Why Fraud Prevention Should be Given More Attention
The leading economies of the West seem to be the hardest hit when it comes to the problem of fraud. Losses to the fraudster and the cost of dealing with the problem are more than many other nations' national budgets. Many frauds carry on through several years and many others are never discovered at all.
Fraud seems to be a problem that many do not give much importance to until it impacts them. This is human nature, where many do not look after their health for example, until some ailment such as obesity or cancer from smoking severely impacts their life. Prevention being better than the cure is as true for fraud as it is for matters of health. Given that unlike some aspects of health most fraud is completely preventable at very little cost to an organisation, this is surprising.
By typing 'how to prevent fraud' into Google you will find contacts for many expert fraud advisors selling fraud prevention packages. In some, if not most of these cases, the advice will have substantial value to anybody wishing to purchase it. In all likelihood the advice will consist of the following:
1. The advisors will conduct a fact finding review of the business involving discussions with key staff and mapping out the financial and business processes - this is very similar to the work carried out during the planning stages of a statutory audit that most businesses (all large companies) will have by law every year.
2. The result of this review will be a report outlining weaknesses within the accounting and management systems that might be vulnerable to the attack of the fraudster. These will be discussed with the management of the business and this will give the opportunity to fix the weak points within the business.
3. The advisor will provide a template for a 'fraud policy document' for the business to put in place. This is a document that sets out the organisation's policy that it will not tolerate fraud within the organisation and document some of the steps that it has taken to ensure that fraud is considered to be unacceptable by all its staff.
4. The advisors may also offer training to the organisation's staff in how to recognise fraud and how to take simple measures that are additional to the firm's own policies that will further help prevent it.
5. The astute fraud advisor will ensure that his client also has a 'response plan' for fraud - setting out ways to deal with fraud if it does happen. This will usually include contacting the advisor for support during the process of dealing with the fraud.
The advice being given by the advisor is essential for the business, if it has not considered its vulnerability to fraud in the past. However, installing such systems alone will not fully protect the organisation. The reason for this is that the fraudster will be spending more time trying to find the chink in the anti-fraud armor - and many frauds continue to be discovered in businesses that have taken on board significant anti-fraud advice in the past.
What is needed in addition, is the awareness that the fraudster is always going to be on the look out for opportunities. Therefore, the business itself must always be on the lookout for the same. One of the biggest mistakes is to spend vast sums on fraud prevention advice and then to consider the business to be protected. It is complacency that often allows fraud to happen again and again, even after formal anti-fraud advice has been taken.
Initial fraud advice need not be complicated or expensive, so long as an organisation takes on board an 'anti fraud mind set' and continues to be aware of the threat of fraud on an ongoing basis. Being seen to be reviewing fraud controls and talking to the staff about fraud risk on a regular basis is likely to be more effective in most companies than a one off visit by a fraud expert.
Mark Jenner is a Fellow of the Institute of Chartered Accountants in England and Wales, a Certified Fraud Examiner and has a Masters Degree in Fraud Management. He advises companies on fraud prevention and how best to protect themselves from fraud.
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