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VishalModiDirector- AuditandAssurance
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AvoidingFraud
Thissessionwillcover:
• Howyoucanprotectyourorganisation
• Whyeffectiveinternalcontrolsareimportant
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“Atanygivenmoment, thereisacertainpercentageofthe
population that’suptonogood”
J.EdgarHooverDirectoroftheFederalBureauof
Investigation(FBI),USA
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Fraud
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MisappropriationofAssets
CorruptionFraudulentFinancial
Statements
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FraudTree
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FraudTree
MisappropriationofAssets
Cash
Theftofcashonhand
Theftofcashreceipts
Skimming
Sales/Services
Receivables
Refunds
Cashlarceny
Fraudulentdisbursements
Billing
Payroll
Expensereimbursement
Cheques/EFT
Allotherassets
Misuse
Larceny/Theft
FraudulentFinancialStatements
Netassets/NetIncome
Understatement
Netassets/NetIncome
Overstatement
Corruption
ConflictofInterest
Bribery
Illegalgratuities
Economicextortion
Source:AssociationofCertified FraudExaminers
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FraudTriangle
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FraudTriangle
Incentives/Pressures
Opportunities Attitudes/Rationalisation
Lackofsegregationofduties
Significantcashtransactions
Lackofcontrols
Informalgovernance
Personalfinancial problems
Desireforstatussymbol
Needtomeetwithbudgets
Gamblingproblems
“Iamonlyborrowing themoney”
“Iamentitled tothemoney”
Familypressures
Highturnover ofstaff
“Iamunderpaid”
Needtomeetwithfundraising targets
“Ihavetostealtoprovideformyfamily”
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Howyoucanprotectyourorganisation
Itisimportant thatyouconsider theseaspectsofyourorganisation:
• Ethicalculture
• Communication flow
• Formalpoliciesandprocedures
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Internalcontrolweaknessthatcontributed tofraud
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2%
2%
4%
4%
6%
16%
17%
24%
26%
Lackofclearlinesofauthority
Lackofindependent checks/audits
Other
Lackofemployeefraudeducation
Lackofcompetent personnelinoversightroles
Lackofmanagementreview
Poortone atthetop
Overrideofexisting internal controls
Lackofinternal controls
Source:Report totheNations:Asia-PacificEdition, AssociationofCertified FraudExaminers
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Stepsforfraudprevention
• Beclearabouttheethicalvalues,e.g.honestyandaccountability– setthe“toneatthetop”onfraudulent behaviour
• Beopenaboutthepossibility (risk)offraud,evenifitisonlyasmall risk– ifyoudon’tacknowledgethatfraudhappens,youarenotgoingtofindit
• Identifythetypesoffraudyoumaybeatriskfrom– conductariskassessment
• Understand theredflags thatactasawarningofpossible issues– e.g.behaviouralorlifestylesymptoms, accounting&analyticalanomalies
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Preventfraudwithproperinternalcontrols
• Developsoundwrittenpoliciesandprocedures – important theyareclearaboutrolesandresponsibilities, andwhatstepsmustbetaken,including:
ü detailedandrobust financialprocedures, information technology &security
ü fraudpreventionpolicy
ü humanresourcesprocedures
• Promptly report anysuspectedfraudorothercriminalactivitythattakesplace,andtakestepstominimiseanylossandprevent itfromreoccurring
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Whyeffectiveinternalcontrolsareimportant
• Implementing effectiveinternalcontrols iscriticaltoreducing your organisation’s exposure tofraud risk
• Reviewingtheeffectivenessofinternal controlisanessentialpartoftheBoard’sresponsibilities; whilstmanagementisaccountabletotheBoardfordeveloping,operatingandmonitoring thesystemofinternalcontrolandforproviding assurancetotheBoardthatithasdoneso
• TheBoardcannotrelysolelyonaprocessofinternalcontrolembeddedwithintheorganisation’s operations, butshould regularlyreceiveand reviewreportsoninternalcontrol frommanagement
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Whyeffectiveinternalcontrolsareimportant
• Aswellasaregular review,doundertakeanannualassessment
• Riskmanagementandcontrolsarenottobeseenasaburdenonbusiness, ratherthemeansbywhichbusinessopportunitiesaremaximisedandpotential lossesassociatedwithunwantedeventsreduced
• Develop asuccessfulsystemofinternalcontrol thatisresponsivetochange
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Aboutme– VishalModi
• Expertiseinproviding commercialentitiesandmembership basedorganisationswithexpertadviceandguidancewiththeirassurancerequirements
• Focusedonbuilding strongpartnershipswithclients• Passionateabout advisingandimplementing efficientriskmanagementcontrolsand
affecting longtermsustainableimprovements inbusinessoutcomes• JoinedHillRogersin2005andappointedDirectorin2012• BachelorofCommerce• MemberofCharteredAccountantsAustraliaandNewZealand• RegisteredCompanyAuditor• [email protected] │m:0434129005
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t+61292325111f+61292337950www.hillrogers.com.au| [email protected]
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Disclaimer:HillRogersAdvisory PtyLtdThe material contained in this publ ication is general commentary only fordistribution to cl ients of Hi ll Roger s. None of the material i s, or shou ld beregarded as persona l or financial product advice. Accordingly , no per sonshould rely onany of the contents of thispublication without f irst obtain ingspecific advice from Hil lRogers. Every effort has been made t oen sure thatthe content is accurate, however it is not intended to be a completedescription of the matter s described. Hil l Roger s, its Pr incipals and agentsaccept no respon sib ility to any per son who actsor re lies in any way on anyof the material without first obtaining such specific advice.
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