Fraud Prevention

Week 11

For the following entry please consider the facts of the case below:

A speaker at a business advisory conference focusing on fraud prevention identified the characteristics you may find within a firm that may lead to fraudulent activities occurring. They are:

• Fraud is not perceived as a risk, or risks are not assessed
• Management ignores irregularities
• Morale is low
• High turnover within the firm
• Staff lacks training in the systems in which they operate on a day to day basis
• A rapid increase in revenues and profits
• A very strong, egotistical leader
• Profit is the ultimate goal.  It is to be reached no matter what occurs to deter the organization or employee.
• Salary structure is tied to profits

He then said: “These are just a few of the characteristics you might find prevalent within a corporation ripe for fraud. Although in Australia there have been multitudes of frauds committed during the past ten to 15 years, by men such as Alan Bond, Joel Barlow, Rene Rivkin and Christopher Skase, fraud is still increasing in Australia.  It seems that these frauds have not increased awareness within most businesses.  Awareness and education is the key to defeating fraud within today’s organisations”

“Do you agree or disagree with the final statement made in the case on awareness and education? Using documents, lectures, readings and other journal articles, plus your own knowledge and experiences, provide arguments and recommendations to your organisation on how they can prevent the incidence of fraud. Use your reflective writing techniques in answering this question.”

Based on my knowledge of large fraud cases such as ING and Queensland Health, I believe that awareness and education must be used in conjunction with other fraud preventative measures to defeat fraud within today’s organisations. According to Smith (1998) fraud prevention and control strategies range from general policies to highly specific, individually tailored procedures.

Preventative policies have been developed by the Government, industry and academics to manage fraud for organisations. For example, the Government has published the AS 8001-2008 guideline which is available for businesses to prevent fraud and corruption. Grain Corp (2008) has effectively incorporated the guidelines of AS 8001-2008 as part of their policy to mitigate fraud risk.

Additionally models of fraud detection have been developed such as the Analysis Led Fraud Assessment (ALFA) model (Steane and Cockerell, 2005). The ALFA approach identifies areas of high fraud risks and critical fraud risks to enable organisations to address the risk of fraud. Furthermore Steane and Cockerell (2005) have defined critical risks to be area of high fraud risks where there are poor or no risk controls in place. To simply illustrate the ALFA approach, I have reflected on my experience Zorbing which presented a critical risk, but through safety measures in place, it was reduced to a high risk activity.

Moreover I have highlighted below some of my key recommendations based on the fraud I have witnessed at a small business:

• Developing an ethical culture
• Employment screening process
• Whistle blowing schemes
• Red Flags and fraudster profiling
• Strong internal controls

Therefore I believe that the above methods should be implemented, in conjunction with education and awareness training, to mitigate the occurrence of fraud.

Reference List:

Australian Standards 8001-2008. (2008).Fraud and corruption control. Retrieved from: http://fraud.govspace.gov.au/files/2010/12/Australian-Standard-8001-2008.pdf

Grain Corp (2008). Fraud & corruption control: corporate governance procedure. Retrieved from: QUT Blackboard.

Smith, R. (1998). Best practice in fraud prevention. Retrieved from: http://www.aic.gov.au/documents/F/3/2/%7BF3256DEB-9A04-4416-9D11-156922F22EC8%7Dti100.pdf

Steane, P., & Cockerell, R. (2005). Developing a fraud profile method – a step in building institutional governance. Retrieved from: http://soc.kuleuven.be/io/ethics/paper/Paper%20WS3_pdf/Peter%20Steane.pdf