A CULTURE OF FRAUD – DON’T SHOOT THE MESSENGER JUST BECAUSE THEY BRING BAD NEWS
The Association of Certified Fraud Examiners (ACFE) estimates in its 2016 ‘Report to the Nations’ that the typical organisation loses 5 percent of its revenue to fraud. Based on the 2014 Gross World Product of $14.16 trillion, this means that fraud is a $3.7 trillion problem. It is not a problem that will go away on its own. It just might be part of your corporate culture.
Culture starts at the top. If the culture at the top is a business version of ‘take no prisoners’, then the ‘kill or be killed’ mentality will filter from the boardroom to the broom closet. Fraudulent conduct will metastasise like a cancer through the whole organisation.
There are several methods companies use to detect occupational frauds. These include internal audit, external audit, account reconciliation, management review, surveillance, monitoring, and document review.
The 2016 ACFE report identified a lack of internal controls which was cited in 29.3 percent of cases, followed by an override of existing internal controls. Overrides accounted for just over 20 percent of cases.
Tips are the most common detection method by a wide margin, accounting for 39 percent of the 2410 cases reported in the 2016 study. In the US, tips accounted for 37 percent of detected frauds. In comparison, Asia-Pacific was 45.2 percent, Sub-Saharan Africa was 37.8 percent, Latin America/Caribbean was 36.9 percent, Western Europe was 40.9 percent, and Eastern Europe and Western Central Asia was 47.4 percent.
External audits accounted for 14.1 percent in the US, 16.2 percent in Sub-Saharan Africa, 15.8 percent in Asia Pacific, 19.8 percent in Latin American, 16.4 percent in Western Europe, 21.9 percent in southern Asia, 20 percent in Eastern Europe, and 16.3 percent in Canada.
Jul-Sep 2016 Issue