a discussion of using data mining type software to uncover o

a discussion of using data mining type software to uncover occupational fraud. Talk about some of the controls that might be used to prevent fraud in the firt place What other techniques might be use to uncover occupational fraud? What other types of occupational fraud are there? ave you witnessed any?

Solution

Controls that can be used to prevent fraud:

> Ensure that no single person has all the powers and authority i.e distribute a transaction among number of people and keep checks at varoius point to ensure that the financial transaction comes accross the knowledge of the whole department. Eg- Seperating purchasing and payable fuuctions, making and signing of checks by different individuals.

> Reconcile Bank Statements every month to ensure that misappropriation come to the notice, timely.

> Timely review and authorisation of expense by supervisors and management.

> Safeguarding and reconciliation of petty cash.Petty cash improprieties may be a signal of broader issues regarding management’s approach to internal controls

> Ensure that office assets are used only for the purpose of official business purposes.

> Prepare written guidelines and fiscal policies in writing and obtain the approval of Board of Directors.

> Implementation of a portal or fraud helpline where employees could report any happening without fear (Whistle blower policy).

Techniques to uncover occupational fraud:

> Fraud Risk Management: A clear policy which covers the following stages; prevention, detection, deterrence and response, should be in place.

> Testing of system should be done on an ad-hoc basis by a person from senior management or a forensic accountant.

> Incorporating IS Audit techniques in the accounting software to keep in check the unusual transaction as it occours. This could include suppliers who are receiving payments with differing characteristics to average procedures.

> Ratio analysis: Simple ration analysis could identify unexpected errors.

> Review suspense and large transactions: These should be checked in and out and are generally a good indication of dishonest activity.

Types of occupational fraud include:

> Misappropriatio of cash.

> Unauthorised expense reimbursement.

> Misappropriation of company assets.

> Use of corporate funds for private purposes.

> Payroll fraud (Bogus salaries, Ghost employees).

> Corrupton in Billing schemes.

> Bribes to influence decision making.

> Financial statement fraud.

Being a Chareted accountant i have done a number of big and small audits and have come across many cases of occupational fraud most common being misappropriation of funds followed by financial statement fraud and unauthorised expense payment. These were sometimes not easy to catch since complete audit trail wasn\'t present in most cases or were planned with perfection.