VishalModiDirector- AuditandAssurance

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AvoidingFraud

Thissessionwillcover:

• Howyoucanprotectyourorganisation

• Whyeffectiveinternalcontrolsareimportant

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“Atanygivenmoment, thereisacertainpercentageofthe

population that’suptonogood”

J.EdgarHooverDirectoroftheFederalBureauof

Investigation(FBI),USA

Fraud

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MisappropriationofAssets

CorruptionFraudulentFinancial

Statements

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

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”

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

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• Vishal.Modi@hillrogers.com.au │m:0434129005

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t+61292325111f+61292337950www.hillrogers.com.au| info@hillrogers.com.au

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