FRAUD AUDITING AND ACCOUNTING

Introduction

Fraud, Theft and Corruption are rife in both the public and private sectors, thus poses a major problem to business. Despite this, the incidence of fraud, theft and corruption reflects an upward tendency of enormous proportions, indicating that actions initiated have been unable to curtail or reduce the number of reported cases – let alone those never reported.
There are many reasons for the current state of affairs, including a shortage of manpower and expertise in both the South African Police Service and the Department of Justice, resulting in lengthy investigations and the possibility of unsuccessful prosecutions.

However, no organisation can ignore the increasing likelihood of becoming a victim of commercial crime. Despite a growing awareness of the risk of exposure to commercial crime, most of these crimes are detected by chance. There is a vital need to raise a strong defense and the pro-active prevention of crime has of necessity become an integral aspect of business today.

Working with AURCO Forensic & Investigative Group

AURCO Forensic & Investigative will deliver:

Provision of an independent, pro-active, responsive service, together with credible forensic results.

A professional approach to enhance our clients image by eradicating and preventing economic crimes, and thereby adding value for all their stakeholders.

Strategies for conducting forensic audits

The following strategies will be considered as the minimum to achieve best practice:

1. Well planned and comprehensive Forensic Audit on the indicated areas of the business
2. Fraud risk identification and fraud risk management program
3. A culture of zero tolerance of crime together with a well-publicised code of ethics
4. Effective fraud prevention, detection and awareness strategy
5. Fraud response plan
6. Effective investigations

Main reason why AURCO will deliver the service

• AURCO provides investigators/auditors with specialised skills and expertise in the field of forensic auditing
• Availability of forensic auditors on a 24 hour basis
• Continuity through dedicated individuals
• Hands-on approach by all individuals involved
• Independent forensic investigators
• Access to world-class capabilities through continuous development programs
• Provides management with a fixed cost for audit/investigation services.

Meeting your immediate needs to manage the risk of fraud

As part of our strategy, we will deliver the following services to achieve best practise:

1. Comprehensive Forensic Audit
The identification of all potential weaknesses in the system of internal control and governance will be investigated to obtain sufficient evidence that fraudulent activities are minimised.

Comprehensive audit tests will be performed to ensure all areas of the business are covered for possible fraudulent activities.

Audit programmes will be tailored to ensure full coverage of all activities.
Audit procedures and tests will focus on areas of high potential risk areas.

Data interrogation
Continual proactive interrogation is essential. The latest techniques in data interrogation allow us to search for unusual or unexpected patterns and trends in transaction data that could indicate criminal activities. Analysing large volumes of data electronically is a quick, efficient and cheap way of searching for potential losses.

2. Fraud risk identification, assessment and mitigation
Opportunities for commercial crime risk can generally be categorised as industrial- company- and employee specific. Assessing such risks is essential to understand the risk profile of the whole entity.

This is done by a formal process of observation, interviews and workshops with key financial and operational personnel. The risk profile can be benchmarked against local and international standards, the result of which will then be an understanding of how exposed the organisation is to the threat of crime. The output of such a process aids the client in focusing resources and efforts on critical issues.

Create and maintain a database with all relevant information with a view to identifying high risk and problem areas. This will enable us to recommend pro-active steps to enable Management to reduce risk, to reduce the incidence of economic crime, and thereby enhance corporate governance, proper compliance with the Company’s Code of Ethics, and, in the end, to enhance profitability by reducing losses suffered as a result of economic crime.

Create and maintain a database with up to date statistics of economic crime in the organisation, and report the current status of commercial crime in the organisation on a regular basis to Management.
An organisation significantly reduces its exposure to the risk of commercial crime by training employees in how to identify and act upon any suspicions of fraud. Awareness is critical if an organisation wishes to promote a culture of zero tolerance. Fraudulent practices are then more easily identified and the opportunities for collusion much reduced.
Awareness training is an integral part of any fraud risk management effort, providing a means of communicating the corporate anti fraud ethic and supporting whistle-blowing.

AURCO will perform such training in accordance with the Clients’ specific needs.

3. Organisational ethics and integrity measurement program
This is a direct means of raising fraud awareness and reducing the impact of criminal activity.
The importance of a code of ethics in an organisation stems from the organisation being dependent on its employees for the proper conduct of its business. The organisation’s business objectives are advanced and secured by its employees, whose conduct is the measure of the organisation’s ethical health.
The ethics and integrity management system is designed to enable business to align policies and procedures with various South African codes of ethics and standards of conduct, as well as with legal and corporate governance requirements. The system is also designed to ensure that the framework of policies and structures of the business effectively project the stance of the business toward unethical behavior and economic crime.

The ethics and integrity management program comprises four phases, being the following:

• Investigation phase
• Development phase
• Implementation phase
• After care and compliance phase

4. Prevention and Detection as a crime fighting strategy
Whistle-blowing – Operating a toll free fraud hotline
It is a fact in South Africa that the majority of commercial crimes are perpetrated by organisational insiders. Current fraud surveys have established that employees within organisations continue to pose the single largest fraud risk. Such employees either act on their own, in concert or in collusion with third parties.

What is of significance; however is that almost 40% of successfully detected fraud is as a result of tip-offs from employees, customers and trading vendors. This alone demonstrates the tremendous value, which can be derived from maximising every opportunity of obtaining information relating to dishonest practices from employees and trading partners.

The AURCO Fraud Hotline facility is a simple, independent reporting, or “whistle-blowing” mechanism that employees can use without fear of identification or victimisation. All reports will be treated in the strictest confidence, and anonymity will be maintained.

Intelligence
Building up a network of informers that could assist us in identifying possible syndicates and/or possible criminal activities. An aspect that is crucial in the business environment.

5. Responding to commercial crime
An effective response plan is essential in order to mitigate loss and begin the process of remedying the matter. Certain key elements should be included in any effective fraud response plan.

AURCO will develop an effective fraud response plan in accordance with the Clients’ business environment.

6. Investigations
Investigations are performed utilising innovative, constantly developed and integrated techniques to enhance effectiveness with due cognisance of the requirements of law, in order to enable clients to make optimum use of resources available.

Technology is applied as an integrated investigative tool with traditional approaches, providing optimum ability in the provision of investigative services.

Investigate the matter swiftly, efficiently, properly and in a co-ordinated way with a view to taking the appropriate steps, and to provide the required admissible evidence in this regard.

Ensure all possible savings and recoveries of money.