How To Detect And Forestall Fraud

PREAMBLES

• The greatest problem dealing with the banking industry globally in the present day is fraud.

• The banking industry loses billions of dollars annually to fraudulent activities.

• Some of the frauds are executed efficiently by outsiders while a reasonable number is successfully perpetuated with the connivance of an insider/staff.

• Anybody can perpetuate a fraud.

FALSE ASSUMPTION ABOUT FRAUD

Under are some false assumptions about fraud:

1. Most individuals won’t commit fraud.

Response: A overwhelming majority of people, under certain circumstances, will commit fraud particularly if they are convinced that it’ll go undetected. Subsequently everyone must be assumed to tend to commit fraud.

2. Fraud is just not material.

Response: Fraud could be very material and it’s capable of eroding the working capital of any organization which consequently outcomes to illiquidity and insolvency.

3. Most fraud goes undetected.

Response: Most frauds are detected over time especially if due process and procedure is followed.

4. Fraud will be well concealed and the auditor cannot detect it.

Response: There is often a loop hole that may ultimately come to the open. With a sound inside management process, such fraud will eventually be detected.

A well trained auditor can easily detect a fraud following correctly designed audit program.

5. Those that are caught and prosecuted aren’t wise.

Response: The employees with fraudulent intentions think that those caught aren’t smart and the mindset of a first-time fraudster is both: I am just going to do it once or, I’m too smart to get caught.

COMMON TYPES OF FRAUD

Widespread types of fraud in banking include the following:

1. Cheque substitution

2. Cheque Suppression

3. Cheque cloning

4. Cheque kitting

5. Cheque alteration

6. Teeming and lading

7. Claiming unearned overtime allowance

8. Dry posting

9. Accumulating prices due from unauthorized and unofficial long duration phone calls

10. Overstating claims for reimbursement

11. Deposit suppression

12. Adding fictitious names to the payroll

13. Overcharging customers

14. Removing money directly from vault, till box, petty cash and many others

15. Obtaining payments for false invoices both self-prepared or obtained provider or vendor (e.g. Hotel, air ticket etc).

FACTORS CONTRIBUTING TO FRAUD

• Growing complexity in the structure of an organization

• Rising speed of transaction dynamics

• Improved technological advancement which support the benefit with which transactions are concluded

• History of inattention of supervisors

• Understaffing which might cause a breakdown of dual management

• Acceptance of some level of fraud as ‘cost of doing business’.

• Outdated and ineffective control measures that don’t meet settle forable world standard.

• Improve in staff turnover which technically could lead to understaffing

• Aggressive accounting entries all in the bid to post profit.

FRAUD SIGNS

The following are traits of a fraudulent employees which ought to put supervisors and associates on guard:

1. An worker who usually borrows small quantities of cash from other colleagues

2. An worker who asks to “hold” his or her personal cheque earlier than negotiating it

3. A employees who continuously closes late and does not go on vacation.

4. Low or inadequate wage ranges workers

5. Staff who show resentment at not being handled pretty or being taken advantage of

6. Superiors who lack respect and appreciation for employees

7. Highly domineering senior management

8. Staff who look like living, and spending above their means

9. Split purchases

10. Bid process irregularities

11. Identical bidders time and time once more

12. Cost of invoices from a duplicate slightly than an unique

13. Uncommon sequence of numbers on vendor invoices

EFFECTS OF FRAUD

Fraud has far reaching impact on the group and the society at large.

• Fraud can deplete the working capital of any organization which will culminate finally to distress.

• Disengagement of workers and the associated social hazards to the staff and his dependant.

• Loss of confidence of shoppers, suppliers, creditors, contractors and shareholders on the organization and the industry.

FRAUD ALERT AND PREVENTION TIPS

1. Assume everyone can commit fraud beneath the fitting circumstances.

2. Use your information of internal control to “think dirty” after which check out your suspicions.

3. Do not forget that good documentation does not mean something happened; only that somebody said it happened.

4. Take note of documents themselves and the supporting paperwork, observing the consistency of numbers, dates amount.

5. Consider the reasonableness of account balances and accounting entries, particularly adjustments

6. Develop relationships and pay attention to hints or rumors of wrongdoing. Follow up. Do not forget that people are typically torn between their moral requirements and their reluctance to get involved. They seldom inform all they know within the first interview.

7. Check out hunches; first impressions are often right.

8. Be inquisitive; do not simply accept explanations, especially in the event you do not understand them.

9. Use statistical sampling to power you to look at items you wouldn’t usually in any other case look at

10. Look for patterns of bizarre transactions. (In case you’re shocked, it is unusual!)

CONCLUSION

Because of the rising chorus for prosperity, overwhelming majority usually are not prepared to sweat it out there in making wealth. This has given rise to varied sharp practises (fraud) leading to many being caught and jailed. Honesty, diligence, hard-work is the only route to enduring wealth with lengthy-life. Don’t involve in any kind of fraud!

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