Fraud Detection
Fraud Detection can Minimize Fraud Losses
Corporate fraud is frequently detected by accident. This underscores the need not only for fraud prevention measures, but also for sound fraud detection analysis. Improving the probability fraud is detected can help organizations minimize fraud-related losses and preserve their hard-earned reputations.
Cendrowski Corporate Advisors helps organizations find fraud with a variety of fraud detection control measures designed to identify areas where the “fraud triangle” factors of rationalization, pressure and opportunity may exist. Examples of these fraud detection procedures include:
- Proactive testing—Periodically testing for anomolies in transactions can bring red flags to light before other warning signs are noticed. Moreover, when employees know that transactions are being closely monitored, they realize the opportunity for fraud is slim, nearly eliminating one of the 3 elements of the fraud triangle. Cendrowski Corporate Advisors can assist firms in developing proactive testing and monitoring procedures designed to detect fraud ahead of other internal control systems used by the organization. These tests can help minimize fraud-related losses for the firm.
- Proper authorization processes—As a routine course of business, employees are typically granted the authority to authorize certain transactions, such as purchasing supplies or granting client or vendor discounts. These authorizations usually require an employee’s signature or initials or their electronic equivalents, which must be recorded as they occur and transactions must be audited regularly as a part of fraud detention.
- Segregation of duties—Almost 70% of occupational frauds are committed alone, according to the Committee of Sponsoring Organizations of the Treadway Commission (COSO). One person (like a trusted bookkeeper) frequently performs multiple duties in small business environments, for example. But some functions, such as the receipt and banking of money, should be done by separate individuals. Simply including more people for the control and oversight of critical financial or inventory functions makes fraud more difficult to commit.
- Adequate record keeping—Organizations should maintain paper trails – or electronic versions of them – that contain detailed documentation of transactions and information regarding all individuals involved in them.
- Physical controls over assets and records—Firms must protect assets as a routine part of fraud detention, not just from third-party threats, but also from employee theft, accident or unauthorized use. Examples of controls include maintaining a register of all physical assets, maintaining regular backups of electronic data, and using passwords to restrict access to computer systems and sensitive information.
- Independent internal checks—Companies should conduct peer audits of transactions as part of fraud detection to ensure they are being done properly, completed by the proper authority and are being recorded accurately. Peer auditors should be independent of individuals being audited.
Authors of a Proprietary Fraud Deterrence Methodology
CCA’s certified fraud examiners and forensic accountants wrote the book titled The Handbook of Fraud Deterrence (Wiley, 2006). Time is of the essence when your organization’s reputation is at risk, and the CCA team is ready to respond immediately and with great sensitivity to confidentiality requirements.
Contact CCA for a fraud detection assessment today.