Anti Fraud Prevention

Anti-Fraud Prevention

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Professor

Anti-Fraud Prevention

Fraud is the intentional act of stealing another individual’s identity or misappropriating funds from a business or an organization. These individuals intentionally steal money from their business or commit acts of deception to gain the money of their victims. It is important for the company and even the individual to establish internal controls to prevent fraud. The company will need to employ a prevention plan that includes a clear fraud policy and use detection strategies to discover acts of fraud.

Regardless of size or sector, training, especially involving loss prevention, is critical to any business (2009). The small business takes the greatest hit from this type of crime and it can cause the small business to go bankrupt. The FBI's Internet Crime Complaint Center released its annual Internet Fraud Crime Report in 2006. The reports included multiple fraud types, including auction fraud, non-delivery, and credit-card fraud, as well as non-fraudulent complaints, such as computer intrusions, spam/unsolicited email and child pornography (2010).

A monetary loss from business and personal fraud exceeds $660 billion annually and on average a business or organization will lose 6% of their profit in a year. Businesses with less than one hundred employees will be the hardest hit by this crime. Occupational fraud and abuses fall into three main categories: asset misappropriation, fraudulent statements, and bribery and corruption (2009). A comprehensive control program would aid the organizations in avoiding this financial loss. It will provide valuable internal controls and assess the effectiveness of current internal controls. A confidential, anonymous reporting system will be developed and safeguard the companies assets.

The comprehensive control program would provide many benefits for the company. It would provide preventive, detective, and corrective controls and will apply new improved auditing standards and rules to follow concerning the standard of controls concerning both inventory and cash flow. In order to be proactive when protecting a company from fraud, this program would provide helpful strategies and methods for eliminating fraudulent activity.

Preventive measures that would be taken would work to stop fraud before it happens. It will provide controls for protecting the company’s assets and the private information of company personnel. Detective controls will be applied to alert company officials of any potential threats of fraud and aims at finding and investigating possible incidents of fraud. Corrective controls will monitor existing controls and apply alternative actions for any aspect of the fraud plan is not beneficial to the company. The comprehensive control program will provide measures to remedy problems that are discovered, so that future frauds can be better prevented and detected (Spelman, 2010).

The preventive measures that would be applied are providing safeguards for assets, proper authorization of transactions, segregation of duties, independent checks on performance, and an anonymous reporting mechanism like a fraud hotline. The program will provide fraud education and evaluating, designing, and implementing controls that proactively prevent fraud form occurring in the company or the organization. If a company provides preventive measures for fraud it will take away the opportunity for immoral employees to commit acts of fraud.

The first step in any preventive programs is to encourage a policy of reporting any wrongdoings, and to remain anonymous to avoid any repercussions from fellow employees. The objective of the plan is to educate the executives on the environment in which fraudulent crime are more likely to occur (Spelman, 2010). The employees should feel encouraged to report any cases of suspected fraud. The culture of the work environment can play into the criminal’s ability to commit a crime. The goal is to control the environment through internal controls and increase the pressure against committing fraudulent acts.

Procedures that should be considered for detective controls, including independent checks and a system for documents and records are random audits, inventory counts, external audits, designated reporting structures, and investigations. Monitoring activities are important processes of detection procedures for fraud. Monitoring access to assets, data, and the accounting system will help detect any act of fraud and limit access to the financial information of the company. Record and documents should be stored in a locked, authorized area, with limited access. Protecting the private information of company employees is another important process of preventing and detecting fraud.

Another important aspect of fraud control is the watchful eye of other employees. A program will be implemented that educates employees on the sign of fraud and the proper steps for reporting fraudulent activity. The employees will be guaranteed anonymity and will be able to report any acts of possible fraud to a fraud hotline. The hotline will provide a telephone number for all employees where a message concerning the fraud can be left anytime during the day or night. The assurance of anonymity will encourage employees to report acts of fraud and save the company countless numbers of dollars in lost assets. Personnel in charge of monitoring the hotline will use discretion when taking down fraud complaints and no personal information will be requested from the tipster.

Corrective measures will be taken using the comprehensive control program. Once an incident of fraud has been reported to the company’s fraud hotline, an investigation of the accusations will be launched. The investigation will be conducted discreetly and uncover any acts of fraud. Employees will not be accused of fraud but instead evidence will be gathered before any determinations are made. The employee that is accused of fraud will be fired from their job and face criminal action. In order to stop fraud from other employees, a strong message must e set when an employee is caught committing acts of fraud.

Other corrective measures will include reviewing the current procedures being employed by the organization. A risk assessment will be developed for the company and alternative preventive and detective measures will be implemented. The program will be designed to fill in the gaps and provide more comprehensive procedures for protecting the company from fraud. A code of conduct and hotline are necessary elements of an anti-fraud program (Lister, 2007). Key stakeholders in the anti-fraud program; such as internal auditors, general counsel, compliance officers, and other executives must be made aware of the areas that are vulnerable to fraud.

Making employees aware of this comprehensive control program will help to limit the number of fraudulent acts committed in a company. Preventive, detective, and corrective controls will protect the company from acts of fraud and provide a better company culture in which employees can thrive. Fraud destroys the assets of a company and breeds a culture of mistrust. The company environment will be controlled through internal controls and increase the pressure against committing fraudulent acts. Employees that blow the whistle on fraudulent acts will be provided with complete anonymity and activities of employees will be monitored to prevent these acts from happening.

References

(2009). Security Loss and Prevention Training. Retrieved November 7, 2010 from