Mitigating fraud and misconduct Mitie © 2020 Deloitte LLP. All rights reserved. 2
Agenda for the session
Welcome
1Welcome and introduction
5Summary and close
2The risk environment and potential issues
3Governance and external pressures
4Mitigating the risks
Mitigating fraud and misconduct Mitie © 2020 Deloitte LLP. All rights reserved. 3
Welcome and introduction
COVID-19 financial misstatement and misreporting
Deloitte ForensicPartner
+44 20 7303 2905
Peter MaherJules Colborne-Baber
Deloitte ForensicPartner
+44 20 7007 2020
Peter MaherSimon Cuerden
Deloitte ForensicDirector
+44 20 7303 2535
Peter MaherRob Wylie
Deloitte ForensicDirector
+44 20 7007 3169
Peter MaherAmber Andrade
Deloitte Risk AdvisoryDirector
+44 161 455 6715
Peter MaherJames Meadowcroft
Deloitte Forensic Assistant Director
+44 131 535 7078
Peter MaherRosemary Ford
Mitigating fraud and misconduct Mitie © 2020 Deloitte LLP. All rights reserved. 5
The COVID-19 landscape brings with it a number of challenges which increase the likelihood of financial misstatement and misreporting
COVID-19 financial misstatement and misreporting
Potentially leads to
Restrictions on travel
Resource challenges
Remote working and lockdown
Pressure
Opportunity
Rationalisation
Revenue and liquidity issues
Challenges
Mitigating fraud and misconduct Mitie © 2020 Deloitte LLP. All rights reserved. 6
Potential issues
COVID-19 financial misstatement and misreporting
Manipulation of impairments, write-offs and
provisions
Inappropriate capitalisation of expenses
Failure to discloseCovid-19 impact
Overstatement of revenue
Using Covid-19 to mask
unrelated issues
Manipulation of models, forecasts
and KPIs
Mitigating fraud and misconduct Mitie © 2020 Deloitte LLP. All rights reserved. 8
Governance
COVID-19 financial misstatement and misreporting
Primary responsibility for prevention and detection of fraud rests with those charged with governance and senior management.In the UK, this is expressly recognised in both:
1) Paragraph 4 of International Standards on Auditing 240; and
2) Code Principle C of the UK Corporate Governance Code which states that the board should establish a framework of prudent andeffective controls which enable risk to be assessed and managed
The Brydon Report recently recommended that there be:
1) a new reporting duty on directors to set out the actions they have taken each year to prevent and detect material fraud; and
2) a corresponding new duty on the auditor to state in its report how it has assured the directors’ statement on material fraud, andwhat additional steps it has taken to assess the effectiveness of the relevant controls and to detect any such fraud.
Boards need to ensure they are managing financial statement misstatement, fraud and misconduct risk with appropriate robustness.
Mitigating fraud and misconduct Mitie © 2020 Deloitte LLP. All rights reserved. 9
External pressures
COVID-19 financial misstatement and misreporting
The board and those charged with governance
Regulatory bodies
Auditors
Shareholders
Banks
Mitigating fraud and misconduct Mitie © 2020 Deloitte LLP. All rights reserved. 11
Practical steps to mitigate the risks
COVID-19 financial misstatement and misreporting
Fraud follows opportunity and attacks weakness.Know where you are vulnerable and how to take control.
Update fraud risk assessments
Have robust internal controlsKeep clear records
Stress test forecasts
Monitor effectiveness and remediate where required
Set a tone from the top and provide clear communication
Mitigating fraud and misconduct Mitie © 2020 Deloitte LLP. All rights reserved. 13
Summary and close
COVID-19 financial misstatement and misreporting
3But, there are practical steps you can take to mitigate the risks• Management should act now to assess the heightened risk of financial misstatement and misreporting• Effective governance, fraud risk assessments, monitoring and surveillance will help to prevent and detect any such issues
1The risk landscape has changed• COVID-19 has brought with it increased pressure, opportunity and rationalisation for fraud and misconduct • There are a number of key risk areas specifically relating to financial misstatement and misreporting
2There is currently increased scrutiny on boards and management• Management and the board have a crucial role to play in the prevention and detection of these issues • External stakeholders have been vocal about what they expect from companies
Mitigating fraud and misconduct Mitie © 2020 Deloitte LLP. All rights reserved. 14
Today's speakers
We are happy to facilitate a peer-to-peer virtual meeting for round table style discussion on those issues covered today, or any that are specifically
impacting your business.
Deloitte ForensicPartner
+44 20 7303 2905
Peter MaherJules Colborne-Baber
Deloitte ForensicPartner
+44 20 7007 2020
Peter MaherSimon Cuerden
Deloitte ForensicDirector
+44 20 7303 2535
Peter MaherRob Wylie
Deloitte ForensicDirector
+44 20 7007 3169
Peter MaherAmber Andrade
Deloitte Risk AdvisoryDirector
+44 161 455 6715
Peter MaherJames Meadowcroft
Deloitte Forensic Assistant Director
+44 131 535 7078
Peter MaherRosemary Ford
Please contact us if this is of interest to you and we will arrange.
This publication has been written in general terms and we recommend that you obtain professional advice before acting or refraining from action on any of the contents of this publication. Deloitte LLP accepts no liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.
Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 1 New Street Square, London EC4A 3HQ, United Kingdom.
Deloitte LLP is the United Kingdom affiliate of Deloitte NSE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"). DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NSE LLP do not provide services to clients. Please see www.deloitte.com/about to learn more about our global network of member firms.
© 2020 Deloitte LLP. All rights reserved.
Designed by CoRe Creative Services. RITM0446158