Steane and
Cockerell (2005) developed the Analysis Led Fraud Assessment (ALFA), a method
of identifying fraudulent behaviour within an organisation and mitigating
against the risk of fraud occurring. Steane and Cockerell (2005) identified
that the main benefit of using the ALFA method is its ability to detect
fraudulent behaviour and fraud risks which are normally overlooked. The reason
such fraudulent behaviour and risk may be overlooked include the pressures of time, operational complexity and poor managerial controls.
The ALFA approach identifies areas of high fraud risk
and critical fraud risk to enable organisations to address the risk of fraud. Critical
risk is defined as an area of high fraud risk where there are poor or no risk
controls in place. For example, internet banking poses a critical risk if there
were no username and password protection measures to deny access.
The stages of ALFA are outlined below, with the diagram highlighting the
different stages of information used to access a company’s fraud risk:
1. The receipt of
information from the client. Information from an audit, industry specific fraud
knowledge repositories
2. Analysis, assessment
and identification of client high fraud vulnerability areas using the fraud
profiles and the information gathered in stage one
3. The development of
methodology to investigate these areas
4. Analysis and
assessment of findings and identification of critical fraud vulnerability areas
again using the fraud profiles and information gathered
5. Strategies to
identify if fraud is occurring through proactive investigation using the
component of the fraud profiles in particular fraud impact/consequence and
fraud methods.
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| Figure 1 - ALFA Staged Processes (Stene and Cockerell, 2005) |
Further Reading:
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
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