Question

Describe the fraud risks (Please be industry specific, you can find this out indirectly by reading more about the company) Amazon is the company

Answer 1

What is Fraud Risk?

The various organizations incur various activities in day to day business life. The organization activity possibility of being fraudulent is called fraud risk. A business can lose a huge amount of their assets due to fraud and even in some cases the businesses are more sensitive to fraud this may lead to shutdown of the company too. There are number of factors which may lead to a fraud in an organization:

Nature: Items which are in the nature of being high volume, there is less risk for fraud to them.

Ease of Resale: If there is a ready market for resale of fraud related goods, this leads to an increase of fraud risk in an organization.

As stated above, the fraud risk is an intermittent loss to the organization thus it is an great loss of surplus of a company, thus we need to control them as early as possible in a very effective manner, the controls for fraud risk are as follows:

(i) Separation of duties: When there are multiple delegation for an activity due to which phased approval is required for a particulars transaction and responsibility to do a work in a proper and lawful manner is assigned to every level, thus there is a less risk of fraud because staff is accountable for their respective duties.

(ii) Documentation: When there is no physical or electronic record of a transaction,employees are more tempted to perform fraud transaction because of no record maintenance.

(iii) Complexity: When the nature of business is complex for an organization there are more chances to create a chaos and manipulate the result of a transaction and incur fraud.

(iv) Auditing: When there is lack of internal audit function in an company its is less likely that a particulars fraud or incorrect thing may be corrected.

Fraud risk for Amazon:

Amazon in its annual return asserts that they had been faced with fraud risk on their online platforms where they had been found liable for fraudulent or unlawful transaction of sellers on those platform.

Fraud Risk assessment:

It should be assessed by performing following guidelines:

(i) Internal controls

(ii) Identify anti fraud risk assessment

(iii) Accountability of responsible person

(iv) Monitor day to day activites

(v) Conflicting interest of employees with organization

(vi) Ethics awareness among employees and management

(vii) Reporting of suspected violation of ethics

(viii) Seasonal Job Rotation of employees