Question

"Fraud Mitigation Techniques" Please respond to the following: From the e-Activity, determine the theft red flags that would create the most opportunity for abuse and make recommendations for the types of controls that could detect various types of frauds. Be as specific as possible by providing illustrative examples to support your position. Suggest why collusion between employees and management in the commission of a fraud is difficult to both prevent and detect. Discuss preventative measures or risk mitigation strategies to address this issue.

Answer 1

Employee fraud is a significant problem faced by all types of organizations.

Mainly Fraud can be broken down into three categories:

1. Asset misappropriation,
2. Corruption
3. Financial statement fraud.

Asset misappropriation are stealing cash before or after it’s been recorded, making a fictitious expense reimbursement claim and stealing non-cash assets of the organization.

Financial statement fraud involve omitting or intentionally misstating information in the company’s financial reports. This can be in the form of fictitious revenues, hidden liabilities or inflated assets.

Corruption happen when employees use their influence in business transactions for their own benefit while violating their duty to the employer. Examples like Undue benefits from Suppliers and other stakeholders, and also disclosing the company secrets to competitors for financial benefit of employee.

The Fraud mitigation techniques are.

1. Know Your Employees

Before Appointing an employee ensure his contact verification. Check with the pervious employer about his conduct in the office. Fraud perpetrators often display behavioral traits that can indicate the intention to commit fraud. Observing and listening to employees can help you identify potential fraud risk.

2. Employee Awareness

Awareness affects and helps all employees. Everyone within the organization should be aware of the fraud risk policy including types of fraud and the consequences associated with them. Those who are planning to commit fraud will know that management is watching and will hopefully be deterred by this. Honest employees who are not tempted to commit fraud will also be made aware of possible signs of fraud or theft.

3. Implement Internal Controls

Internal controls are plans or programs implemented to safeguard your company’s assets, Segregation of duties and reporting framework is an important component of internal control that can reduce the risk of fraud from occurring

4. Rotation of work.

The company should have a rotation policy, The employees capable of being rotated may be rotated every 2-3 years. So that there is chance of any misappropriations done get caught by the new staff in place came through rotation.

5. Surprise Audits

Surprise Audits of the work can unearth the frauds if any conducted by employees. This can help is catching the fraudster red handed.