Question

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What is the medium timeframe for detection of fraud schemes?

Answer 1

There is no specific timeframe for the detection of fraud, but the severity and adverse impact of fraud on the organization business activities will require early detection of the fraud and then prevention and corrective measures can be taken to reduce the impact of the fraud. As frauds cannot be reduced to the fullest extent, but its impact can be reduced to an acceptable extent. Frauds may also be discovered as a result of controls and mechanisms put in place on the advice of internal and external auditors.

A lot of frauds, however, are discovered accidentally or as a result of information received, either via a tip-off or through a whistleblowing hotline. In many cases, greater losses are suffered as a result of employees at all levels ignoring the obvious. It is everyone’s responsibility to find and report fraud and irregularity within an organization, and it is therefore essential that an organization has appropriate reporting mechanisms in place to facilitate this.

The organization should put in place the following fraud detection methods for early detection of frauds as and when occurred:

1. Whistleblowing mechanism: If an employee raises a genuine concern under this policy, he or she will not be at risk of losing their job, nor will they suffer any form of a detriment as a result. As long as the employee is acting in good faith and in accordance with this policy, it does not matter if they are mistaken.

Once an employee has informed the organization of his or her concern, the concerns will be examined and the organization will assess what action should be taken.

2. Change of personnel/duties i.e rotation of responsibilities.

3. Internal Audit: Where an organization has its own internal audit department the likelihood is that the task of investigating any incidence of fraud would fall to them.

4. External Audit: An organization without its own internal audit department may consider consulting their external auditors should they discover a fraud, if only to obtain the expertise to establish the level of loss. The external auditors may also be in a position to provide expert assistance from elsewhere within the audit firm, such as from a specialist fraud investigation group.

5. Fraud alert system: Fraud alerts have been described as specific events or red flags, which may be indicative of fraud.

Early Detection of frauds lead to early fraud prevention measure can be taken which can reduce the impact of fraud.

Early Detection of frauds leads to early fraud correction measure can be taken which can reduce the impact of fraud.

The fraud response plan is a formal means of setting down clearly the arrangements which are in place for dealing with detected or suspected cases of fraud. It is intended to provide procedures that allow for evidence gathering and collation in a manner that will facilitate informed decision-making while ensuring that evidence gathered will be admissible in the event of any civil or criminal action.

Fraud shall be detected before it explores to the stakeholders and the public at large else the organization shall fall into pitfalls.