How To Detect And Stop Fraud

PREAMBLES

• The greatest challenge dealing with the banking trade globally right this moment is fraud.

• The banking trade loses billions of dollars yearly 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.

• Anyone can perpetuate a fraud.

FALSE ASSUMPTION ABOUT FRAUD

Beneath are some false assumptions about fraud:

1. Most individuals will not commit fraud.

Response: A overwhelming majority of people, below certain circumstances, will commit fraud especially if they are satisfied that it will go undetected. Therefore everybody should be assumed to tend to commit fraud.

2. Fraud isn’t material.

Response: Fraud could be very material and it is capable of eroding the working capital of any group which consequently results to illiquidity and insolvency.

3. Most fraud goes undetected.

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

4. Fraud could be well hid and the auditor can’t detect it.

Response: There may be usually a loop gap that will eventually come to the open. With a sound inside control procedure, such fraud will finally be detected.

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

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

Response: The staff with fraudulent intentions think that those caught should not smart and the mindset of a first-time fraudster is either: I’m just going to do it once or, I’m too smart to get caught.

COMMON TYPES OF FRAUD

Common types of fraud in banking embody the next:

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 expenses due from unauthorized and unofficial lengthy period phone calls

10. Overstating claims for reimbursement

11. Deposit suppression

12. Adding fictitious names to the payroll

13. Overcharging clients

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

15. Acquiring payments for false invoices both self-prepared or obtained supplier or vendor (e.g. Hotel, air ticket and so forth).

FACTORS CONTRIBUTING TO FRAUD

• Growing complexity in the structure of an organization

• Rising velocity of transaction dynamics

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

• History of inattention of supervisors

• Understaffing which could cause a breakdown of twin control

• Acceptance of some degree of fraud as ‘value of doing enterprise’.

• Outdated and ineffective control measures that do not meet acceptable world standard.

• Improve in staff turnover which technically may lead to understaffing

• Aggressive accounting entries all within the bid to publish profit.

FRAUD SIGNS

The following are traits of a fraudulent workers which should put supervisors and associates on guard:

1. An employee who often borrows small amounts of money from different colleagues

2. An employee 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 staff

5. Workers who show resentment at not being treated fairly or being taken advantage of

6. Superiors who lack respect and appreciation for workers

7. Highly domineering senior management

8. Employees who look like dwelling, and spending above their means

9. Split purchases

10. Bid process irregularities

11. Similar bidders time and time once more

12. Payment of invoices from a copy somewhat than an authentic

13. Uncommon sequence of numbers on vendor invoices

EFFECTS OF FRAUD

Fraud has far reaching effect on the organization and the society at large.

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

• Disengagement of employees and the related social hazards to the staff and his dependant.

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

FRAUD ALERT AND PREVENTION TIPS

1. Assume everybody can commit fraud under the fitting circumstances.

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

3. Do not forget that good documentation doesn’t imply something occurred; only that somebody mentioned it happened.

4. Pay attention to documents themselves and the supporting paperwork, observing the consistency of numbers, dates amount.

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

6. Develop relationships and pay attention to hints or rumors of wrongdoing. Observe up. Keep in mind that persons are typically torn between their ethical standards and their reluctance to get involved. They seldom tell all they know within the first interview.

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

8. Be inquisitive; don’t easily settle for explanations, particularly if you do not understand them.

9. Use statistical sampling to force you to have a look at objects you would not usually otherwise study

10. Search for patterns of unusual transactions. (For those who’re surprised, it is unusual!)

CONCLUSION

Because of the rising chorus for prosperity, overwhelming majority aren’t prepared to sweat it on the market in making wealth. This has given rise to various sharp practises (fraud) leading to many being caught and jailed. Honesty, diligence, hard-work is the only path to enduring wealth with long-life. Don’t contain in any form of fraud!

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