March is Fraud Prevention Month - Is Your Organization Doing Enough?
Monday, March 12, 2012 by Greg Draper
Dealing with an incident of fraud is tremendously distracting to an organization and may cause it to temporarily lose focus on its core business, if the fraud is significant.
Fraud can (and does) happen, to any organization, large or small. The Association of Certified Fraud Examiners reported in its 2010 Report to the Nations that:
- Survey participants estimated that the typical organization loses 5% of its annual revenue to fraud.
- The median loss caused by the occupational fraud cases in their study was $160,000 and nearly one-quarter of the frauds involved losses of at least $1 million.
- Small organizations are disproportionately victimized by occupational fraud.
15 Questions to Ask Yourself About the Impact of Fraud on Your Organization
The best way to reduce the potential impact of fraud on your organization is to be proactive. The investment is well worth it. The following are some questions you should ask yourself:
- Does the organization’s “Tone at the Top” and culture strongly encourage ethical behavior?
- Does the board play an active role in monitoring the effectiveness of the organization’s anti-fraud programs and controls?
- Are there policies and procedures that address dishonest or unethical behavior, such as a code of conduct and a conflict of interest policy and are they consistently and strongly enforced?
- Is there a reporting mechanism allowing employees to confidentially report wrongdoing?
- Does the organization conduct thorough pre-employment background checks to identify previous dishonest or unethical behaviour?
- Does the organization educate its employees about the importance of ethics and anti-fraud programs, and how to recognize indicators of fraud?
- Does the organization have an effective internal audit function?
- If the organization does not have an internal audit function, does senior management periodically perform a detailed review of key financial records?
- Is the accounting department adequately staffed to ensure proper segregation of duties related to authorization, custody of assets, and recording or reporting of transactions?
- Are there adequate controls and documented policies and procedures not only over cash management but also over other key areas such as procurement, payroll, and intellectual property, and are these controls adequately audited?
- If the organization recently experienced significant change, such as a merger, acquisition, reorganization or downsizing, has it revised its anti-fraud programs, policies and controls accordingly?
- Does the organization periodically perform and update fraud risk assessments?
- Does the organization enforce its vacation policy?
- Is there adequate fraud / employee dishonesty insurance in place?
- Is there a response plan in place to provide guidance on how to handle instances of fraud and other wrongdoing?
If you answered no to one or more of these questions, your organization may be at risk. Should you have any questions on implementing effective proactive measures against fraud and other wrongdoing, MNP’s Investigative & Forensic Services team would be pleased to assist.