controls  are  not  static. Risks posed to an organization are dynamic, and are subject to change over time. 

Additionally, it is key for an organization to find the appropriate balance of internal control. Many organizations hire us  as  internal control consultants to recommend the appropriate level of control. We  help design and implement internal controls, and develop systems to monitor, assess and update those controls.