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Identifying and preventing fraud - Coggle Diagram
Identifying and preventing fraud
Potential for fraud
Prerequisites
Dishonesty
Motivation
Opportunity
Fraud risk
External factors
General environment (increased competition)
Industry features
Technology
Economic changes
Internal factors
New personnel
New systems
New operations
Restructuring
Business risks
Profits levels deviating from industry norms
(Exhibits profits far above, turnover rises rapidly but costs do not rise in line,..)
Turnover increasing rapidly
Market opinion
Complex group structure
Large organisation
Personnel risks
Expensive lifestyle
Long hours
(do not take holidays)
Autocratic style
(absolute power)
Lack of segregation of duties
Low morale
Secretive behavior
Computer fraud
Lack of training
Computer hackers
Risks awareness
User-friendly and flexible systems
Fraud
Removal of funds or assets from a business
Theft of cash, inventory
Payroll fraud
Claim overtime they didn't work
Miscalculate selected payslips or inflated rate/hours
A fictitious member of staff
Teeming and lading
(Theft of cash or cheque receipts. Setting subsequent receipts for the previous one to cover the theft)
Collusion with customers
Bogus supply of goods
Falsely invoice
Paying for goods not received
Manipulation of cash book
Misuse of assets
Fictitious customers
(stealing inventory)
Disposal of assets to employees
(employees buy a company asset for personal use and pay below market value for it)
Intentional misrepresentation of the financial position
Overvaluation of inventory
Fictitious sales
Generation of false invoices
Overcharging customers for goods or services
Selling goods to friends and buying them back later
Manipulation of year and events
Understating expenses
Manipulation of depreciation figures
Prevention policies
Emphasizing ethics
Recruitment procedures
(check the candidates backgrounds)
Personnel controls
Training and awareness
Segregation of duties
(functions should be kept separate
eg: separating receiving payments and reconciling the bank balance sheet)
Limitation controls
(allowing staff to choose suppliers from approved list, limit access to the computer network)
Physical security
(use lock, camera, guards,...)
Authorization policies
(eg: when employees deliver goods they need to have written authorization from managers)
Standard procedures
Computer security
Money laundering
Placement
(Disposal of the proceeds of initial illegal activity)
Layering
transfer of monies to conceal the original source)
Integration
(become legitimate funds)
Agreement
Financial Action Task Force(FATF)
Vienna Convention 1988
Responsibility for fraud
Organisation
BOD
(maintain a sound systems of internal control)
Audit committee
(monitor & review internal control and risks)
Employees
(fraud prevention & detection)
Auditor
(express an opinion on whether financial statements give a true and fair view of the company's financial situation and results)